If you are posting a vacation rental on Airbnb, they currently provide four cancellation policies a new host must choose from. Plus, there is an additional policy that affects all reservations of 28 nights or longer. Picking your Airbnb cancellation policy gives you some control over your income.
Warning About Airbnb
Guests will regularly ask you to waive your cancellation policy. Airbnb will step in and attempt to sway you on the guest's behalf. Ironically, Airbnb robotically recites their own policies as evidence why they cannot do something. However, when it comes to mediating host versus guest issues, they often take the side of the guest. Always keep in mind that this is your business, and you need to protect it. If you think waiving your policy will get you future bookings and provide a long-term benefit, do it. If you made major plans and spent money to be out of the house for a guest wanting to cancel, stick to your policy.
My Airbnb Cancellation Policy
Everything about how my business runs is different from how a hotel functions. A traditional hotel can accept more guests than their number of rooms because there will always be no-shows. When you run a one-home vacation rental business, overbooking is clearly not possible. Hotels employ full-time housekeeping staff whereas our business utilizes a third-party cleaning service that requires a reasonable amount of time to coordinate their scheduling.
Especially unique is that my family occupies the home, so logistics, like booking our own hotel room or planning around activities, require advance planning. For these reasons, I do have a specific preference for my personal cancellation policy, which I will discuss later in the blog.
I’m giving you the CliffsNotes version of the four cancellation policies, but you can read the full descriptions of each here: https://www.airbnb.com/home/cancellation_policies
Airbnb Cancellation Policy FLEXIBLE:
If a guest cancels more than 24 hours before your stated check-in time, the guest receives a full refund.
Assuming they cancel less than 24 hours before your stated check-in time, guest pays for the first night only.
If travelers cancel mid-reservation, you will not be paid for nights beginning 24 hours after they cancel.
This policy is better suited to budget friendly accommodations in high tourist destinations. If you intend to follow my business model of renting out your primary home, selecting this policy would be a disaster. You could end up paying for your personal hotel on nights beyond when your guest is paying. I imagine this policy only works for hosts who rent out a room in their home and don’t need the income.
Airbnb Cancellation Policy MODERATE:
If a guest cancels more than 5 days before your stated check-in time, the guest receives a full refund.
Assuming they cancel less than 5 days before your stated check-in time, guest pays for the first night in full and 50% of additional nights.
If travelers cancel mid-reservation, you will be paid only 50% of nightly rate beginning 24 hours after they cancel.
This policy doesn’t fit very well with my business model, either. For me, any policy that allows a mid-reservation cancellation that reduces expected revenue is a deal-breaker. Once a guest checks in, I deserve to know how much income will be deposited in my business account. Furthermore, the chance of getting rebooked on short notice are very slim for my property which houses 15 people.
Airbnb Cancellation Policy STRICT (GRACE PERIOD):
If a guest cancels within 48 hours of booking and at least 2 weeks prior to arrival, the guest receives a full refund.
Assuming they cancel 7 days before your stated check-in time, the guest receives a 50% refund.
If travelers cancel less than 7 days before your stated check-in time, the guest is not entitled to any refund.
This is my preferred cancellation policy.
Essentially 48 hours after you receive the booking, you can be fairly certain in making and keeping plans for your family. I prefer this policy over the standard Strict because many new users on Airbnb will book a home before speaking to their group and end up canceling a few hours afterward or because of various, unforeseeable reasons. New short-term rental visitors are vital to the growth of the platform. This policy gives them 48 hours of buyers remorse time. I don't want people to feel screwed out of money and become sour on Airbnb.
Airbnb Cancellation Policy STRICT:
If they cancel 7 days before your stated check-in time, the guest receives a 50% refund.
If they cancel less than 7 days before your stated check-in time, the guest is not entitled to any refund.
When I first started using Airbnb, this was my cancellation policy. But then, there were instances where guests would book my house five months in advance only to get back to me an hour later because they didn’t realize how far it was from a wedding site or their sister didn’t want her kids sleeping on bunk beds. It was hard to stick to this policy since I’m a decent human and my goal isn’t to swindle thousands of dollars from overly anxious group organizers. As soon as Airbnb launched the Strict (grace period) option, I switched immediately.
The Real Deal
That concludes my super boring post of Airbnb’s four main cancellation policies. Whew. Glad we got that out of the way.
As much as I wish I could stick to my policy 100% of the time, in all honesty, I don’t. For the most part, the cancellation policy serves as a deterrent for guests who will book a home with little probability of actually utilizing it. But when a guest reaches out to me with an agonizing sob story about family members no longer speaking or a financial crisis preventing them from travel, I have a heart. Yes, I know I’ve said to run your vacation rental as a business and keep emotions out of it, but sometimes we have to consider our humanity. I would rather earn slightly less profit than stick to a policy that creates massive complications for a fellow human.
Before I let you go, I’ll give you a quick run-down of Airbnb’s final policy affecting long-term rentals. This particular policy hasn’t been an issue for my business model since my nightly rate is so high, but if you’re someone who will be renting an individual room in your home, this is likely to affect you.
Airbnb Cancellation Policy LONG TERM (28+ NIGHTS):
If they cancel before your stated check-in time, guest pays for the first month of reservation.
If they cancel after your stated check-in time including during their stay, guest pays until the end of their reservation (if under 28 days left) or for one month after cancellation (if more than 28 days left).
Unlike the other policies which give you options for cancellations, this policy is automatic. Long-term rentals make your space unavailable for booking by other guests for more than 28 nights at a time. Airbnb realizes that you deserve compensation in the event that a cancellation occurs since you most likely missed out on many other potential bookings. This Airbnb cancellation policy seems like a fair balance for appeasing both sides of the transaction.
I do hope this information has provided you with more insight than simply using blind luck in picking the perfect Airbnb cancellation policy for your listing. Please feel free to email me at email@example.com if you have any questions at all.