When can a package holiday be cancelled, and who foots the bill?

Refunds in the wake of a pandemic

The issue of when a holiday can be cancelled, and how a customer can obtain a refund was at the forefront of the travel industry during the covid-19 pandemic. Even now in 2025, we are still obtaining guidance from the courts about the approach to be taken regarding when a refund is due to a customer.

Who is liable for cancellation costs?

One could be forgiven for assuming the travel insurer would always bear the cost of holiday cancellations. However, there are circumstances where the holiday organiser, the customer themselves, or even the credit card company is liable for fees as a result of cancellation.

Customer’s right to cancel

A customer is entitled to cancel their package holiday any time before the package starts. However, fees may be payable to the organiser as stipulated by the booking terms and conditions. No termination fee would be payable by the customer if they have terminated due to ‘unavoidable and extraordinary circumstances’ at the destination or its immediate vicinity which significantly affects the performance of the package or carriage of passengers to the destination. This is set out within Regulation 12(7) of the Package Travel and Linked Travel Arrangements Regulations 2018 (‘the Regulation’).

When can the holiday organiser cancel?

Similarly, the holiday organiser may cancel the holiday contract where it is prevented from performing the contract due to ‘unavoidable and extraordinary circumstances’ but must notify the customer without undue delay.

Defining ‘Unavoidable and Extraordinary Circumstances’

This begs the question; what is an ‘unavoidable and extraordinary circumstance’?

The test applied is an objective one; such that it should be obvious to any holiday organiser when a customer is using the Regulation to cancel the holiday. The relevant circumstances must occur at the place of destination or its immediate vicinity and not at the place of departure.

An ‘unavoidable and extraordinary circumstance’ is defined in the Regulation as a situation which is beyond the control of the party who seeks to rely on such a situation, the consequences of which could not have been avoided even if all reasonable measures had been taken. For example, the courts have held that the covid-19 pandemic, and the decisions taken by governments in relation to it, are capable of being unavoidable and extraordinary circumstances.

Covid-19 and recent case law

However, in the case of Dennison v Love Holidays  (unreported, Lincoln County Court [2021]) on appeal it was held that self-isolation rules did not amount to ‘unavoidable and extraordinary circumstances’ occurring at the destination or its immediate vicinity which significantly affected the performance of the package or the carriage of passengers to the destination.

A 2025 decision on objective grounds for cancellation

In the recent decision in the case of Our Lady & St. John Catholic College v Acorn Travel Group Ltd [2025] 2 WLUK 582, the fact there had been unavoidable and extraordinary circumstances in Spain at the time of the cancellation was not in dispute. However, the parties were in dispute about whether or not the claimant had terminated the contract because of those circumstances. The court considered that the subjective reasons for cancellation were not required as a pre-cursor to the operation of the Regulation. HHJ Malek found that if the defendant’s interpretation of the Regulation was correct, and the court needed to ‘delve into the subjective reasons for cancellation’, an unnecessary hurdle would be put in the way of enforcing these consumer rights, and litigation would gain unwelcome ‘complexity and length’.

Managing customer expectations

Ultimately, travel companies can best manage unavoidable and extraordinary circumstances by being proactive in managing the expectations of their customers.

The role of travel insurance

If a customer needs to cancel their holiday but is not entitled to a refund from the holiday organiser, they may be able to claim the cost of their holiday back from their travel insurer. Travel insurance isn't just for when you're on holiday, but also to protect against unforeseen circumstances that prevent you from going on your trip in the first place. 

As with any insurance policy, there will be certain circumstances which are covered, and those which are not. Travel insurance will usually pay out if you have to cancel or cut short your trip because of illness or the death of a close relative, for example, but perhaps will not pay out where a decision is taken to cancel the holiday due to a change in preference of destination. Travel insurers can avoid paying claims for various reasons, including policy exclusions, non-disclosure of medical conditions, participating in activities not covered by the policy, or if losses are recoverable from another source, like an airline.

Credit card claims as a backup option

Customers may have yet another avenue for refunds if they booked their holiday using a credit card, as they can utilise Section 75 of the Consumer Credit Act to obtain a charge back from the credit card company.

Explore all options

As detailed above, customers have several options for cancellation and all should be explored, subject to the circumstances and reasoning for wishing to cancel the holiday; travel insurers don’t always have to foot the bill.