Even though most property managers and hosts would love to just set the strictest possible cancellation policies, that is often not the best choice for your bookings. In this blog we will break down how you can choose the best cancellation policy for your listings to maximize your revenue.
What are Airbnb cancellation policies and what do they entail
Airbnb offers several cancellation policies for hosts to choose from, allowing flexibility while ensuring some level of protection against last-minute cancellations. These policies determine how refunds are handled and how much a host gets paid when a guest cancels.
On January 20, 2025, Airbnb started rolling out updates to its standard cancellation policies for certain countries, including Argentina, Canada, Chile, Colombia, Morocco, the Netherlands, the Philippines, Poland, South Africa, Sweden, and Turkey for now. Any reservations made on or after this date in these countries will follow the new rules. For bookings made before January 20 or in other locations, the existing policies still apply.
Here’s what’s changed:
One major change is the introduction of a new Limited policy, which lets guests cancel up to 14 days before check-in for a full refund. Another significant shift is that the Strict policy will no longer be an option for new listings. Hosts currently using the Strict policy will automatically be switched to the Firm policy unless they actively choose to keep Strict before the deadline.
- Flexible: Guests can cancel up to 24 hours before check-in for a full refund. If they cancel within 24 hours, the host gets paid for one additional night beyond the nights the guest stays.
- Moderate: Guests can cancel up to 5 days before check-in for a full refund. If they cancel later, the host receives payment for one extra night plus 50% of any remaining nights.
- Limited: Guests can cancel up to 14 days before check-in for a full refund. If they cancel between 7 and 14 days before check-in, the host gets paid 50% for all nights. If they cancel within 7 days, the host gets 100% of the booking.
- Firm: With the Firm policy, guests can cancel up to 30 days before check-in and get a full refund, meaning you won’t get paid. However, if they cancel less than 30 days before check-in, you’ll still be paid for all the nights they’ve stayed plus an extra 30 nights.
- Strict: The Strict policy is a bit tougher. Guests only get a full refund if they cancel within 48 hours of booking and at least 28 days before check-in. If they cancel after the 48-hour window or within 28 days of check-in, you’ll be paid for all the nights they’ve stayed plus an extra 30 nights.
Some hosts, by invitation only, have access to even stricter policies:
- Super Strict 30 Days: If a guest cancels at least 30 days before check-in, the host receives 50% of the total booking amount. If they cancel within 30 days, the host gets full payment.
- Super Strict 60 Days: Similar to the 30-day version, but with a 60-day cutoff instead.
Impact of Airbnb cancellation for hosts
Your Airbnb cancellation policy plays a significant role in how often your listing gets booked, how much revenue you earn, and even how visible your property is in Airbnb search results. Striking the right balance between guest-friendly flexibility and host protection can make a big difference in your success.
How your Airbnb cancellation policy affects visibility
Your Airbnb cancellation policy can affect how often your listing appears in search results. Many guests factor in cancellation policy details when deciding where to book, and Airbnb's algorithm takes this into account.
Recent data shows that stricter Airbnb cancellation policies slightly reduce a listing’s chance of appearing on the first page of search results. Listings with the most flexible cancellation policies appear on the first page about 47-48% of the time, while stricter policies lower that number to around 43%. While it’s not a drastic drop, it’s something to consider if you want to maximize visibility and attract more bookings.
The impact on conversion rates
Here’s where the numbers really stand out. The same research showed that listings with a flexible Airbnb cancellation policy see a 1.3% conversion rate, while those with a super strict 30-day policy drop to just 0.4%, that’s a threefold difference! This means the more flexible your cancellation policy, the more likely guests are to complete their booking.
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While having a strict policy might feel like extra protection, it could also be costing you valuable reservations. The key is to find an Airbnb cancellation policy that balances guest expectations with your need for reliable income, helping you optimize both visibility and revenue.
Which Airbnb cancellation policy is best for your properties
Choosing the right policy should be based on a holistic overview of the market, your current performance and more. In this blog we will take a look at the different factors you should consider when making the decision.
Consider your current visibility
Page views and cancellation policies are closely linked when it comes to ranking on Airbnb.
If your listing gets more page views than the competition, it means Airbnb’s algorithm already favors your property. You’re getting more exposure, which leads to more potential bookings. This allows you to be slightly stricter with your cancellation policy without suffering a major drop in visibility.
How to find page views for your portfolio:
- Go to your Airbnb dashboard
- Navigate to the “Insights” section
- Click on ‘Conversions’
- Check “Views”
- Select ‘All listings’ and adapt your time range to see the data of 1.5 years
On the other hand, if you see that your listing is already showing lower visibility than similar listings in the area, you should consider getting a more flexible policy to attract more views and get more bookings.
Learn more about Airbnb SEO in this blog.
Why you should consider booking window
It’s important to factor in the booking window, the time between when a guest books and their check-in date. The shorter the booking window, the higher the chance you can fill a canceled reservation, which means you can afford to offer more flexibility.
A recent study looked at the relationship between lead days, also known as booking window and cancellation rates, and the results are eye-opening.
Bookings made more than 20 days in advance have a 30% cancellation rate, making long-term bookings riskier.
Once bookings are within 10 days of check-in, cancellations drop significantly, with same-day bookings having a cancellation rate below 10%. This could explain why many hosts feel they only get last-minute bookings, as longer-term ones tend to cancel more.
How to find your booking window on Airbnb
- Navigate to your performance dashboard.
- Go to insights via ‘Menu’
- Click on performance and navigate to ‘Conversions’
- There you will be able to see your average booking lead time
If most of your bookings are over 20 days out you can consider a stricter policy to protect your revenue. For short-term bookings within 10 days you can be more flexible to attract last-minute guests.
How to adjust your cancellation policy based on demand and market
Your Airbnb cancellation policy should adapt to market conditions, demand fluctuations, and external factors like weather and events. Here’s how to fine-tune your policy for maximum revenue and occupancy.
Consider market unpredictability
Adjusting your settings based on demand can help you stay competitive and protect your revenue. During high-demand periods, like peak season or events, a stricter policy can prevent last-minute cancellations.
In low-demand times, such as the off-season, a more flexible policy encourages bookings by giving travelers confidence.
If demand is fluctuating, consider using Airbnb’s non-refundable discount option. This offers both flexibility for guests and guaranteed revenue for you. You can set a discount, typically 10% off the base price (except in China), which will appear in search results.
Consider the competition
A good strategy is to be just a bit more flexible than your competitors.
One easy way to keep track of your competitors' policies is by checking their listings.
- Simply go to a competitor’s page;
- scroll down to the "Things to Know" section;
- see what cancellation policy they implement.
You can also experiment with different check-in dates to see if they adjust their policy based on seasonality or length of stay.
Airdna shared data from the summer of 2024 showing the most popular cancellation policies among U.S. hosts. The diagram reveals that the strictest policy is the most commonly chosen, followed by Firm and Moderate policies. This suggests that most hosts prioritize security over flexibility when it comes to cancellations.
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How to update your Airbnb cancellation policy
Now that you've considered all the factors, it's time to adjust your policy to suit your current needs. Here’s a quick guide to help you make the change:
- Log into your Airbnb account.
- Go to "Listings" and select the property you want to update.
- Navigate to Listing Editor > Your Space > Cancellation Policy.
- Choose your preferred policy and save your changes.
How increasing your visibility gives you more flexibility in choosing your cancellation strategy
As mentioned earlier, your visibility compared to competitors plays a crucial role in determining the best cancellation policy for your listings. If your property receives fewer page views than similar listings in your area, a stricter cancellation policy may further reduce your visibility, making it harder for potential guests to find and book your property.
However, loosening your cancellation policy isn’t the only solution. Instead, you can focus on increasing your visibility first. Once your listing attracts more page views than competitors, you gain greater flexibility in selecting the cancellation policy that best aligns with your revenue goals.
One of the best ways to ensure your listing is visible is through effective keyword optimization. AutoRank is the first solution that automatically updates your listings description, title and summary with highly effective keywords. These updates help your listings stay relevant to guest search behavior, giving you a higher ranking.
Conclusion: Maximize your bookings with the right cancellation strategy
Just like your pricing strategy, your cancellation policy should be dynamic too. Keep an eye on the factors we’ve discussed to make informed decisions at the right time for your property.
Your Airbnb cancellation policy influences your ranking, conversion rates, and overall revenue. While a stricter policy can protect against last-minute cancellations, too much rigidity might reduce your visibility and deter potential guests. The key is strategic flexibility adapting your policy based on market demand, booking windows, competitor trends and your visibility.
Want to optimize your listing’s visibility and performance? Book a call with AutoRank today and let AI help you optimize your Airbnb listings!