Trip cancellation: how a travel agency should refund a client
In short
When a traveller cancels a package holiday, the agency may keep a cancellation fee set out in the contract, as long as it is reasonable and justifiable. It refunds the rest. The refund is in full if the agency cancels, or if unavoidable and extraordinary circumstances affect the destination. In every case, the agency must refund within 14 days of the cancellation. A voucher is only possible if the traveller accepts it.
A traveller books a €6,000 trip departing on 10 July. They pay a €1,800 deposit by card in February, then a €2,100 instalment by SEPA direct debit in April. On 21 May, they cancel.
The agency now has three questions to answer. How much can it keep? How much must it return, and by when? On which payment method?
This guide covers the EU package travel rules, then how to issue the refund in practice, one payment at a time.
What must a travel agency refund when a trip is cancelled?
It depends on who cancels, and why.
For a package holiday, the rules come from Directive (EU) 2015/2302. Each EU country has written it into national law. In France, for example, it sits in article L211-14 of the Tourism Code. There are three situations.
| Situation | What the agency can keep | What it refunds |
|---|---|---|
| The traveller cancels | A cancellation fee set out in the contract | Everything paid, minus that fee |
| Unavoidable and extraordinary circumstances at the destination | Nothing | Everything paid |
| The agency cancels | Nothing | Everything paid, sometimes with compensation |
The traveller does not have to give a reason. They can cancel at any time before departure. What changes from one case to another is how much the agency can keep.
Cancellation insurance does not change these rights. It may reimburse the traveller for the fees they paid. It does not reduce what the agency owes them.
The traveller cancels: what fees can the agency keep?
An "appropriate and justifiable" fee, set out in the contract. The agency does not keep the deposit as such. It charges a fee, and the deposit covers it.
The contract can set standard fees. Under article 12 of the directive, they must be reasonable. They depend on how close to departure the cancellation happens, and on the savings or income the agency can expect from reselling the services.
Without standard fees in the contract, the fee is worked out booking by booking: the price of the trip, minus the savings made and the income from reselling the services.
In both cases, the agency must justify the amount if the traveller asks.
Back to our example. The traveller cancels 50 days before departure. Let's assume the terms of sale set a fee of 30% of the price between 60 and 31 days before departure.
- Price of the trip
- €6,000
- Already paid by the traveller
- €3,900
- Cancellation fee (30%)
- €1,800
- To refund by 4 June
- €2,100
The 30% scale is an example, not a rule. Each agency sets its own. It should match what the agency really loses at that date.
If the cancellation comes later and the fee is higher than what was paid, the logic is reversed: the traveller may owe the difference.
When must the refund be in full?
In four cases, the agency refunds everything that was paid, with no fee.
Unavoidable and extraordinary circumstances at the destination. A natural disaster, a conflict or an epidemic can affect the destination or its immediate surroundings. If it has a significant effect on the trip, or on transport to the destination, the traveller can cancel with no fee. They get a full refund, with no extra compensation.
The agency cancels because there are too few participants. This is possible if the contract sets a minimum number and the agency tells the traveller in time. The deadline is 20 days before departure for a trip of more than six days, 7 days before for a trip of two to six days, and 48 hours before for a shorter trip.
The agency is prevented by unavoidable and extraordinary circumstances. It cancels and tells the traveller as early as possible before departure. Here too, the refund is in full, with no compensation.
The agency cancels for any other reason. The traveller gets a full refund, and is also entitled to compensation. In France, article R211-10 of the Tourism Code sets it at no less than the fee the traveller would have paid had they cancelled on that date.
There is a fifth, less common case. If the agency raises the price by more than 8%, or changes an essential part of the trip, the traveller can refuse and cancel with no fee. This case is set out in articles 10 and 11 of the directive.
What the agency can keep
- The traveller changes their mind
The cancellation fee set out in the contract, by date. The rest is refunded.
- A serious event affects the destination
Nothing. The traveller gets a full refund.
- The group does not reach the minimum
Nothing, if the agency gave notice in time. Otherwise, compensation is added.
- The agency cancels for another reason
Nothing. It refunds everything and also owes compensation.
Whether circumstances count as "unavoidable and extraordinary" is decided case by case. Official advice against travel to a country carries a lot of weight, but it is not the only test. When in doubt, a written exchange with the traveller and legal advice are worth more than a partial refund that gets disputed later.
How long does the agency have to refund?
No more than 14 days after the contract is terminated. The deadline is set by article 12 of the directive, and by each country's law. In France, it is article R211-10 of the Tourism Code.
The clock starts on the cancellation date, not on the planned departure date. In our example, the traveller cancels on 21 May: the agency must refund them by 4 June, even though the trip was due in July.
Bank processing times come on top of those 14 days. According to Stripe's refund documentation, a card refund reaches the traveller's account in 5 to 10 business days. A SEPA direct debit refund is processed in 3 to 4 business days and arrives in about 5 business days.
So it is best to issue the refund as soon as the amount is settled, without waiting for the deadline.
A late refund also has a commercial cost. A traveller waiting for their money may dispute the payment with their bank. Visa even has a dispute reason for this case: a service cancelled, then not refunded. How these disputes work is covered in our article on chargebacks for travel agencies.
Can you offer a voucher instead of a refund?
Yes, but the traveller can refuse it. The agency cannot impose a voucher.
The Court of Justice of the European Union said so in a ruling of 8 June 2023. The case was about a French order from 2020 that let agencies refund in vouchers during the Covid-19 crisis. The Court held that a country cannot release the organiser from refunding in money. A voucher remains possible, as long as the traveller freely accepts it.
In practice, a voucher works well when it is presented as an option. For example, the agency offers to move the trip to other dates, at the same value. If the traveller prefers a refund, they get it within 14 days.
How do you refund a card, a SEPA direct debit or a bank transfer?
On the original payment method, wherever possible. Each method has its own limits.
Card. The refund goes back to the card used to pay. With Stripe, it cannot be sent to another card or account. If the card has expired or been replaced, the traveller's bank usually credits the new one. A refund made very shortly after the payment can show up as a reversal: the charge simply disappears from the statement, with no credit line.
SEPA direct debit. Stripe lets you refund it up to 180 days after the payment, according to its SEPA Direct Debit documentation. This limit matters in travel. A deposit paid by direct debit eight months before departure can no longer be refunded this way. The agency will have to send a bank transfer from its own account.
Stripe flags another risk. If the traveller opens a dispute with their bank while the agency is refunding them, they can be credited twice. A SEPA direct debit can be disputed with no reason for eight weeks. Tell the traveller as soon as the refund is issued, and how long it will take to arrive.
Bank transfer. A transfer received is refunded with a transfer the other way. The agency asks for the traveller's IBAN and sends the transfer from its bank account. Keep the date and reference: they are the proof of the refund.
Several payments on the same booking. Each payment is refunded separately, on its own payment method. In our example, the agency owes €2,100. It can refund the €2,100 SEPA instalment in full, or part of the deposit and part of the instalment. The first option is the easiest to track, and to explain to the traveller.
| Payment method | Where the refund goes | Time to arrive | Limit |
|---|---|---|---|
| Card | The original card | 5 to 10 business days | Amount of the original payment |
| SEPA direct debit | The debited account | About 5 business days | 180 days after the payment |
| Bank transfer | The IBAN given by the traveller | That of the transfer | None |
Who pays the transaction fees on a refund?
The agency, in most cases.
Stripe does not return the fees on the original payment when you refund the client. A €2,100 payment refunded in full has therefore cost its transaction fees and brought in nothing.
That cost cannot be passed on to the traveller as a card surcharge: surcharging consumer cards is banned in the EU, as explained in our article on card surcharges. When the refund must be in full, the agency bears it.
Plan for this cost like the rest of your payment costs: build it into your selling prices. Over a year, a few full refunds weigh little if prices account for them. They weigh much more if you only discover them when refunding.
What happens to the booking after a refund?
The amount collected on the booking goes down by the amount refunded. That figure tells the agency, at any time, how much it still holds for that traveller.
Three points need attention.
Stop upcoming payments. If the booking has a payment plan, the remaining instalments must be cancelled before refunding. Otherwise, an automatic debit may go through after the cancellation, and it will have to be refunded too. How payment plans work is covered in our guide to travel payment plans.
Keep a written record. The date of the cancellation request, the fee calculation, the amount refunded and the refund date. These four facts answer most complaints and disputes.
Match the refund to the right booking. A refund is one more movement to reconcile in the accounts. If it is not linked to a booking, it quickly becomes an unexplained line on the statement. Our guide to online payments for travel agencies explains why every payment should be tied to its booking.
Before refunding a cancelled trip
- Note the date of the cancellation request and who made it.
- Work out the fee with the scale in the terms of sale the traveller accepted.
- Check whether the case requires a full refund.
- Cancel the instalments not yet paid.
- Choose the payment or payments to refund, on their original method.
- Issue the refund well before the 14-day deadline.
- Send the traveller the amount, the calculation and when to expect the money.
How does Ezus Pay handle refunds?
In Ezus Pay, a payment is refunded from the Transactions page, with the "Refund" action, or from the booking, with "Refund this payment". This action is limited to the agency's admins, because it moves money out.
A full or partial refund. The agency enters the amount, up to what is still refundable on that payment. It can refund the same payment in several goes. It picks a reason, such as "Requested by traveler", and can add an internal note that only its team can see.
A summary before confirming. The refund window shows the amount refunded to the traveller, the amount taken from the agency's Stripe balance, and what will still be refundable. It also states that the Ezus fee on the original payment is not returned.
The booking updated. Once Stripe confirms the refund, the amount collected on the booking goes down by the same amount. The payment's status changes to "Partial refund" or "Refunded". In Ezus Pay, a card refund is usually confirmed within seconds, even though the money then takes a few days to arrive. A SEPA refund is only confirmed after a few days.
The traveller informed. They receive a confirmation email with the amount refunded and the booking reference. The agency gets a notification in the app.
The plan flagged, not chased. If the refunded payment was an instalment of a plan, the instalment stays paid, but the plan shows "Installment refunded". Nothing is requested from the traveller again automatically. For a cancelled trip, the agency uses "Cancel plan": unpaid instalments and the link are cancelled, and the traveller can no longer pay.
There are two limits to know. A manually recorded payment, such as a transfer received on the agency's own account, cannot be refunded from Ezus Pay: the money never went through Stripe. And Stripe's 180-day limit on SEPA direct debits applies too.
The full overview is in our guide to online payments for travel agencies. Handling the deposit and balance on the same booking is covered in our guide to travel deposit and balance payments.
Ezus Pay is the payment solution built for travel agencies, DMCs and tour operators. It lets you collect by card or SEPA, issue refunds and track every payment on the right booking, with or without Ezus.