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First thing, credit the renter something back. While my vacation would not be "ruined", you have a customer to satisfy. I would make a token gesture that said I Am Sorry, and here's for your trouble. Flowers + gift card? Do something for them NOW.
Now, who is wrong or right is a matter that does not concern your renter. I think you were wrong.
bookings from waitlist should always prompt a call in to make sure of what you have. if your confirmation letter did not specifically say Oceanfront and/or there is a disclaimer that says unit type not guaranteed, you should have called.
Before you rented it to someone else relying on oceanfront, regardless of whether the reservation was from waitlist or not, you should have confirmed unit view, or relayed uncertainty, such as, "you can request oceanview when you check in, it's not guaranteed".
I'm sorry. That's the way I see it. But definitely pacify those renters at your soonest. You need a happy outcome but there is nothing you can do about unit assignment at this point. If the resort will sell them an upgrade, you should pay for it.
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