The Airbnb cancellation policy is undergoing some changes in 2021. Airbnb recently announced that its extenuating circumstances policy will no longer cover guests with unexpected personal emergencies.
Right now, guests are able to cancel plans for two reasons:
Starting on January 20, 2021, the new extenuating circumstances policy will no longer cover personal circumstances, like flight delays. Guests will still be covered for events that are out of their control, such as a lockdown for instance.
Airbnb cancellation policies protect both the hosts and guests.
Hosts can partially be compensated for cancellations, depending on which cancellation policy they choose (and the exact terms also depends on the location of the host). There are three main Airbnb cancellation policies: flexible, moderate, and strict.
Find out exactly how the Airbnb cancellation policy works so that you can decide which one is best for you.
The short answer is, it depends. For new hosts, I definitely recommend the flexible policy. For seasoned hosts, it could be flexible or moderate. I advise against using the strict cancellation policy.
Note: The super strict 30 and 60 cancellation policies are only available by invitation and under special circumstances. I'm not sure what these are, and I've never seen anyone use these.
At the beginning stage of your Airbnb business, getting bookings is of the highest importance. A flexible policy promotes bookings as guests know that they can cancel for a small fee. Plus, showing that you're willing to accommodate the needs of your guests will help them trust you while you build up your reviews.
PS – When I say new, I mean hosts who haven't reached near full occupancy yet. An empty room or house makes nothing, so if you have big gaps in your calendar, the last thing you want to do is deter guests from making a booking by having a strict cancellation policy.
If you already have a strong reputation on Airbnb, I don't think a moderate cancellation policy will lose you a lot of bookings. At the same time, it doesn't offer much protection either. From my experience (I'll provide some numbers below), most cancellations happen more than five days in advance, so both policies would provide a full refund to the guest.
The main difference between these policies is the flexible policy provides a full refund if canceled more than a day in advance, while the moderate Airbnb cancellation policy offers the guest only a 50% refund when canceled less than five days before.
The difference between the strict policy and the other two is quite significant. Guests are not eligible for a full refund, no matter how long in advance they cancel. I strongly believe this policy deters users from booking, and a majority of bookings wouldn't have been canceled anyway. Here's why…
First of all, cancellations are pretty rare in general. With a moderate cancellation policy in place, I accepted 379 reservation requests during my hosting journey in Amsterdam, and only 33 canceled. That's less than 9%. That means that only about one in twelve bookings was canceled.
Only one of these bookings was canceled less than five days before check-in, so I got to keep 50% of the booking amount. I lost a total of 25 booking days as a result of the cancellations. I calculated this by looking at the days that were canceled and how many of these days I managed to book after the cancellation.
In other words, during nearly five years of hosting, only 25 booking days were canceled that I didn't manage to re-book. That's a very small number, about 2.5% given that I've hosted a total of 1087 days. I'm fairly confident that if I would have had a strict cancellation policy in place, I would have hosted significantly fewer days.
Our brains are wired to always consider the worst-case scenario. Whenever we commit to something, the “what if?” question pops up. It makes people feel uncomfortable to be stuck with a commitment that they'll have no way to back out of. Even if they don't plan to back out of it. They'll most likely look for another rental with a more lenient policy, especially when dates are far into the future.
This is the reason that hotel bookings websites have started to offer the free cancellation option up until the day before check-in for a lot of hotels. It gives the booker the peace of mind that if plans would change, they can cancel. However, it's very rare that these plans actually change, as you can see from the numbers that I provided.
If you want to easily access this data for your listing, in your Airbnb dashboard go to “Your Reservations,” scroll down to the bottom and select “View all reservation history.” Then click on the “Print this page” in the top right corner. Now use the “find” function (usually ctrl-F or command-F) and search for “accepted” to find your total number of reservations and “canceled” for the total amount of cancellations.
Now scroll through the list to count the “fake” cancellations. I had 11 out of 44 that weren't real cancellations, these were bookings where the booker made a mistake, canceled, and made a new booking. Remove these from your calculation.
Airbnb is testing a change to their cancellation policies in Italy. The main changes are:
The new policies are simplified in the sense that all policies now include a period of time where the guest can cancel without any financial loss. This is a game-changer. The security and peace of mind that this gives the booker will allow them to book with less hesitation.
Clearly, the new policies are more in favor of the guests and the initial reaction from Italian hosts isn't very positive, as could be expected.
Airbnb is aiming to make its platform more user-friendly by incentivizing hosts to adopt a flexible cancellation policy. Although I understand the pushback from hosts, in the long term I think this is a good thing. The increased user-friendliness will help the platform attract more users, which will benefit hosts.