Airbnb cancellation policy - A host's dilemma [Recommendations Inside] | Smartbnb

Airbnb cancellation policy - A host's dilemma [Recommendations Inside] September 18, 2019

By Rowan Clifford

Author of Airbn'b'Smart and Smartbnb user

As a host you want financial certainty and zero cancellations.  

Your guests, however, want maximum flexibility with the ability to cancel last minute (without any penalties).

Interests aren’t exactly aligned at this point...

Research suggests guests are more 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 it comes to selecting the right cancellation policy?

This post attempts to answer these questions and break down each of the 6 different cancellation policies in layman's terms so that you can make informed decisions that best fit your risk thresholds.

The Rapid Breakdown

Airbnb has 6 different tiers of cancellation policy.  

They are:

Each policy has its own set of restrictions, penalties and fees.

These policies are enforced to protect hosts and guests alike.

As this post is directed at Airbnb hosts, I’ll be discussing the merits of each cancellation tier and the pros and cons of choosing each one.

The Airbnb 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 that were willing to open their homes to complete strangers.  The more new hosts they could onboard, the more guests they could accommodate.

For that reason, hosts were very well protected with favourable 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, 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 are becoming ever more aligned in the guests favour.

As a result hosts are incentivised 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?

Flexible: Full refund up to 24hrs 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, and if your guest decides to leave early, the nightly rate for the nights not spent (24 hours after cancellation) are fully refunded.

You as a host are exposed to the cancellation whims of your guests, and your vulnerable to lost earnings without recourse.

On the flip-side, guests are more likely to book, safe in the knowledge they can cancel at any time (up to 24 hours prior).

This is what your guests will see when they book:

Pros

Cons

Who this is suitable for:

‘Flexible’ is suitable for newer hosts looking to populate their calendar with maximum bookings.  It’s also better suited to smaller, cheaper listings with lower average nightly stays.  

Avoid ‘Flexible’ policy if your minimum nightly stay is above 3 nights, and if your listing is not a budget option.

Moderate: 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 reasonable flexibility and peace of mind to guests.

As a Host you’ll receive a 50% refund (minus the first nights stay and Airbnb’s service fee) for any booking cancellations 5 days before check-in.

For example:

A 7-night stay at $100 p/n would net a host $700.

If a guest cancels 5 days prior to check in the host would receive a $279 fee as a cancellation payout.

Your potential maximum loss would be $429.

The ‘Moderate’ policy provides a little more financial certainty to hosts, although it still exposes them to substantial risk.

This is what your guests see when they book:

Pros

Cons

Who this is suitable for:

‘Moderate’ is suitable for 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.

Strict: Full refund up to 14 days prior check-in

‘Strict’ is where the ball starts to swing back into the hosts favour.

This is the first tier where you have protection over the full amount of your booking (up to 7 days before arrival), plus you’re also entitled to a 50% refund up to 14 days before arrival.

Although this policy is labeled ‘Strict’, it’s my personal opinion that this is the most fair (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.

This is what your guests see when they book:

Pros

Cons

Who this is suitable for:

‘Strict’ is suitable for established hosts that have accrued a number of positive reviews, and have a listing that’s in high demand.

It’s also suitable for premium listings, and listings with minimum night stays of 3+.

Super Strict 30 Days: 50% refund up until 30 days prior to check in.

‘Super Strict 30 Day’ cancellation policy is only applicable in certain circumstances, and is strictly by invitation only.

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.

*There have been cases where the Super Strict 30 Day policy has been granted to hosts who contacted Airbnb directly. For a list of all Airbnb’s contact numbers click here.

This is what your guests see when they book:

Pros

Cons

Who this is suitable for:

Suitable for hosts with premium listings upwards of $1000p/n that are exposed to considerable financial risk from late cancellations.

Super  Strict 60 Days: 50% refund up until 60 days prior to check in.

Just like the ‘Super Strict 30 day’ policy, this one too is invite only!

Once again, I’ve heard rumours of mid-priced listings being granted the 60 day policy, however, it’s mainly reserved for the mega expensive listings that have the biggest risk.

This is what your guests see when they book:

Pros

Cons

Who this is suitable for:

‘Super Super Strict 60 day’ policy is suitable for the ultra high end listings upwards of $2000p/n that are exposed to considerable financial risk from late cancellations.

Long Term: First month not refundable, 30 day notice for cancellation

The ‘Long-Term’ policy is applicable to any reservation over 28 nights.

The ‘Long-Term’ policy entitles you as host to a refund to the value of the first months reservation cost in full for any cancellations within 30 days or less.

Not all hosts are willing to open up their homes for long term guests, however, this cancellation policy ensures 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 cancellation policy.

Pros

Cons

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?

Conclusion

Ultimately, the cancellation policy you choose will depend upon your current circumstances as a host.  

However, now that you have a deeper understanding of what Airbnb’s cancellation policy are, their pros and cons and how they can affect your bottom line, you should be able to make better decisions moving forward.

For what it’s worth, I operate with a ‘Strict’ policy (and have been for the past 4 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 though that it is your property, and you call the shots, so make whatever the best decision is for you.

Happy hosting.

Rowan.

Rowan Clifford is a serial solopreneur and founder of Airbn’b’Smart where he writes tips, tricks and hacks for savvy Airbnb hosts looking to maximise their earning potential with minimum effort.