Breaking News January 2021: Airbnb to Update Extenuating Circumstances Policy
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.
>Find out more about Airbnb's announcement here
Right now, guests are able to cancel plans for two reasons:
- Personal circumstances
- Natural disasters
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.
Is there more than one Airbnb cancellation policy?
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.
1. Flexible – Full refund one day prior to arrival.
2. Moderate – Full refund five days prior to arrival.
3. Strict – 50% refund up until one week prior to arrival.
4. Super Strict 30 – 50% refund up until 30 days prior to arrival.
5. Super Strict 60 – 50% refund up until 60 days prior to arrival.
6. Long Term – First month down payment is required; 30 days notice is necessary for lease termination.
[fancy_link title=”Download the list of my 6 favourite MIRACLE Airbnb tools” link=”www.getpaidforyourpad.com/tools/” target=”” style=”1″ class=”” download=””]Which Airbnb cancellation policy should you choose?
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.
For new Airbnb hosts: flexibility is the way
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.
For seasoned hosts: flexible or moderate
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.
Why I believe you shouldn't use the strict Airbnb cancellation policy
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…
The numbers: less than 9% of reservations were cancellations
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.
How to easily compose this data for your listing
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.
New cancellation policy in Italy
Airbnb is testing a change to their cancellation policies in Italy. The main changes are:
- Host fees are increased for the moderate policy (4% instead of 3%) and strict (5% instead of 3%)
- 100% refund now includes the Airbnb fees
- Changes in the cut-off time for moderate (from 5 to 7) and strict (from 7 to 30)
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.
More info on the Airbnb Cancellation Policy
Airbnb's website
Help center
The new cancellation policies explained in detail
Good research!
Thanks Francisco!
Interesting numbers Jasper. I use Instant Book with the strict policy and checked my data over the last two years – 91 bookings/199 nights with only one cancellation which I was able to re-book. I also have my own booking platform attached to my website, and have a 14-day cancellation policy – no charge except for a $50 admin fee. I’ve found that I get a few more cancellations on this platform that on my “strict” Airbnb platform. It may be that I have significant demand and tend to book well in advance, and therefore the cancellation possibility is less of an issue.
Either way it was an interesting exercise to go through. Thanks for the inspiration.
Very good article Jasper!
I am an occasional host, our town is very seasonal and I think we should be able to have different cancellation policies dependent on dates.
Good point, I like the idea.
What if people have paid,staying and decide it’s not to their standard? Do they get a refund ? If so how much,as clearly too late to re-book!
It depends on your policy, if it’s flexible than nights 24 hours after the cancellation are 100% refunded, 50% for moderate and no refunds if you use the strict policy. If you advertise your listing accurately on Airbnb, you’ll find that this is extremely unlikely. I’ve hosted over 400 groups and had this situation only twice, one of which the guests didn’t ask for a refund.
Hi, can you explain more about the long-term rule that says a host gets to keep the first 30 days’ payment following a cancellation? When a LT cancellation occurs, Airbnb rules are in favor of the host, even when the host has selected the Flexible option. But aren’t the renters always going to want to cite “unavoidable circumstances” to try to get all their money back? What’s the thinking behind this rule (and ramifications either way)? Thank you.
The only time the guest will get fully refunded is under the extenuating circumstances policy, but the conditions are pretty strict. Except for right now during the Coronavirus crises of course.
Hi there! I have a LONG TERM (28 day)booking made and paid for in September 2020. Unfortunately now with the lockdown effects (unable to work, change in school holidays etc) in NZ I need to cancel it. Such a shame! My host is sympathetic but obviously does not want to be penalized. I am a bit confused as to whether I can get this money back under the AIR BNB Long Term Rental policy. My host says that my booking has a MODERATE cancellation policy attached to it, but my end it just says it is LONG TERM. Can you help clear any of this up? Thanks so much.
Host cancelled me one hour before my arrival because he didnt remember he had rented the apartment and finished cleaning. Obviously was a lie as he wrote me in the morning asking me what time I was arriving. He couldnt find a cheap place to stay and decided to cancel me. What Airbnb did?? Nothing….they left me abandoned with a 7 years old by 17.00 hs in Santa Monica. I had to change my plans and pay for everything. I want to present a legal claim… they cannot leave a family like that….
Hello~ I am not able to locate the Long Term policy that you are mentioning on Airbnb. We have a 30+ Day Stay Community of 10 cottages that this would work very well for us. Is this a setting we must turn on with Airbnb? Thank you for your help!. VRBozeman | Vacation Rentals & Little Cottages
Hey Jasper, good article. Are you interested in updating it to take the new non-refundable, and “firm”, cancellation policies into account?