As an Airbnb host, it’s important to set your cancellation policy in a way that protects your income without alienating potential guests. This is a fine line to walk, and you must take great care in how you handle this issue. Your Airbnb guest refund policy can significantly impact your property’s performance.
The Airbnb Cancellation Policy Dilemma
If you set your Airbnb cancellation policy too loose, you may suffer from many last-minute cancellations. Such a policy can leave you with no revenue and insufficient time to find a replacement guest. Flexible cancellation policies can kill your income.
If you set a strict cancellation policy, however, you may have a difficult time securing guests. Guests want to know that a free cancellation is available to them if something comes up.
Cancellation and refund policies can influence where guests choose to book in the first place. Nobody likes paying cancellation fees, and guests will check your Airbnb refund policy before booking your place.
Whether reasonable or not, an Airbnb guest who decides to cancel wants his money back. So, you must find the best place between the Airbnb strict cancellation policy and the Airbnb flexible cancellation policy.
So, What Is There To Do?
There are different types of cancellation policies, and each one has its own advantages and disadvantages. In order to make the right decision for your situation, you need to understand the different options available to you.
Below, we’ll discuss the most common types of cancellation policies available to Airbnb hosts. We’ll also explain when each type of cancellation policy is most appropriate. Finally, we’ll discuss cancellation policies that may be outside of your control, such as Airbnb’s extenuating circumstances policy.
The Different Types of Airbnb Cancellation Policies
As an Airbnb host, it’s important to set your Airbnb cancellation policy in a way that best protects your business. There are different types of cancellation policies, and each one has its own advantages and disadvantages. In order to make the right decision for your situation, you need to understand the different options available to you.
So, how should you handle it when a cancellation occurs?
Airbnb’s Strict Cancellation Policy
A strict cancellation policy requires guests to cancel their reservations at least fourteen days before check-in. (The guests must also cancel within 48 hours of booking.) If the guest decides to cancel between seven and fourteen days before check-in, he’ll receive a fifty-percent refund. After that, he’ll owe the cost of the entire reservation as a cancellation fee. (However, he’ll typically receive back the cleaning fee, so long as he cancels before check-in.)
As you can see, the Airbnb strict cancellation policy makes it difficult for guests to secure a free cancellation. And in those situations, you’ll typically have sufficient time to secure an alternative guest.
However, while this Airbnb cancellation policy may seem great for hosts at first, it can scare away potential guests. Since most guests who book actually stay, setting a strict cancellation policy may cost you more than it saves.
Airbnb’s Moderate Cancellation Policy
A moderate Airbnb cancellation policy requires guests to cancel their reservations at least five days before check-in. After that, guests must pay for any days they stay plus one additional night and fifty percent for all unspent nights.
So, if a guest books a two-week stay, stays two nights, and then cancels the rest of the trip, the guest must pay for the two nights he stayed plus a third night. However, he will receive a cancellation rebate of fifty percent for the remaining nights.
Obviously, the moderate cancellation policy is more accommodating than a strict Airbnb cancellation policy, but it still provides some protection against no-shows, last-minute cancellations, and post-check-in cancellations. So, this is a popular option among hosts who want some protection but don’t want to scare off potential guests.
Airbnb’s Flexible Cancellation Policy
A flexible policy allows guests to cancel their reservations up to twenty-four hours before check-in for a full refund. If they cancel after that, they’ll have to pay for each night they stay plus one additional night.
This is the most guest-friendly of the Airbnb cancellation options.
Airbnb’s Firm Cancellation Policy
A nice balance between the moderate and strict cancellation policy is the firm policy. Guests can receive a full refund if they cancel at least thirty days before check-in. (If they book between fourteen and thirty days of check-in, they can still receive a full refund if they cancel within forty-eight hours of booking.)
If they cancel between seven and thirty days before check-in, they’ll receive a fifty percent refund. After that, they’re on the hook for the entire fee. (Again, however, the cleaning fee is typically refunded unless the guest cancels after check-in.)
Depending on your market, however, even this may be deemed too strict for guests.
Airbnb’s Super Strict 30 Days Cancellation Policy
This policy is not a standard option. Airbnb must invite you to use this policy, and even then, it’s only available under certain circumstances. (The guest’s trip details can drive this determination.)
Under this policy, if a guest cancels at least 30 days before check-in, he’ll receive a 50% refund. After that, no refund is available.
Airbnb’s Super Strict 60 Days Cancellation Policy
The super strict 60-day policy is the same as the super strict 30-day policy, except 60 is the magic number. The super strict 60 policy is also by invitation only.
Some hosts may offer free cancellations but provide discounts to those guests willing to book a non-refundable stay. This way, the guest consciously takes on the risk of cancellation in exchange for a discount.
Understanding Airbnb’s Cancellation Policy for Long-Term Stays
The reservation details can affect the types of policies that are available. In particular, different options are available for long-term stays, that is, stays of thirty days or more.
Airbnb’s Strict Long Term Cancellation Policy
A strict long-term stay cancellation policy provides a full refund only if he cancels within forty-eight hours of booking and at least twenty-eight days before check-in. If the guest cancels after that, he’ll have to pay for all nights spent plus the lesser of thirty additional nights and the number of nights remaining on the reservation.
Since a long-term reservation blocks off much of your calendar, this is a typical arrangement. It provides you with an amount of protection commensurate with the risk you take by accepting long-term reservations in the first place.
Airbnb’s Flexible Long Term Cancellation Policy
A flexible long-term cancellation policy allows a guest to receive a full refund if he cancels at least thirty days before check-in. After that, he’ll pay for all nights stayed plus thirty additional nights. If fewer than thirty days remain on the reservation, the guest will only pay for all of those remaining nights.
As you can see, given the risks associated with accepting long-term reservations, even the flexible terms provide a significant amount of protection to hosts.
How to Choose the Right Airbnb Cancellation Policy for Your Property
It’s important to decide which of Airbnb’s cancellation policy terms best serves your business. You have to make the Airbnb cancellation policy work for you.
When you’re first starting out, it’s often a good idea to maintain a flexible cancellation policy. You want to attract as many guests as possible so you can garner early positive reviews and gain traction. Once your property is more established, however, you can look at being a bit more strict when setting your own cancellation policy.
We typically recommend looking at the market comps to see what the average booking window is in your area. If your market gets very few last-minute bookings, then allowing for a flexible policy probably won’t work for you because you won’t have time to find a replacement guest. Depending on the market’s booking window, a firm or strict policy may be best for you.
If your market favors last-minute stays, however, a flexible policy may be best. Your goal should be as flexible as your local market will allow.
Note, however, that while you get to set your own cancellation policy, there are occasions where Airbnb’s cancellation policy overrides the host’s cancellation policy. For example, as a result of the Airbnb extenuating circumstances policy, Airbnb allowed for free cancellations during COVID even where the host did not.
The Extenuating Circumstances Policy
The Airbnb extenuating circumstances policy terms outweigh all, so you should keep this in mind to avoid unpleasant surprises. Fortunately, this policy rarely applies, as it’s generally limited to “situations that occur after booking, are unforeseen at the time of booking, and prevent or legally prohibit completion of the reservation.”
The Airbnb cancellation policy terms in these situations are typically limited to
Guests can cancel their reservations without penalty if legal or regulatory changes make traveling to or staying in the Airbnb impossible or illegal. So, when travel restrictions imposed by a governmental agency prevented people from traveling during COVID, Airbnb provided these guests with a refund.
Under the standard Airbnb cancellation policy, guests can cancel their reservations without penalty if the travel location is under a declared state of emergency, including epidemics and pandemics. However, the policy will not apply where the disease in question is endemic to an area—a malaria outbreak in Thailand, for example.
Guests will not be required to pay for reservations in a warzone.
The Airbnb cancellation policy allows guests to cancel without penalty if a natural disaster prevents them from traveling to the location in question. However, this policy does not apply where the natural disaster is common enough in an area as to render it a foreseeable risk. That is, foreseeable natural disasters do not evoke this policy.
So, if you have an Airbnb in Florida, your guest probably can’t cancel because of a hurricane. According to Airbnb policy, by booking a Florida property during hurricane season, the guest takes on the risk of a hurricane interfering with his plans.
Understanding the Airbnb Cancellation Policy
You have little say in the matter should Airbnb decide to evoke this cancellation policy in response to a guest’s request. And note that if Airbnb refunds your guest’s fee, that money comes out of your pocket. Airbnb does not cover it.
On the bright side, however, such policies can apply to you as a host as well. If your house burns down, for example, Airbnb will not penalize you for having to cancel on a guest. The benefits of the Airbnb cancellation policy can cut both ways.
Note, however, that Airbnb may provide a guest with a full refund for other reasons beyond these. If your home is not as advertised (e.g., you listed it as a ten-bedroom home when it only has one) or there are health and safety concerns, Airbnb may allow the guest to receive a full refund, sometimes even after they check out. Airbnb’s cancellations policies can be a lot more expansive than a cursory reading of them suggests.
Of course, if you are guilty of these issues, you probably won’t last very long in the vacation rental business anyway.
Should You Offer Refunds?
Airbnb hosts who have a strict, firm, or moderate cancellation policy in place are not required to offer refunds to guests after the cancellation period has passed. However, having such a policy in place allows the host to make case-by-case decisions about offering refunds. As the host, you are free to offer refunds for cancellations whenever you’d like, whether or not your policy obligates you to do so.
For example, we commonly offer refunds to guests who cancel if we are able to secure a replacement guest. This allows us both to be fair to the guest and ensure their cancellation doesn’t cost us anything. Things happen, and we typically don’t feel right about making extra money from a guest’s misfortune.
You are free to evaluate situations on a case-by-case basis. So, if you want to offer a refund minus any out-of-pocket expenses the cancellation may have cost you, you are free to do so.
What About Airbnb Service Fees?
If you’ve ever stayed at an Airbnb yourself, you’re likely familiar with the Airbnb service fee that tacks an extra fourteen percent or so onto the accommodation fees. If you offer your guest a partial refund, you’ll likely get questions about the Airbnb service fee.
Note that Airbnb will only refund this service fee if you provide a full refund to the guest. If you offer only a partial refund, Airbnb keeps the entire fee. They don’t prorate it. So, this is part of the Airbnb cancellation policy that’s important to understand.
Knowing this on the front end and communicating it to your guest can help reduce your confusion.
Consequences of Cancelling a Guest’s Reservation
We’ve talked extensively about what happens when a guest cancels a reservation, but what about when a host cancels? What are the policies there?
In short, do absolutely everything you can to avoid canceling a guest’s reservation. When an Airbnb host cancels a guest’s reservation, there are many negative consequences, none of which are particularly pleasant.
Leaving a Negative Review on Airbnb
One serious consequence of canceling a guest’s reservation is the negative review you may receive. Not only may the guest leave you a bad review, but the Airbnb system will typically leave an automatic review indicating that you canceled on a guest.
This can be damaging to the host’s reputation and may dissuade future guests from booking a reservation with him. No one wants to risk losing their reservation at the last minute.
Airbnb will also typically block off those canceled dates so that you cannot rent your property to anyone else. This is to prevent hosts from canceling guests for discriminatory or other inappropriate reasons.
The idea is, of course, that if you need to cancel those dates, then it should be because your property is absolutely not available. And finding out you undercharged a guest for a high-demand weekend, for example, is no excuse.
If you cancel on a guest, Airbnb may also fine you. That’s right. There can be significant financial penalties for canceling on a guest, up to $1,000.
How much you’re charged depends on how much notice you give the guest. Below are the current Airbnb policies. Note that Airbnb recently changed these to make canceling on a guest much more painful.
More Than 30 Days Prior To Check-In Date
If you give the guest more than 30 days’ notice, you will be fined 10% of the reservation amount. The reservation amount includes the nightly rate and cleaning and pet fees. Taxes and guest fees, however, are excluded.
More Than 48 Hours But Less Than 30 Days
If you give the guest more than 48 hours but less than 30 days prior to the check-in date, Airbnb will fine you 25% of the reservation amount.
Less Than 48 Hours Prior to The Check-In Time
If you cancel on a guest less than 48 hours prior to his check-in time, the fee is 50% of the reservation amount for the nights not stayed. So, if you cancel on a guest after they have already arrived, the fee will not be charged against any days you allowed him to stay.
Lose Superhost Status
Canceling on a guest can also cost you your Superhost status, which can have a big impact on where your property appears in the search results.
So, obviously, the financial implications for canceling on a guest can be quite significant.
So, in sum, never cancel on a guest unless it is absolutely necessary. This means that even if a guest asks you to cancel their reservation, do not do it for them. Direct them to cancel online themselves.
And should you absolutely have to cancel a reservation, contact Airbnb first. Tell them the situation. If the cancellation qualifies for a penalty-free cancellation under their policy—your house burned down, for example—they will cancel the reservation themselves without penalty.
Never ever cancel a reservation on your own; always check with Airbnb first. You may have special circumstances that allow you to escape the penalty.
Remember, as an Airbnb host, one of your responsibilities is to provide great customer service to your guests. If you aren’t prepared to honor your reservations, you shouldn’t be hosting in the first place. Those willing to cancel reservations simply should not become hosts.
In conclusion, understanding Airbnb cancellation policies is key for hosts who want to protect their rental income while still providing a great experience for their guests.
By being aware of Airbnb’s cancellation policies, hosts can keep their rentals full and retain more of the booking fees as profit. With a little know-how, Airbnb hosts can easily maximize their rental income and keep their guests happy.
Remember that you must offer great customer service. So, make your cancellation policies as guest friendly as possible, though within reason.
If you’re interested in learning more about how Weekender Management can help you get started in real estate, schedule a call with us today!