Hospitality versus fees

Cancellation policy applicable in Japan: “Is the customer really God?”

In Japan, the prevailing view is that “the customer is God”. Hotels and their customers are not on a level playing field and the hotel side is expected, in line with the “spirit of hospitality”, to accept any sacrifice that has to be made. This underlines the importance of client relations in the service industry, particularly hotels and never more so when it comes to cancellations.

text: Junsuke Kondo  //  photography: istock

That said, the issue of cancelled reservations is a thorny one for those running the hotels. As well as missing out on anticipated sales, such cancellations also cost the hotel other potential staying guests, who may have become fans. Let’s take a closer look at why Japan’s hotel cancellation policy is considered lax compared to other countries. This article will focus on small- and medium-sized hotels in Japan.

Cancellation fees not imposed or unpaid

Hotels in Japan often stipulate a cancellation fee policy that comes into effect around 3 days before the initial reservation. Namely, a fee of 50-80% if cancelled 3 to 1 days before, 100% for same-day cancellations and so on. Even so, whether the cancellation fee is actually collected or not is a completely different story.

For example, when issues like children falling ill, family troubles or other unexpected situations come up, many hotels would hope to remain the venue of choice for the next time, rather than collecting the cancellation fee. Moreover, under circumstances that are outside the control of the customer reserving, namely earthquakes, typhoons, heavy snowfall, suspension of public transport and so on, many hotels seem to resignedly accept that “accepting cancellation losses like this is inevitable for the hotel."

When asked, Mr. Kensaku Watanabe, who runs an inn in Hyogo prefecture, Japan, said the policy on cancellation would depend on whether or not there was contact from the customer as well as the general atmosphere of proceedings at the time. “If I get the feeling that the customer is truly sorry for the inconvenience caused, the cancellation fee can be waived. The customer then feels grateful and is more likely to consider the accommodation next time around. Conversely, for blatant no shows or customers who prove less than willing to pay the cancellation fee, invoices are normally sent in line with regulations.”

And even if the cancellation fee is requested, it often ends up unpaid. The effort and cost required to hire a lawyer and engage in proceedings to recover multiple cancellation fees are prohibitive.

Agreement on the part of a customer to pay the cancellation fee is considered an ‘act of good faith’ from the hotel perspective and it is far from rare to see hotels then take measures such as reducing the cancellation fee payable or deciding to exempt the customer from payment if another guest is found. Some accommodation establishments will respond when cancellation fees are paid by sending letters of thanks and regional speciality products.

Cultural factors behind the cancellation fee issues

Customers are also well aware of such prevailing circumstances - even to the point of viewing hotels that actually collect cancellation fees as rude and unpleasant. According to Mr. Takanobu Noguchi, an accommodation management consultant, there is also concern on the part of hotels that shoring up their cancellation regulations will see customers switching to options where they can stay and still enjoy lax regulation. In reality, however, there are no confirmed cases of any change in cancellation policy having a significant impact on the number of customers in either direction.

The fact that cancellation policies are not applied so strictly in Japan reflects the difference in the mindset on contracts between it and other Western countries.

In Japan, the concept of a ‘tacit understanding’ is deeply rooted in the culture, according to which spelling every last detail out is even considered rude. This culture and mindset is reflected in the terms and conditions of accommodation agreements, which frequently include ambiguous clauses like “〇〇 cases may sometimes occur" or “the matter will be resolved by consultation between the relevant parties”.

For the accommodation industry as a whole meanwhile, the issue of unbilled and unpaid cancellation fees is a huge dilemma. The fact that either cancellation fees are not levied at all or can be tacitly ignored, even if issued, sees numerous customers booking multiple hotels and cancelling just before the reservation, or in the worst cases, no-shows without any contact whatsoever.

Net penetration sparking changes

However, change is emerging, as internet reservations become ever more prevalent. For many booking sites, use is conditional on accepting pre-settlement by credit card and the booking site itself intervenes when it comes to collecting cancellation fees. Even so, many sites still offer the “in-person payment” option and allow users to complete reservations without entering credit card information beforehand.

A service called “Cansell”, allowing “those wishing to cancel" to sell their confirmed reservation to “those seeking cheap stays" has also attracted attention (https://jp.cansell.com/). Since this service also allows the hotel to collect room rates as normal, it is welcomed by sellers, buyers and hotels alike.

A record high of foreign visitors to Japan was recorded in 2017 and the Japanese tourism industry is expected to boom even further in the run-up to the Tokyo Olympic Games in 2020.

The issue of the "loose cancellation policy in Japan" should be solved by settlement technology. For Japanese small- and medium-sized hotels to boost profitability, their reservation settlement system should be reviewed.

Facts:

• Japan’s cancellation policy has not been strictly applied

• Cancellation charges are often not imposed or remain unpaid, even if requested

• Despite the cultural background perception that ‘the customer is God’, the spread of the internet is sparking change

 

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