Consumer watchdog Consumer NZ is challenging Airbnb and Bachcare's "unfair" cancellation terms, lodging a formal complaint with the Commerce Commission.
Customers were left hundreds of dollars out of pocket when the country went into Alert Level 4 lockdown and they couldn't travel, Consumer NZ chief executive John Duffy says.
The booking sites refused refunds with strict cancellation policies.
"Consumers who had booked accommodation but couldn’t travel because of the lockdown told us they’d been denied a full refund," Duffy says.
"Even though they couldn’t use the accommodation, through no fault of their own, they were informed they wouldn’t get their money back. That’s plainly unfair."
Commerce Commission has the power to investigate and take court action if it finds the policies breach the Fair Trading Act.
Duffy says on Airbnb, customers could lose 50 to 100 per cent of the accommodation fee even if they give reasonable notice of the cancellation.
However, if an Airbnb host wanted to cancel the booking, it would face, at most, a $145 charge.
Meanwhile, Bachcare would keep the customers' entire accommodation fee and service fee, even if it was cancelled two months in advance.
Duffy says the fees are excessive and unjustified.
"If an accommodation provider imposes a cancellation fee, it can’t just charge whatever it wants," he says.
"Companies must have a legitimate basis for their fees and take into account the fact the property could be relet to another customer."
A spokesperson for the Commerce Commission confirmed to 1 NEWS they'd received the complaint and would be looking into it.
In a statement, a Bachcare spokesperson said: "We take our obligations under the Fair Trading Act very seriously and work to ensure the balance between property owners and guests is fair.
"Since the unprecedented events of Covid-19 we’ve issued over 5,000 refunds, equivalent to almost 15% of our annual bookings.
"We review our terms and conditions on a regular basis and we will consider this feedback from Consumer NZ in our ongoing review.
"When the pandemic first struck, we were overwhelmed and worked tirelessly to deal with a tidal wave of cancellations.
"During the August lockdown, all impacted eligible Bachcare bookings received a credit, we do what we can to accommodate refunds for guests with extenuating circumstances and encourage customers to reach out to us if they feel they should qualify for a refund."
Airbnb has been contacted for comment by 1 NEWS.