Vacation Rentals, which operates the Hoseasons and brands in the UK, has agreed to offer refunds for cancelled bookings following action by the competition watchdog.

But other companies are facing further scrutiny over their policies following thousands of consumer complaints, the Competition and Markets Authority (CMA) warned.

Vacation Rentals is the legal entity which operates a number of brands, including Hoseasons and parent Awaze in the UK.

It voluntarily changed its policy after originally failing to offer refunds to all customers whose trips were cancelled, according to the CMA.

The change came after the CMA announced that it would be focusing on the holiday accommodation sector as part of an investigation into cancellations and refunds.

The CMA has now secured a formal commitment from Vacation Rentals that customers will have the option of a full refund if a booking has been cancelled because of restrictions associated with the coronavirus outbreak.

The firm is one of a number of companies that have been reported to the CMA’s Covid-19 Taskforce, set up to monitor market developments and identify “big problems” facing consumers as a result of the pandemic and the lockdown.

The Covid-19 Taskforce has received around 4,500 reports about UK holiday rental companies, with complaints about Vacation Rentals making up a significant proportion of those reports.

Other holiday lets firms have not yet agreed to do the same as Vacation Rentals, and the CMA said its investigation is continuing.

Common complaints include companies refusing to provide full refunds at all or offering only vouchers instead of cash refunds.

A Vacation Rentals spokesperson said: “We have been offering the option of refunds to all customers with a holiday during the government imposed lockdown period since the CMA published its guidance on April 30.

“This change predated any investigation by the CMA and was made as we felt it was the right thing to do.

“We believe the CMA has appreciated our co-operation and the open approach we have taken.”

The authority said: “The CMA will continue with its inquiries into the holiday accommodation sector, which may ultimately lead to court action against companies which fail to comply.”

Holiday accommodation was named as a sector of particular concern when the CMA launched its investigation into cancellations and refunds, along with weddings and private events and nurseries and childcare providers.

It has since expanded the scope of its investigation to also include package travel.

CMA chief executive Andrea Coscelli said: “Our Covid-19 Taskforce is working hard to ensure that consumers get what they are entitled to, so it’s good news that Vacation Rentals has agreed to offer people the refunds they are due.

“We welcome this step and other holiday lets firms must now follow suit.

“We know the pandemic is presenting businesses with challenges too, but it’s not right that people are being left hundreds or even thousands of pounds out of pocket – on top of having to sacrifice their holidays.

“Consumer protection law exists for a reason; businesses must observe the law or face the possibility of enforcement action.”

Which? Travel editor Rory Boland said: “We reported Hoseasons and to the CMA for using potentially unfair terms and conditions to deny refunds for cancelled holidays, so it is good to see these companies have now made a commitment to the regulator to ensure customers will receive the refunds they are entitled to.

“While it is positive to see some firms changing their policy on refunds, there are still many customers struggling to get their money back for cancelled holiday accommodations and package travel bookings.

“The CMA must continue to investigate these sectors and come down strongly on any firms found to be flouting the law.”

Competition law expert Jonathan Compton is a partner at law firm DMH Stallard, said in response: “This is a warning shot.

“Many other UK holiday businesses have so far not made the formal undertakings given by Vacation Rentals.

“By investigating one of the leading businesses in the sector and by getting them to agree formal undertakings, the CMA is serving notice on those businesses of whom it has received complaints, that it is prepared to take enforcement action.”

Webcast: Lee Hayhurst speaks about domestic travel to Awaze chief executive Henrik Kjellberg