What is a Good Cancellation Policy for Tour Operators? A Guide

Cancellations are the one part of the travel business no one looks forward to, yet every tour operator has to deal with. Whether it’s a customer backing out last minute, a tour that just doesn’t get enough sign-ups, or a sudden cancellation from an OTA, the unpredictability can be exhausting. You’re left trying to balance fairness and flexibility, all while keeping your tours bookable and your customer relationships intact.

So, what's a good cancellation policy? How can you write one (or, several) as a tour operator that makes sense for all parties involved?

In this article, we'll cover:

The last-minute cancellation conundrum

Why people cancel

Best practices for cancellation policies for tour operators

Cancellations policies and OTAs

When you have to cancel

How booking reservation software can help you manage cancellation policies

The Last-Minute Cancellation Conundrum

Every operator knows the feeling: you've spent weeks (or months) planning a tour, from setting up accommodations, to confirming guides, and securing transport, all to have a customer cancel just days before departure. Worse, they want a full refund. Your options are limited, your costs are sunk, and it feels like you’re the one who gets left at the gate.

Unfortunately, late cancellations aren’t rare, especially as travelers increasingly expect flexible terms. And while offering that flexibility can make you more competitive, it also exposes you to risk. As Brandon Mimms, CEO of TripShepherd says, "It's such a tough balance. Too strict and guests hesitate to book, too lenient and you risk losing the day entirely. We’ve had to tweak our policies a few times just to stay sane with no-shows."

Finding a way to balance all of this is the key to a successful tour operator.

Why People Cancel (and When It’s Fair)

People cancel for all sorts of reasons. Some are understandable, while others seem to dodge all logic.

Here are common reasons:

• Illness or family emergency

• Travel delays or missed connections

• Visa issues or passport expiration

• Budget changes

• Booking multiple tours and deciding later

• Simply changing their mind

  
  

While emergencies and health concerns are legitimate, your business still incurs costs, which is why your policy shouldn’t hinge solely on “Was it a good excuse?”. Instead, keep some of these basic rules in mind:

• Be empathetic but consistent: It’s okay to make rare exceptions, but don’t make it your default.

• Encourage travel insurance: Remind customers that it’s the best way to cover personal emergencies.

• Use credits as a middle ground: Offering a partial credit instead of a full refund shows goodwill without hurting your bottom line.

A cancellation policy that accounts for valid reasons, but protects your business first is the sweet spot.

12 Best Practices for Cancellation Policies for Tour Operators

A cancellation policy is a legal necessity for every business, but it's also a way to build trust with potential customers and current customers. A clear, thoughtful policy can increase bookings, reduce no-shows, and protect your business financially. But, too much flexibility can hurt your margins, and too little can frustrate customers.

Here’s how to strike the right balance:

1. Use tiered refund windows

Multi-day tours require more upfront investment, from securing accommodations to arranging transport and local guides. Because of this, your cancellation policy should reflect longer lead times and stricter refund terms than those used for day tours. Here's a recommended structure, based on industry standards inspired by larger, multi-day tour operators:

Notice period before departure	Refund suggestion	Notes
60+ days	Full refund minus deposit	Deposit can be held as credit (e.g. 'Lifetime Deposit'),
30–59 days	50% refund of total (excluding deposit)	Deposit retained as credit where possible
15–29 days	No refund	Optional: deposit credit
0–14 days	No refund, no credit (but, hopefully they'll have travel insurance!)	Most operators treat this period as fully non-refundable

We'll go into more details of these items in a bit.

2. Match policy to tour type

Not all tours require the same level of flexibility. You can consider different cancellation rules depending on a few factors. For instance, the region where the tour is taking place may have stricter policies in place for suppliers, which means you may have to boost your policy to 150 days notice in some cases (more on this below). An example of this is if a tour operator is based in New Zealand, the tours they operate to Africa might have stricter cancellation policies than those they run domestically.

Other determining factors include:

• Private vs. group tours

• High-demand tours with limited space

• Multi-day tours with accommodation

• Low-cost experiences with minimal overhead

  
  

Just be sure to label the cancellation terms clearly for each product.

3. Clearly define 'last-minute'

The phrase 'last-minute' means different things to different people. Generally, the advice in the industry for multi-day tours is 30 days is considered 'last-minute'. But, this can also vary depending on various factors.

In any case, avoid misunderstandings by spelling it out:

"Cancellations made less than 30 days before the tour are considered last-minute and are not eligible for a refund."

You might also want to:

• State specific cut-off times (e.g., “by 5:00 PM local time two days before”)

• Clarify how to submit the cancellation (email, form, etc.)

• Allow for rebooking or credits if appropriate

Also, include examples so it’s extra clear:“If your tour starts at 9 AM on Saturday, the deadline for a partial refund is 5 PM on Wednesday.”

4. Make cancellation policies easy to find (and understand)

A cancellation policy should never live in fine print. To avoid customer confusion or complaints:

• Include a summary during the booking process

• Link to the full policy on tour pages, FAQs, and confirmation emails

• Use simple language and break it into clear sections

• Add a cancel/reschedule button to confirmation emails, if possible

• Provide a direct way to get in touch (email, phone, or form)

The easier it is for customers to cancel within the rules, the fewer refund battles you’ll face.

5. Require a non-refundable deposit

Many customers don’t realize what a non-refundable deposit covers, so it’s important to be clear. These deposits usually go toward upfront costs like admin time, hotel reservations, permits, or internal flights—things you commit to as soon as someone books.

Make that explicit in your policy. For example: “This deposit covers planning and pre-booked services that begin once your spot is reserved. It’s non-refundable and not included in any cancellation refunds.”

Deposits also help:

• Cover unrecoverable costs (e.g., permits, guides, vehicle rentals)

• Discourage casual bookings likely to cancel

• 
  

At checkout, state the policy clearly:

“A non-refundable deposit of [10–20%] is required to confirm your spot. This amount will not be refunded if you cancel.”

Consider adding a terms-and-conditions checkbox to confirm acknowledgment.

Tip: To increase conversions, consider lower deposits for early bookings, or offer a 'Lifetime Deposit' that can be used for future rebooking.

6. Offer travel credit as an alternative to refunds

Instead of losing the full value of a booking, guests may be happy to receive credit toward a future trip or be able to offer it to someone else who can take the trip in their place with a name change.

Set expectations:

• Let them know the credit amount and expiration

• Clearly state that credits are non-transferable and non-refundable

  
  

This approach is especially helpful for last-minute cancellations where you’ve already incurred costs. Guarav Bhan Bhatnagar, founder of The Folk Tales which offers sustainable tours through rural India, said:

"We set a certain expectation right from the start. Since we offer FIT tours, our clients know that designing them takes substantial effort. So, only serious ones proceed. We have clearly displayed the cancellation policy on the website so that there is nothing hidden. If something happens that cannot be avoided, we understand."

He continued to share, "That’s why we provide the client the ability to keep their deposit with us and use it for another tour anytime within two years. They can also transfer the tour to another person (friend/family/colleague). This saves them from unnecessary losses in international transfers, and our processing fee. We try to find a win-win situation. If nothing works, and the client still wants a refund, we of course do it."

7. Encourage guests to buy travel insurance

You don’t need to be the one responsible for every emergency or change of plans. Add a gentle nudge:

“We strongly recommend purchasing travel insurance to protect your trip against illness, delays, or unforeseen events.”

You can even link to recommended providers or include this in booking confirmations, with perhaps some guides or blog articles to help guide them in the right direction. That being said, they should also be clear what's covered by that insurance policy, too.

8. Have a no-show policy (because it happens)

Sometimes guests don’t cancel; they just don’t show up.

No-shows are costly, and they can take a space someone else could’ve booked. Address this with:

• A clear no-show clause in your policy (e.g., “Failure to arrive is treated as a same-day cancellation and is non-refundable”)

• Automated reminders via SMS or email the day before

• A process to track no-shows and adjust policies if needed (e.g., different rules for high-risk tours or channels)

  
  

You may even want to follow up after the fact with a friendly message, just in case it helps with reviews or future bookings.

9. Review your policy with legal or industry experts

Every country or region has different consumer protection laws. Before publishing:

• Review your terms with a legal advisor or industry association

• Make sure you’re compliant with local refund laws

• Ensure clarity on 'force majeure' events (e.g., extreme weather, pandemics)

If you don't have a legal team at the moment, some AI tools like ChatGPT can help you draft or revise the language in order to keep you covered, but always run it past a human expert before publishing.

10. Be transparent and human in communication

Cancellation policies help keep your tour operation going, but they’re also a reflection of your brand.

• Use friendly, approachable language (“We understand that plans can change…”)

• Emphasize what you can do (“We can offer a credit if it’s too late for a refund…”)

• Respond to edge cases with empathy and consistency

  
  

A thoughtful tone and transparent process can turn a cancellation into a positive guest experience—and sometimes, a rebooking. Gently encourage travelers to read the terms carefully and prepare for the worst case scenario with other alternatives.

11. Have a policy for 'fair reasons' outside the refund window

You don’t need to be responsible for every personal emergency that affects someone’s trip. But, there are always exceptions you might want to be willing to accept. Be clear about:

• What you consider a fair reason: e.g.,

  • Documented illness or medical emergency

  • Family emergency or bereavement

  • Natural disasters or travel disruptions (especially if it affects multiple travelers)

    
    

• What guests need to provide: e.g.,

  • A doctor’s note or hospital discharge paper

  • Airline cancellation notice

  • Brief explanation via email or form

    
    

Make it clear that:

• These cases are handled on a case-by-case basis

• You may offer a credit or reschedule option, even if refunds aren’t possible

• Travel insurance should still be the primary protection

• Abuse of this policy (e.g., vague or unverifiable claims) may result in denial

  
  

You can phrase it like this on your site:

“We understand that unexpected situations arise. If you need to cancel outside the refund window due to an emergency, please contact us as soon as possible. While we cannot guarantee refunds, we’ll do our best to find a fair solution.”

Including this section builds goodwill and reduces back-and-forth when someone really does have a valid issue.

12. Offer cancellation protection as an add-on

Some tour operators have started offering cancellation protection as an optional extra at checkout, either by managing it themselves or through third-party providers.

Sara Cooke of Toursbylocals, "We give people a choice: they can get the standard 15 days out full refund with their booking, or they can pay an extra cost and have the freedom to cancel up to the minute. Charging the extra fee allows us to still pay out the guide on the platform if the guests cancels last minute (because they shouldn't be out of pocket!) and gives customers the choice of having more flexibility."

This approach can:

• Provide peace of mind to travelers

• Create a small new revenue stream

• Reduce refund requests later on

  
  

Just be sure to check the legal requirements in your country, especially in the EU where offering cancellation protection may fall under insurance regulation. And make sure your terms are clear and customer-friendly, otherwise it could disrupt the booking flow.

Cancellation Policies and OTAs

Working with an OTA can help you reach more travelers and fill your calendar, but their flexible cancellation policies may not always align with your business needs.

Many OTAs enforce blanket rules such as 24-hour free cancellations and 'buy now, pay later' options. While these features are attractive to customers, they can lead to high last-minute cancellation rates, especially from travelers who book impulsively without firm plans. That’s a major problem for small tour operators who reserve staff, transportation, or block out capacity based on those bookings.

One operator reported a 33% cancellation rate for OTA bookings, with some customers reserving tours months in advance only to cancel days before. This left the company unable to resell those spots and absorb the costs. In response, they moved to an “all sales final” policy for all tours, and saw an unexpected upside: more clients began reaching out to book directly.

All that said, many tour operations wouldn't get as many bookings if it weren't for distribution. So, for many, it's worth it. But, if you're going to distribute your tours with an OTA, remember to:

• Know the terms: Some OTAs don’t allow changes to their default cancellation policies, while others may offer limited flexibility or tiered refund options.

• Push direct bookings: Offer perks or clarity on stricter refund policies to encourage travelers to book via your own site.

• Track performance by channel: If cancellations are consistently higher on one platform, consider reducing availability there or adjusting your pricing.

• Use tiered pricing when available: Some platforms allow you to list both flexible and non-refundable options, so take advantage of this in order to protect your margins.

Ultimately, while OTAs can boost exposure, it’s important to understand the trade-offs. High commissions and customer-friendly policies can eat into your revenue if not managed carefully. Make sure your own policies are clearly communicated and that they’re helping you attract the right kind of customers.

When You Have to Cancel

It’s rare, but sometimes the decision to cancel falls on you: low bookings, weather issues, safety concerns, political unrest, supplier issues, or emergencies. Canceling a tour is never ideal, but how you do it can make a big difference.

Here’s what to do:

1. Communicate early and clearly: As soon as you know a tour can’t run, notify your customers with a clear explanation and next steps.

2. Offer alternatives: Can they rebook on a different date? Get credit? Join a similar tour?

3. Take ownership: Even if the cancellation isn’t your fault, how you respond shows your professionalism.

4. Have a backup plan in your policy: Your cancellation terms should explain what happens when you cancel, whether it’s full refunds, re-booking options, or additional compensation.

How Booking Reservation Software Can Help You Manage Cancellation Policies

Trying to manually track cancellation windows, send updates, and manage refunds across channels is not only time-consuming, but risky. With all the other tasks you have on your plate, how can you ensure that each and every customer who books with you is fully aware of those policies you have set? How can you effectively communicate those policies with them in the first place? And, how can you reiterate these policies in the event someone has to cancel without losing the customer's trust?

That’s where savvy booking reservation software comes in, which allows you to incorporate your cancellation policies right into the platform.

With Tour Amigo, you can:

• Automate policy enforcement based on time-frames

• Offer self-service cancellations or date changes to customers

• Apply different rules per product or channel (e.g., direct vs. OTA)

• Instantly issue credits or refunds

• Sync terms across your website and partners

Don't Let Poor Cancellation Policies Impact Your Bottom Line

Whenever a guest cancels, it's a bummer. But, it doesn't have to wreak havoc for your business.

Cancellations are an inevitable part of being a tour operator, but you can have more control of how much impact it will have by setting the right cancellation policies.

A clear, fair, and visible policy helps customers feel confident booking with you, knowing exactly where they stand if plans change. With a thoughtful policy that allows them to feel safe booking a tour with your company, consistent communication, and the right tech in place, you can keep customers happy while protecting yourself, no matter what may happen.

If you need help managing your cancellation policies more smoothly, Tour Amigo helps tour operators automate, streamline, and protect their operations. View our plans or book a demo today to learn more!