As a host, you want financial certainty and zero cancellations.
Your guests, however, want maximum flexibility with the ability to cancel at the last minute (without any penalties).
Research suggests guests aremore likely to book listings with a more flexible cancellation policy, yet that exposes you (the host) to the overwhelming majority of financial risk of last-minute cancellations.
Is it a zero-sum game?
Or is there a happy medium you can reach that matches your risk to reward when selecting the right cancellation policy?
This post attempts to answer these questions and break down each of the eight cancellation policies in layman’s terms so that you can make informed decisions that best fit your risk thresholds.
Airbnb Cancellation Policy: The Rapid Breakdown
Airbnb has eight different tiers of the cancellation policy and a non-refundable option.
They are:
- Flexible
- Moderate
- Firm
- Strict
- Super Strict (30 days)
- Super-Super Strict (60 days)
- Strict Long-term
- Firm Long-term
Each Airbnb cancellation policy has its own set of restrictions, penalties, and fees.
These policies are enforced to protect hosts and guests alike. You can choose the standard and long-term policies that work best for you, and there are also invitation-only policies available to only certain hosts under special circ*mstances.
As this post is directed at Airbnb hosts, I’ll discuss the merits of each cancellation tier and the pros and cons of choosing each one.
The Airbnb Guest Cancellation Policy Dilemma
Airbnb is a two-sided platform with hosts on one side and guests on the other. Both sides are important to the success of Airbnb; however, both sides are not equal.
When Airbnb first launched, the biggest problem was onboarding hosts willing to open their homes to strangers. The more new hosts they could onboard, the more guests they could accommodate.
For that reason, hosts were very well protected and had favorable cancellation terms and requirements.
Times have changed, however, and the value proposition has switched.
With Airbnb’s reach spreading around the globe, now operating in over 81,000 cities, and providing more than 5 million unique places to stay, the question is no longer “How to onboard new hosts”; instead, it’s “How to onboard new guests.”
For this reason, hosts are getting squeezed, and the incentives increasingly align in the guests’ favor.
As a result, hosts are incentivized to take on more risk and more exposure to late cancellations in exchange for preferable visibility in Airbnb’s search results pages.
Therein lies the hosts’ dilemma.
How much exposure to cancellations can you afford to take?
Mastering the cancellation policy is one of the ways to boost your STR performance.Download our guideto learn 8 more approaches.
Airbnb Flexible Cancellation Policy: Full refund up to 24 hours before check-in.
The ‘Flexible’ policy gives maximum freedom to your guests.
Your guests are entitled to a full refund up to 24 hours before check-in. If they cancel after that, you’ll be paid for each night they stay at your property and one additional night.
As a host, you are exposed to the cancellation whims of your guests, and you’re vulnerable to lost earnings without recourse.
Conversely, guests are more likely to book, safe in the knowledge they can cancel at any time (up to 24 hours prior).
Pros
- More bookings
- Better visibility in Airbnb’s search
- More flexibility for your guests
- No commitment needed for your guests
Cons
- Exposed to last-minute cancellations
- Potential loss of earnings
- Little to no compensation
- You take on all of the risk
Who this is suitable for:
Airbnb’s flexible cancellation policy suits newer hosts looking to populate their calendars with maximum bookings. It’s also better suited to smaller, cheaper listings with lower average nightly stays.
Avoid the ‘Flexible’ policy if your minimum nightly stay is above three nights and your listing is not a budget option.
Airbnb Moderate Cancellation Policy: Full refund up to 5 days before check-in
‘Moderate’ is the most popular cancellation policy. It reduces a little of the exposure to last-minute cancellations for hosts and offers guests reasonable flexibility and peace of mind.
Guests can cancel until five days before check-in and get a full refund, and you won’t be paid. If they cancel after that, you’ll be paid for each night they stay at your Airbnb, plus one additional night, plus 50% for all unspent nights.
The Airbnb moderate cancellation policy gives hosts more financial certainty but still exposes them to substantial risk.
Pros
- Guestscan’tcancel at the last minute without recourse
- More financial certainty
- Less exposure to people abusing the system
- Preferable cancellation terms for guests may result in more bookings
Cons
- You still take on the majority of the risk
- The cancellation rebate is considerably lower than what you’d have earned
- May be hard to fill the calendar at late notice
Who this is suitable for:
‘Moderate’ suits established hosts with budget listings and lower minimum nightly stays.
Avoid ‘Moderate’ if your minimum nightly stay is over 3+ nights or if you have a premium listing.
Airbnb Firm Cancellation Policy: Full refund up 30 days before check-in
‘Firm’ is where the ball starts to swing back into the host’s favor.
Airbnb’s firm cancellation policy can be a better alternative to stricter policies, providing confidence for guests booking trips further ahead and protecting hosts from last-minute cancellations and losses.
Under this cancellation policy, guests who book far in advance have better flexibility to cancel a booking for free up to 30 days before check-in. Guests can also receive a full refund if they cancel within 48 hours of booking and if the cancellation occurs at least 14 days before check-in.
If they cancel between 7 and 30 days before check-in, a host will be paid 50% for all nights. If guests cancel their booking less than seven days before check-in, you’ll be paid 100% for all nights.
Pros
- You can handle cancellations with enough advance notice
- More time to get another booking if a guest cancels
- More peace of mind
Cons
- You still take some risk
- Some potential guests may not like that they need commitment to their reservations
Who this is suitable for:
The Airbnb firm cancellation policy is suitable for hosts whose rental spaces are in demand year-round, so even if a guest cancels and receives a partial refund, you still have enough time to get last-minute bookings.
Airbnb Strict Cancellation Policy: Full refund up to 14 days prior to check-in
In this tier, you also have protection over thefull amountof your booking up to 7 days before arrival. Otherwise, you get a 50% refund. Guests can only get a full refund if they meet two conditions—they must cancel within 48 hours of booking, and the cancellation must occur at least 14 days before check-in.
Although this policy is labeled ‘Strict,’ this is the fairest (for all parties involved).
Guests have ample time to cancel and receive a full refund, and hosts have protection against last-minute cancellations, with adequate time to re-book the vacant dates.
Pros
- You’re entitled to a full refund
- More time to re-book vacant dates
- Less exposure to financial loss
- More peace of mind
- More financial certainty
Cons
- Guests may be less inclined to book
- Requires more upfront commitment/friction for guests
- Could lead to reduced bookings
- May lead to less visibility in search pages
Who this is suitable for:
Airbnb strict cancellation policy is suitable for established hosts who have accrued several positive reviews and have a listing that’s in high demand.
It’s also suitable for premium listings and listings with a minimum night stay of 3+.
Super Strict 30 Days: 50% refund up until 30 days prior to check-in.
‘Super Strict 30 Day’ cancellation policy isonlyapplicable in certain circ*mstances and is strictly by invitation:
- Guests must cancel at least 30 days before check-in to get a 50% refund for all nights.
- You’ll be paid 100% for all nights if they cancel after that.
Access to this ‘Super Strict’ policy is generally reserved for premium listings with big price tags.
If you’re not in this bracket, then this policy likely won’t apply to you.
Pros
- Security against big financial losses
- Increased financial certainty
- Reduced cancellation rate
Cons
- Added friction for guests looking to book
- May result in fewer bookings
Who this is suitable for:
Suitable for hosts with premium listings upwards of $1000 per night who are exposed to considerable financial risk from late cancellations.
Super Strict 60 Days: 50% refund up until 60 days prior to check-in.
Like the ‘Super Strict 30-day’ policy, this one is invite-only!
I’ve heardrumors of mid-priced listings being granted the 60-day policy; however, it’s mainly reserved for the mega-expensive listings with the biggest risk.
Pros
- Peace of mind
- Financial certainty
- Ample time to re-book vacancies
- Full control
- Reduced cancellations
Cons
- More risk for your guests
- May reduce the number of bookings
Who this is suitable for:
The ‘Super-Super Strict 60-day’ policy is suitable for ultra-high-end listings upwards of $2000 per night that are exposed to considerable financial risk from late cancellations.
Long-Term Cancellation Policies
Not all hosts are willing to open up their homes for long-term guests; however, these cancellation policies ensure that if you do, you at least have a financial cushion to fall on.
This protection is given to hosts regardless of their previously selected guest cancellation policy.
Your ‘Long-Term’ cancellation policy applies to reservations of 28 consecutive nights or more and overrides your standard policy. You can choose between two options.
Firm long-term cancellation policy
The firm long-term cancellation policy gives guests more flexibility than the strict policy. To receive a full refund, guests must cancel their reservation at least 30 days before check-in. If a guest cancels after that, you’ll be paid 100% for all nights spent and 30 additional nights. If fewer than 30 nights remain on the reservation when the guest cancels, you’ll be paid 100% for all remaining nights.
Strict long-term cancellation policy
If you choose a strict long-term cancellation policy, guests who book your home for long-term can receive a full refund only if they cancel within 48 hours of booking and the cancellation occurs at least 28 days before the check-in date.
If guests cancel after that, you’ll be paid 100% for the nights already spent, plus the next 30 nights from the reservation.
If fewer than 30 days remain on the reservation when the guest cancels, you’ll be paid 100% for all remaining nights.
Pros
- Incentivized to take longer-term bookings
- Ample time to re-book vacant dates
- Financial certainty
- Little exposure to risk
Cons
- Long-term guests may abuse your property more
- Long-term stays usually command a discounted rate, so you may make less overall
Who this is suitable for:
This policy is automatically enforced for all bookings over 28 days. More appropriately, you must ask yourself whether you want to host long-term guests in the first place.
Non-Refundable Option
You can add a non-refundable option to your listings, giving you greater protection against cancellations. A non-refundable option is a discount you can offer on top of other discounts and cancellation policies. This option allows guests to book your listing at a lower price, but they can’t cancel for a full refund unless a Major Disruptive Event impacts their reservation.
Here is how it works:
- You set your discount (typically 10% off the base price)
- Your discounted price appears in search results
- At check-out, guests can select your standard rate, and your cancellation policy applies to the reservation, or they can choose the discounted, non-refundable rate
- If guests select a non-refundable rate and cancel, you keep your entire payout for all nights booked, minus the cleaning fee if they cancel before check-in
Travelers can book your non-refundable rate until the cancellation policy you set for your listing starts to have an effect:
- Flexible: up to 1 day before the desired check-in date
- Moderate: up to 5 days before the desired check-in date
- Firm: up to 14 days before the desired check-in date
- Strict: up to 14 days before the desired check-in date
Remember that a reservation would be eligible for a non-refundable rate if the check-out date is within 60 days. The discount doesn’t apply if the reservation is booked with a pre-approval orspecial offer.
Pros
- Guests like discounts and may be more inclined to book
- Greater protection from cancellations
- Hosts keep the payout if guests cancel
Cons
- You get less revenue for completed bookings
- Guests may still get a full refund if they cancel the reservation impacted by a Major Disruptive Event.
Who this is suitable for:
You can try a non-refundable option if your guests cancel often and during theslow seasonwhen the demand is lower to attract more bookings and prevent your Airbnb rental from sitting empty.
Refund Options
Two scenarios justify a refund for a guest: a cancellation of the reservation (either on the part of the host or the traveler) or an unexpected incident that occurred during their travels. We have discussed different types of Airbnb cancelation policies, so let’s talk about a refund when a guest suffers a travel incident.
TheAirbnb guest refund policyspecifies travel issues that are eligible for a refund:
- Inability to access the accommodation—a host cancels a reservation within 24 hours of check-in, changes a reservation to another listing without the guest’s consent or does not provide the keys and/or security code.
- Inaccurate listing details—critical features described to a guest at the time of booking are flawed or unavailable. This inaccuracy can be the wrong size and number of rooms, location (proximity), or when promised amenities are not provided or don’t function, such as hot tubs, pools, electrical, heating, or air conditioning systems, major kitchen appliances, etc.
- The place is not safe or clean, contains safety or health hazards that can adversely affect the guest’s stay, or there are pets in the accommodation, and the information about them was not disclosed in the listing.
If guests experience a travel issue, they should submit a claim to Airbnb, and it can intervene as a mediator. Airbnb has the final say in what happens and decides whether to reimburse or re-book a guest who suffers a travel issue. Guests must provide photos, videos, and other documents to support the request. They are also required to provide proof that they tried to contact the host to solve the problem directly.
Airbnb Host Cancellation Policy
Airbnb’s host cancellation policy protects guests and ensures they have a pleasant experience. Airbnb has implemented some measures to address cancellations by hosts that can disrupt guest plans and undermine their confidence in the Airbnb community.
If a Host cancels a confirmed reservation, Airbnb may impose fees subject toa minimum cancellation fee of $50from a host payout or other consequences.
The fee is calculated based on the reservation amount, including the base rate,cleaning fee, andpet fees, but it excludes taxes and guest fees. It also depends on when the reservation is canceled.
- If the booking is canceled 48 hours or less before the check-in date or after check-in, the fee is 50% of the booking amount for the nights not stayed.
- If the confirmed booking is canceled anytime between 48 hours and 30 days before check-in, the fee is 25% of the booking amount.
- If a host cancels any reservation more than 30 days before check-in, the fee is 10% of the reservation amount.
- For longer stays of 28 days or more, the cancellation fees are calculated as a percentage of the non-refundable portion of the reservation as of the time of cancellation up to the 30 days following the cancellation date.
Besides, when you cancel a booking as a host, your calendar remains blocked for the canceled reservation’s dates, and you won’t be able to accept another booking for the same dates.
Conclusion
Ultimately, the cancellation policy you choose will depend upon your current circ*mstances as a host.
However, now that you have a deeper understanding of Airbnb’s cancellation policy, the pros and cons, and how they can affect your bottom line, you should be able to make better decisions moving forward.
Download ourguide for more hands-on hacks to boost your STR business performance.
For what it’s worth, I operate with a ‘Strict’ policy (and have been for the past four years), and I don’t feel like it’s negatively impacted my booking rate; however, we’re all at different stages as hosts so this may not be appropriate for you.
It is worth remembering that it is your property, and you call the shots, so make whatever the best decision is for you.
