When you are an Airbnb host cancellations are going to happen. They are annoying and often rather inconvenient, but a necessary part of the process.

As a smart business person, you’ll want to do all that you can to make sure your interests are taken care of while providing a great guest experience for your guests. In order to do this, you need to implement the correct Airbnb cancellation policy…

Types of Airbnb Cancellation Policy

For your Airbnb cancellation policy, you’ll be faced with three options; Flexible, Moderate, and Strict (grace period).

It should be noted that there are other cancellation policy options available for special circumstances, but they require Airbnb support approval. I’ll be focusing on the three most common options. Here’s a quick summary:

The Flexible Policy

This allows a guest to cancel up to 24 hours before their scheduled check-in without penalty. This one is not a great deal in my opinion as you’ll get nothing and it’s tough to get next day and same day reservations after a guest cancels.

The Moderate Policy

This option means if the guest cancels at least five days before check in they are not penalized and you’ll get nothing. However, if they cancel less than five days in advance, you’ll get 50% of your total nightly rate. A better deal than the Flexible option for sure, but you could still be left scrambling to fill the vacancy with what, for you, is very short notice.

The Strict Policy

This is my preferred choice, as it states that a guest can get 50% of their money back if they cancel a full seven days before check-in. If they do not, you’re paid in full. If the booking is made more than two weeks before check-in, the guest has the option to cancel 48 hours after confirming their reservation for a full refund.

Which Airbnb Cancellation Policy Is Right for Me?

This is a very important question but not one with a particularly cut and dried answer. The pool of available travelers and the demand for your listing has to be taken into consideration.

If you are just starting out on Airbnb, it’s almost always best to go with the flexible or moderate option, for at least the first month. The more flexible the cancellation policy is, the more attractive the offer will be to travelers. Once you have received several great reviews, you can reassess things and as the demand for your property grows, consider implementing the better-for-you strict cancellation policy.

Refunds

So, a guest is canceling their reservation and asking for a refund. What now?

Before we go any further, let’s define the word reserve. It means: “To arrange for, to be kept for the use of a particular person and not given to anyone else.” So when you take a reservation, you’re committing to your guest that the listing will be theirs on their desired dates and not offered to anyone else.

It’s very important to be fair. Case in point, yesterday afternoon someone booked my place for a same night check-in. Then, four minutes later she canceled. Since I have a strict policy I could have kept all her money, but one of the reasons I have a strict policy is so I can recoup losses due to someone blocking my calendar with their reservation, especially if I have to reduce the rate to get the night re-booked.

As this guest only blocked my calendar for four minutes, there wasn’t a loss to me. I gave her all her money back. However, if this person would’ve blocked my calendar for a longer period of time (let’s say 24+ hours), I wouldn’t be inclined to give her a refund.

You chose your policy and it’s posted on your listing page for everyone to see. Guests will be required by Airbnb to agree to the cancellation policy before they reserve. Despite all of that, even though you have a clearly stated your cancellation policy, you will get people who cancel and then ask for a refund they are not technically entitled to. Hey, you don’t ask, you don’t receive right?

What I’ve Learned

I was losing money
When I started hosting I had a flexible cancellation policy. After a few cancellations per month, I noticed that If the night remained vacant I lost; but even if it was re-booked by another guest, I lost money. This is because if you’re using a dynamic pricing strategy, the price of a night decreases as it gets closer to passing on the calendar.

I was doing more work
Cancellations also create more work to process because you—or your cleaning crew—likely base your cleaning schedule around reservations, so cancellations throw everything out of whack. The cleaning is canceled because the property is no longer booked. However, if you managed to get a replacement reservation you’ll need the cleaning rescheduled, and fast. In a nutshell, cancellations are an administrative burden that gets old really quickly.

Remember your “Why”
I’ve been doing this long enough to know that everyone has a story of why they should get special treatment and not be held to an existing policy. Some of those stories will be really really good, and they will tug at your heartstrings. You will be tempted to bend the rules for these sad storytellers. But here’s my standard advice… don’t.

You have a story too. Always remember your big “Why.” Why you’re in this business and why you are working so hard. You don’t have to tell the guest your story because there’s no reason to engage in a dialogue about who needs the money more or who’s story is more touching. You just need to stick to your policy and honor your commitments and ask that guests honor theirs too.

Stick to your guns
So when faced with those guest sob stories, stick to your guns and remember that your policies are posted for everyone to see and agree to before they reserve. And really, the responsible thing travelers should do is to buy travel insurance. You’ve held up your end of the agreement by not renting your place out for the nights they reserved, so guests need to hold up their end of the agreement and pay you according to the cancellation policy you both agreed to.

Sound harsh? Consider this: some guests will continue to shop around for a better deal after they’ve reserved a listing. Then they’ll try to cancel with you if they find a better deal. I’ve had guests tell me there’s absolutely no way they can make it to stay at one of my places—no way no how. But, after they realize they’re locked into the Airbnb cancellation policy and wouldn’t get their money back, they somehow magically figure out a way to make it!

So don’t let cancellation requests get you down and don’t let a traveler pressure you into giving a refund when they simply are not entitled to one. Be polite and hospitable but also know that it’s OK to stand your ground and stick to your Airbnb cancellation policy.

When I make exceptions
There are times, on a very case-by-case basis, that I will refund a guest after a cancellation. Watch this video to see about why I made an exception with one guest.

Happy hosting,

P.S. Subscribe to my YouTube channel to get more tips and tricks about running a successful Airbnb. If you found this post helpful you will also like Why you want Superhost Status on Airbnb, How to Get It and How to Keep It