The self-catering holiday giant behind Hoseasons and Cottages.com has agreed to make full refunds for bookings that had to be cancelled because of the epidemic.
The companies, owned by parent Vacation Rentals UK, had initially refused to hand money back, insisting that it would only allow customers to rebook their trips at a later date.
It has performed a U-turn after complaints poured into the Competition and Markets Authority (CMA) watchdog.
The CMA said its Covid-19 taskforce had received around 4,500 reports about UK holiday rental companies, with complaints about Vacation Rentals UK making up a “significant proportion”.
CMA chief executive Andrea Coscelli said: “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.”
Hoseasons and its sister brands, which between them offer thousands of cottages, lodges and holiday park locations for rent across Britain, said customers could not take up their bookings after government guidance on non-essential travel on March 21.
Some customers were unhappy about transferring their trips to a later date when they would be more expensive.
Holiday Rentals UK is part of a European-wide holiday company sold to Californian-based private equity business Platinum Equity for £1 billion in 2018. Last year it made a pre-tax profit of £22.8 million.
