One of the worst things that can happen to a rental host is a last-minute cancellation. Not only do you lose payment from the guest who had booked your property, but also revenue that you could have earned should the guest have canceled earlier and someone else booked in their place. That’s why many hosts and managers choose to implement Airbnb’s cancellation fee. In this article, we’ll look at the how the Airbnb cancellation policy works, and figure out which cancellation options are right for you.
The purpose of cancellation policies
Cancellation policies are a good way to avoid a financial loss in short-term rental operations. Your earnings depend on reservations coming to term, so why not cover your back in case a guest cancels?
Cancellation charges can help to cover lost revenue if a booking falls through at the last minute, and you’re unable to find someone to replace them. That’s why the majority of hosts on Airbnb, Vrbo, Booking.com, and other short-term rental websites implement cancellation charges.
What’s more, having a booking cancellation fee for your property is a good way to ensure that the guests who book your property actually have an intention of staying there and aren’t just using it as a backup. Much like a vacation rental security deposit, cancellation charges are a way of protecting your business and livelihood.
What the typical Airbnb cancellation policy looks like
According to Airbnb, “77% of consumers surveyed want the ability to cancel or change bookings at the last minute.” Because of this, the typical Airbnb cancellation policy gives at least some flexibility to guests to modify or cancel a new booking with little to no consequences.
Airbnb cancellation charges vary depending on when the guest cancels their stay. Based on industry data, most hosts employ a Flexible or Moderate cancellation policy.
Let’s take a look at how each different policy protects you from Airbnb cancellations.
The different types of Airbnb cancellation policies
It’s important to pick the Airbnb cancellation fee that best protects your Airbnb revenue while still giving potential guests an incentive to book your property. After all, you do still want to increase your vacation rental earnings while attracting as many guests as possible.
Airbnb cancellations can be subject to a number of different policies, ranging from flexible to non-refundable.
Flexible
- Guests are allowed to cancel their booking until 24 hours before check-in for a full refund, and you won’t receive any payment
- If they cancel after that, you’ll be compensated for each night they stay (if they cancel early after checking in), plus one additional night
- Most flexible policy, and helps convert more views into bookings. But riskier.
Moderate
- Guests are allowed to cancel their booking until five days before check-in for a full refund, and you won’t receive any payment
- If they cancel after that, you’ll be paid for the first night, plus each night they stay (if they cancel early after checking in), plus one additional night, plus 50% compensation for all unspent nights
Firm
- You receive a full refund when a guest cancels at least 30 days before check-in
- If a guest cancels between 7 and 30 days before check-in, you’ll receive 50% compensation for all nights
- If a guest cancels less than a week before check-in, you’ll be compensated 100% for all the nights they had booked for. There is no “first night” option if the Airbnb guest cancels after check-in
- If the Airbnb guests cancels mid-reservation, you’ll be refunded for all remaining nights
- Guests can also receive a full refund if they cancel within 48 hours of booking, but only if they cancel at least 14 days before check-in
Strict
- Guests can receive a full refund if they cancel within 48 hours of booking, but only if they cancel at least 14 days before check-in
- Guest that cancel reservations between 7 and 14 days of check-in, will pay 50% compensation for all nights at the booked nightly rate
- If a guest cancels after that, you’ll be compensated 100% for all nights, with the service fee charged to the guest
- This guest refund policy can have a negative effect on converting visitors into reservations
Non-refundable
- You offer two options to guests: your normal cancellation policy, at full price, and a discounted non-refundable option
- If guests choose your discounted rate, you keep the entire payout if they cancel, minus the cleaning fee they paid at check-in
Super Strict 30 days
- Only certain hosts have access to this cancellation policy (you must receive an invitation)
- If a guest cancels at least 30 days before check-in, they receive 50% of the nightly rate
- If they cancel after that, you’ll be compensated 100% for all nights
Super Strict 60 days
- Only certain hosts have access to this cancellation policy (you must receive an invitation)
- If an Airbnb guest cancels before 60 days of check-in, they receive a 50% refund for all nights, and the Airbnbservice fee is still charged to the guest
- If they cancel after that, you’ll be compensated 100% for all nights and the full nightly rate
- This is the best long-term cancellation policy, and favors the host (which is why it’s the most restricted).
Special circumstances
- These strict policies aren’t available to the majority of hosts and are usually applied in limited circumstances
- Special circumstances policies may cover natural disasters, as well as other unexpected events
- There are special circumstances that apply to hosts that employ a Strict cancellation policy in Italy and South Korea
- There are different laws regarding cancellation policies in Germany
How cancellation policies have been slightly altered due to COVID-19
It’s worth noting that Airbnb cancellation fee policies have undergone some slight changes due to the COVID-19 pandemic. Right when the pandemic hit, back in 2020, Airbnb enacted an “extenuating circumstances policy”, which allowed many guests to cancel for a full refund.
However, COVID-19 is no longer considered an “extenuating circumstance” on the Airbnb platform, meaning that the company no longer enforces the broad cancellation refunds that it did back in the thick of the first wave of the Corona virus pandemic.
Given the negative feedback from hosts and managers, it’s unlikely Airbnb will implement a similar policy again. If another variant pops up, strict travel restrictions materialize, or local public health advisories affect travel, we might see an Airbnb Extenuating Circumstances Policy 2.0 (which will hopefully account hosts this time.)
Since the virus hasn’t disappear overnight, many Airbnb guests still have uneasiness when it comes to travel. Therefore, it’s important to keep travelers’ worries about the uncertainty of the current situation in mind when deciding on what type of booking cancellation fee you want to implement for your property.
Which type of cancellation and guest refund policy is the most common?
As we mentioned above, the most common types of Airbnb cancellation policies are the Flexible and Moderate policies. In fact, two-thirds of all hosts cancellation policies are one of these two types:
Flexible
Recap: Guests can cancel their booking up to one day before the check-in date, and you won’t be compensated, or get to collect a service fee. With any cancellations after that, you’ll be compensated for each night they stay (if they cancel early after checking in), plus one additional night.
Airbnb hosts that operate in high turnover markets tend to choose this option. That’s because they have a higher likelihood of filling the gap with a new booking, especially if their Airbnb listing converts well and is listed on the first page of results. It’s also a good marketing tactic since “flexible” can easily be mistaken for “free cancellation.”
Moderate
Recap: Guests can cancel their booking up to five days before checking in, and you won’t be compensated. With any cancellations after that, you’ll be compensated for each night that they stay (if they cancel early after checking in), plus one additional night, plus 50% compensation for all unspent nights.
The Moderate cancellation policy tends to be more popular. That’s because it offers a good balance between giving some flexibility to the guest should they have to modify their travel plans, while providing the Airbnb host with a decent level of protection.
What are the risks of the different Airbnb cancellation policies
Each cancellation policy comes with its own unique risks that you should keep in mind before choosing one for your property. With the Flexible and Moderate policies, you run the risk that an Airbnb guest can cancel within a week of their stay, leaving you without time to find a guest to replace them and the revenue they were going to bring you.
But if you decide to implement a Firm or Strict cancellation policy, you may be missing out on all the potential guests who prefer more protections when it comes to Airbnb cancellations and decide not to book with you simply because of your cancellation policy.
How to know which Airbnb cancellation policy is best for you
Deciding which Airbnb cancellation policy is right for you is all about weighing the pros and cons of each different type of cancellation fee, and all the factors at play in your situation. If you’re just starting out in the vacation rental market, it may be a good idea to use the Flexible cancellation policy, as you won’t have many reviews yet, and it’s a good way to attract some of your first guests.
If you’ve already had a number of guests but are hoping to increase your booking rate, a Moderate cancellation policy is probably your best bet. Guests still have some options when it comes to canceling their booking, and you are given some protection should they choose to do so.
Those with Superhost status or managers with highly coveted property could get away with a Firm or even Strict cancellation policy. However, you will want to make sure that you aren’t decreasing bookings or turning potential guests away from your property just because of your policy on Airbnb cancellations.
Finally, hosts and managers operating in “destination” markets (i.e.: ski towns, week-long beach villas) can get away with the stricter versions of the different cancellation policies. Destination-type rentals are generally booked months ahead of the check-in day.
What should you do now?
Now that you have all the information you need about Airbnb cancellation policies, it’s time to evaluate what type Airbnb profile you have and decide which type of cancellation fee is best for your property. Good luck!
