Why Your Hotel Should Be Using Non-Refundable Rates
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Before 2020, non-refundable rates were standard practice and rarely questioned. But when the pandemic hit, everything changed.
With travel bans popping up overnight and uncertainty at every turn, guests understandably grew wary of committing to bookings they couldn’t cancel. Hotels had to pivot—fast—and flexibility became the name of the game.
Fast-forward five years, and the world has reopened. Yet many properties are still holding onto ultra-flexible booking policies. While this might seem like a guest-friendly move, it could be quietly sabotaging your revenue strategy.
Think about it:
- Cancellations are up.
- Cash flow is unpredictable.
- Budget-conscious travelers are slipping away.
In some cases, offering too much flexibility feels less like hospitality and more like running a returns counter. Guests are treating rooms like items they can “try on” and send back at the last minute—leaving your team scrambling to fill gaps.
So here’s the big question: Is your flexible policy attracting more bookings or just making it easier for guests to walk away?
What are non-refundable rates?
A non-refundable rate is a discounted rate option that requires full payment upfront and cannot be cancelled or changed.
In exchange for a lower price, the guest agrees that they won’t cancel or get their money back—no matter what changes in their plans.
For hoteliers, non-refundable rates help secure revenue in advance and reduce the risk of last-minute cancellations.
For travelers, it’s a way to save money—if they’re confident in their travel dates.
Are non-refundable rates always the best deal?
Non-refundable rates are often positioned as “deals” alongside more flexible options on a hotel’s booking engine.
But the value goes beyond a simple discount.
The strategy behind these rates is to give a little, gain a lot. Hotels offer a slightly lower price, and in return, they lock in
guaranteed revenue. No cancellations. No last-minute changes.
But they’re not always the best for your bottom line. Timing, demand, and booking patterns should all guide when and how you offer them.
How can hotels use non-refundable rates strategically?
Tools like RoomRaccoon’s dynamic pricing rules make it easy to apply stop-sell conditions automatically.
When demand spikes, inventory runs low, or arrival dates get close, non-refundable rates or flexible rates can be paused in real time.
Here are three smart ways to combine non-refundable rates with dynamic pricing to hit your revenue management goals:
Strategy 1: Attracting early bookings
If your goal is to lock in bookings well in advance, non-refundable rates can help.
They encourage guests to commit early, which means you secure revenue long before check-in. That’s money in the bank—and fewer surprises later.
To make this strategy work, timing matters. Set a stop-sell rule, for example, 30 days before arrival.
Why? Travelers are less likely to cancel closer to their stay, so removing the non-refundable option ensures you’re not leaving money on the table.
Plus, flexible bookings made closer to arrival are still protected by your cancellation policy.
You’re covered either way without risking underselling your rooms.
Strategy 2: Incentivizing longer stays
Combining non-refundable rates with length-of-stay restrictions is a smart way to encourage guests to stay longer and reduce operational strain.
For example, offer a non-refundable rate with a minimum stay—like “Stay 3 nights, pay less.”
It’s a great way to fill midweek lulls or off-peak gaps where shorter stays often lead to low occupancy and higher housekeeping turnover.
To get the most from this strategy, set a stop-sell rule for weekends or high-demand dates to remove this discounted rate
and ensure those periods are booked at full price.
That way, you’re using longer stays to fill low-demand gaps without compromising your peak-night revenue.
Strategy 3: Drive commitment during low-demand
Low demand? Pause flexible rates and offer only non-refundable options to entice travelers, reduce cancellations, and secure revenue.
When facing unpredictable demand—such as during shoulder seasons, events with uncertain turnout, or last-minute booking patterns—
hotels can flip the script: pause flexible rates and make non-refundable the only option.
Use a stop-sell rule to temporarily close flexible rates based on occupancy or lead time (under 50% occupancy or within 5 days of arrival).
This creates a sense of urgency while locking in guaranteed revenue.
What are the benefits of non-refundable rates?
Here are five advantages for hotels that offer non-refundable rates:
1. Lower cancellations
Non-refundable rates aren’t just about securing revenue—they’re also a smart way to reduce cancellations.
According to SiteMinder’s Hotel Booking Trends 2024, the global hotel cancellation rate sits at 20%.
In other words, one in five bookings never shows up. That’s a lot of last-minute gaps to fill.
By offering non-refundable rates alongside flexible options, you encourage commitment from guests while still giving them a choice.
The result? Fewer cancellations and less scrambling to resell rooms at the eleventh hour.
📉 1 in 5 hotel bookings gets cancelled. Adding non-refundable rates alongside flexible options helps lower that number—while locking in more guaranteed revenue.
2. Early cashflow
Hotels face daily costs that don’t pause when bookings slow down. Think staff wages, utilities, food and beverage,
cleaning supplies, and tech tools—it all adds up fast.
Pre-payments can help cover these ongoing expenses, especially when guests book weeks or even months in advance.
But non-refundable pre-payments take it a step further. They lock in revenue and give you greater confidence in your cash flow.
3. Better revenue forecasting
RoomRaccoon’s Deposit Tracking makes it easy to monitor both redeemed and unredeemed deposits.
But knowing your income is already secured? That’s even better.
Non-refundable rates give you greater confidence in your numbers. You’re not estimating potential earnings—
you’re working with guaranteed income. That means stronger forecasting, smarter planning, and fewer surprises when it comes to cash flow.
4. Price-sensitive travelers
Who doesn’t love a better deal—especially when it’s shown side by side?
Non-refundable rates appeal to price-sensitive travelers who are happy to trade flexibility for savings.
It’s an effective way to capture that segment without discounting your flexible rates across the board.
According to Access Development, 63% of travelers save money when booking vacations by using deals, hacks, and smartly-timed travel.
With non-refundable rates, you’re speaking directly to that mindset—while protecting your revenue.
💸 63% of travelers look for deals, hacks, and smart timing to save on bookings. Non-refundable rates speak directly to that mindset—while locking in revenue you can count on.
5. Revenue management
As the strategies above show, non-refundable rates aren’t just a fallback option—they’re a valuable lever in your revenue management toolkit.
When used strategically, they can help you drive longer stays, increase lead time, and fill low-demand periods.
It’s about using the right rate, at the right time, for the right guest—without compromising on value.
FAQs about non-refundable rates for hoteliers
1. Why should I offer non-refundable rates?
2. Should I offer non-refundable and flexible rates at the same time?
3. How much cheaper should non-refundable rates be?
4. When should I stop selling non-refundable rates?
5. Can non-refundable rates help during low-demand periods?
6. What if a guest requests a refund anyway?
7. How do I display non-refundable rates clearly online?
8. Can non-refundable rates boost my direct bookings?
9. Do non-refundable rates work for group bookings or events?
10. Can I automate how and when non-refundable rates are offered?
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Nicky. M
Nicky is RoomRaccoon's Senior Content Manager, combining a love for travel with a practical approach to improving hotel performance through tech and insightful tips. Join her journey where travel, hospitality, and technology meet.
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