Deposit, damage deposit, cancellation: rules guests accept

Key takeaways

• The longer the lead time and the harder the re-letting, the more a deposit is justified.
• Cancellation deadlines belong in the confirmation as a specific date, not as a period in the fine print.
• Damage deposits are pre-authorised on cards; the amount must match the furnishings and be visible before booking.
• The rules belong in three places: at the rate selection, in the summary and in the confirmation.
• Strict rules cost bookings. With short lead times and nights that are easy to re-let, toughness rarely pays off.

Payment rules are accepted when they are visible before booking, are stated in amounts and dates rather than percentages and deadlines, and stay in proportion to the stay. The height of the deposit or the length of the deadline matters less than whether the guest knows what will happen when they click. This applies to every website with its own direct booking, whether hotel or holiday apartment.

Conflicts arise more often from unclear rules than from strict ones. "30 percent at booking, balance 14 days before arrival" is a sensible rule, but a poor wording: the guest would have to do the arithmetic twice.

When a deposit makes sense

What matters is lead time, amount and how easily a stay can be re-let. A booking made ten months ahead ties up capacity for a long time, so a deposit is expected here; a booking for the day after tomorrow does not need one. A week in the chalet is different from two nights in a double room. And a city room during a trade fair will find a new guest, whereas a holiday apartment during ski week two days before arrival rarely will.

Against a deposit is the fact that every payment is an extra step in the booking flow where guests can drop out. A staggered approach therefore makes sense: no deposit for bookings a few weeks before arrival, a moderate one for medium lead times, and a higher one for bookings beyond the season or for whole houses.

Tax-wise, a deposit is not a neutral item. In both countries, VAT on a deposit arises at the end of the advance return period in which it is received (section 19 para. 2 no. 1 letter a of the Austrian VAT Act 1994 (UStG 1994), section 13 para. 1 no. 1 letter a sentence 4 of the German VAT Act (UStG)) [Q5] [Q6]. In Austria, accommodation is subject to the reduced rate of 10 percent, including a customary breakfast included in the price [Q1]; in Germany, short-term accommodation falls under the reduced rate of 7 percent under section 12 para. 2 no. 11 of the German VAT Act, but not breakfast and other services that do not serve directly the letting [Q4]. Clarify with your tax adviser how a payment retained after a cancellation is to be treated.

How to word cancellation deadlines

Calculate the date: instead of "free cancellation up to 14 days before arrival", the confirmation says "free cancellation until 3 February 2027, 18:00". Name the amount: "after that, EUR 210 will be charged" instead of "30 percent". And describe the route, whether by email, link or phone, and when the money comes back; this saves follow-up questions.

Two rates side by side, one flexible at the higher price and one fixed at the lower price, let the guest decide for themselves what they are paying for.

How damage deposits work for holiday apartments

For properties with a kitchen, sauna or sensitive furnishings, a damage deposit is common. The most convenient option for the guest is a pre-authorisation on a credit card: the amount is reserved, not charged, and released after departure. Say how long the release can take at the guest's bank. Payment on site is hardly practical for self-arrivals; a flat damage contribution lowers the barrier, but only covers what has been agreed.

The amount should reflect what can realistically be damaged, and it should appear on the property page before booking, not only in the arrival information. A retention needs evidence: a handover record, dated photos and a traceable statement.

What this looks like for a 24-room hotel

In our example, 24 rooms at 60 percent occupancy produce 5,256 occupied nights. At an assumed 2.5 nights per stay, that is about 2,100 bookings at EUR 325 each (EUR 130 per night). If we assume 8 percent are cancelled and half of those are re-let, our example leaves 84 lost stays, or EUR 27,300. A non-refundable deposit of 30 percent covers EUR 8,190 of that in our example. If the deposit requirement costs us 21 bookings a year, our example loses EUR 6,825 in revenue; net, about EUR 1,365 remains.

What this looks like for four holiday apartments

Four apartments with 180 occupied nights each and five nights per stay give 144 bookings a year at EUR 700 each (EUR 140 per night). With an assumed 8 percent cancellations, that is about 12; if half can be re-let, our example leaves 6 losses, or EUR 4,200. A non-refundable deposit of 30 percent, that is EUR 210, covers EUR 1,260 of that in our example. But if the deposit requirement prevents two bookings a year, our example loses EUR 1,400, which is more than covered.

The assumptions are not drawn from a survey; use your own cancellation rate. Both calculations show the same structure: a deposit only pays off when the covered loss is larger than the bookings lost.

How this appears in the booking flow

At the rate selection, a sentence on payment and cancellation sits next to each price, not just a link to the terms. The summary before confirmation shows what is charged today, what is due later and which damage deposit is reserved. The booking confirmation repeats the same amounts with the calculated dates. For how many steps a flow can take overall, see the booking flow without drop-off.

When choosing a system, pay attention to costs: Lodgify, for example, charges a booking fee of 1.9 percent on bookings that come in through the system on its Starter plan (status July 2026) [Q3]. This belongs in the comparison together with the fees of the payment service, as part of the cost overview for direct booking websites; the Smoobu API documentation, for example, shows which fields a booking carries [Q2].

How implementation works with HOHEIT

In HOHEIT's booking flow, you set the deposit and balance as a percentage or amount for each instalment; the balance is collected automatically before arrival. Damage deposits run as a hold on the card, payments go through Stripe, and bank transfers are available for groups and companies with automatic payment reminders. Instalments come from your channel manager. A host website takes four to six weeks, and a hotel website eight to fourteen weeks from approval of the concept. In operation, the commercial decision on the amount and staggering remains yours, as does the consistent application of the rule and the briefing of your team.

When strict rules do not pay off

With short lead times, nights that are easy to re-let and low amounts, toughness costs more than the damage it prevents. The same goes for many business travellers who need to remain flexible. Whether a cancellation clause holds against consumers is a legal question: have your terms checked before you introduce them.

Next, test-book your own accommodation and check whether you see the amount, due date and cancellation date before the final click; for how this is cleanly presented, see booking flow with online payment.

To implement this, you can book a call.

Sources and further reading

• [Q1] Austrian Business Service Portal: VAT rates in Austria
• [Q2] Smoobu API documentation
• [Q3] Lodgify Help Center: The Lodgify booking fee (status 27 July 2026)
• [Q4] Gesetze im Internet: § 12 UStG (German VAT Act, section 12)
• [Q5] RIS: Austrian VAT Act 1994 (Umsatzsteuergesetz 1994), current version (sections 10 and 19)
• [Q6] Gesetze im Internet: § 13 UStG (German VAT Act, section 13)