An Unintended Consequence

Current rules discourage hotels from offering attractive special packages.

Regulations in Taiwan aimed at protecting consumers require hotels to provide a full refund on room bookings canceled at least three days before the scheduled arrival. But as AmCham Taipei’s Travel and Tourism Committee has been arguing in the past several years’ Taiwan White Paper, that policy sometime is actually contrary to the customer’s best interest.

As a result of the Taiwan regulations, hotels in this market have been discouraged from offering special booking packages – often on an early-bird basis – that provide guests with attractive discounts on condition that the payments are non-refundable. The hotels are willing to offer those low rates in exchange for guaranteed occupancy, but the incentive disappears if the customer can cancel at will.

“Usually those types of packages are issued for a low season, or sometimes for a really high season where we wish to attract more customers to get more attention,” says Achim v. Hake, general manager of the Sherwood Taipei. Being able to sell rooms well in advance, knowing they will stay booked, makes it easier for the hotels to plan. During peak holiday seasons when rooms are in high demand, last-minute cancellations can put hotels at risk of losing substantial amounts of money. 

Amendments to the Consumer Protection Act passed in 2017 introduced some slight flexibility to the system by permitting the refund to take the form of credit toward another room within a one-year period, rather than cash. But that change does nothing to alleviate the hotels’ difficulty in coping with vacancies in rooms it expected to be filled.

The chance is always present that an unexpected change in plans may cause a consumer to cancel a non-refundable room. But a study done by Expedia shows that cancellations for special packages are less than half as frequent as those for regular bookings.

Internationally, consumers are willing to accept the risk of having to cancel a non-refundable booking as a trade-off for the significantly lower room rates. Taiwan is believed to be the only market with regulations requiring a refund.

“As the Taiwan market seeks to internationalize, we should be in line with the refund policies of other countries – not only to protect the consumer but also for the sake of the hotels, creating a win-win situation,” says an industry executive who asked not to be identified by name.

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