A cancellation policy defines the terms of a booking: a fully flexible policy lets a guest cancel free up to a cut-off (say 24 or 48 hours before arrival); a non-refundable or partial policy keeps some or all of the payment. Many properties offer a mix, often pricing a flexible rate slightly higher than a non-refundable one.
The policy balances two risks: too strict and guests book elsewhere; too loose and the property absorbs last-minute losses. On an OTA, the policies on offer are shaped by the platform; on a direct channel, the property sets its own.
Why it matters for direct booking
Booking direct lets you set and show your own cancellation terms rather than inheriting an OTA's. Clear, fair terms on your own site build the trust that makes a guest comfortable booking with you instead of through a marketplace.