The passing of the Consumer Protection Act (CPA) has definitely had an impact on hospitality services, such as accommodations, including hotels and resorts. One of the aspects causing the most concern is what the Act means for cancellations of advanced bookings or reservations.
Section 17 of the CPA deals with the right of a consumer to cancel an advanced reservation or booking.
What are the rights under Section 17?
A supplier is entitled to require the consumer to pay a reasonable deposit in advance as a result of making a commitment or accepting a reservation to supply goods or services at a later date. In addition to this the supplier may also levy a reasonable cancellation charge for the cancellation.
What is deemed a reasonable cancellation charge?
Subsection 4 sets out the following criteria that the supplier must use when calculating a reasonable cancellation penalty in the event that the consumer cancels the advanced booking:
- The nature of the goods or services that were reserved or booked;
- the length of notice of cancellation provided by the consumer;
- the reasonable potential for the service provider acting diligently, to find an alternative consumer between the time of receiving the notice and the time of the cancellation; and
- the general practice of the relevant industry.
The supplier will have to take into account the particular circumstance in determining the reasonableness of a cancellation penalty. Where the supplier gets an alternative consumer, the one cancelling has to be refunded in full. Therefore the supplier cannot make twice the fee for the same booking.
Subsection 5 further states that the supplier may not impose a cancellation penalty if the consumer is unable to honour the booking because of death or hospitalisation of the person for whom, or for whose benefit the booking was made.
Furthermore the act is very specific in that it only makes provision for “death or hospitalization” which means that one can only get a full refund in these instances.
The practice of hotels and resorts
Whilst the practice of each establishment differs, hotels and resorts generally have a sliding scale cancellation policy in place i.e. relating to the period of time between the date of cancellation and the date of the reservation. Therefore the cancellation fee is higher the closer the cancellation is to the date of the reservation.
In light of the above mentioned it is clear that the consumer has the right to cancel an advanced reservation or booking but will inevitably be liable for a “reasonable” cancellation penalty. The issue that many consumers are faced with is that suppliers, including those in the hospitality sector, fail to adhere to the reasonable cancellation referred to under Section 17. Whilst it’s common practice to charge a greater amount where the consumer cancels closer to the reserved date, the supplier still bears the onus of validating the charge. Even more, the supplier will have to bear the loss where the cancellation is due to death or hospitalisation. Unfortunately, for the supplier, they can no longer have a blanket ‘no refunds’ policy when dealing with cancelled bookings.
ABOUT THE AUTHOUR
Remolla Naidoo obtained her B.Soc.Sci (Law), LLB and LLM (Business Law) degrees from the University of the Kwa-Zulu Natal. She is currently a SEESA Consumer Protection & POPI Legal Advisor and has 5,5 years of hands-on experience in Consumer Protection and POPI.