The Right Cancellation Policy

It's not breaking up if you were never together.

Too strict of a cancellation policy is like asking for marriage on the first date: you'll probably attract serious suitors, but there likely won't be as many dates. Alternatively, be too cool for school and you may get stood up a lot without time to get something new on the books.

I may earn a commission from links on this page, but only recommend products I back. Learn more.

When potential guests are deciding between different options in your area, in addition to weighing nightly rate, amenities, cleaning fee, location, and quality, they may also be considering how much they are “committing” to staying with you. Commitment can be scary. A really strict cancellation policy may dissuade guests from booking with you in the first place, whereas a very relaxed cancellation policy may leave you with last-minute cancellations and unfilled rooms. Striking the right balance based on the demand in your area and demand for you place in particular, is an important part of running a successful Airbnb or Vrbo.

Airbnb gives hosts six options for cancellation policies, and full description from Airbnb can be found here.

The three policies that apply to short-term rentals are given below:

  1. Flexible: The guest receives a full refund if they cancel at least 24 hours prior to check-in
  2. Moderate: The guest receives a full refund if they cancel at 5 days prior to check-in
  3. Strict: The guest receives a full refund if they cancel at least 14 days prior to check-in AND within 48 hours of booking

Because the Boston area was typically in high demand, and about 25% of my booking came in the 2-3 weeks prior to check-in, I opted for a MODERATE cancellation policy. This way, I had a decent chance of getting a “replacement” booking if someone cancelled, yet it wasn’t so strict that people hesitated to book.