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Policies & Legal

What is a Cancellation Policy?

Updated 2026-05-27

A cancellation policy is a formal set of rules that dictates the financial consequences for a guest who cancels their booking at a short-term rental. It specifies deadlines by which a guest must cancel to receive a full, partial, or no refund.

These policies are designed to protect a property manager's revenue from last-minute vacancies while also providing clarity and fairness to guests. The terms are typically based on the number of days before the scheduled check-in date that the cancellation occurs, with stricter penalties applied closer to the arrival date.

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How it works

Hosts select a cancellation policy from a range of options provided by an online travel agency (OTA) or define their own for direct bookings. These policies are commonly tiered, such as Flexible, Moderate, and Strict.

For example, a 'Flexible' policy might offer a full refund up to 24 hours before check-in, while a 'Strict' policy might only offer a 50% refund if the cancellation is made 30 days prior. Some hosts also offer a 'Non-Refundable' rate, which provides a discount to guests who agree to forfeit any refund if they cancel.

Why it matters

A well-defined cancellation policy is crucial for managing revenue and occupancy. It helps hosts mitigate the financial risk of last-minute cancellations, which are difficult to rebook.

Clear policies also set guest expectations, reduce disputes, and build trust by outlining the terms upfront. The choice of policy can influence booking decisions, as more flexible options may attract a wider range of guests, while stricter ones provide greater income security for the host.

Examples

  • Airbnb's 'Strict' policy often allows a full refund for cancellations made within 48 hours of booking if check-in is at least 14 days away, and a 50% refund for cancellations made at least 7 days before check-in.
  • A typical 'Moderate' policy on Vrbo might grant a 100% refund for cancellations made 30 days before check-in and a 50% refund for cancellations made 14 days before check-in, with no refund thereafter.
  • Booking.com frequently features 'Non-Refundable' rates where guests pay the full amount at the time of booking and receive no refund if they cancel, often in exchange for a lower nightly price.
  • A direct booking website might offer a custom policy, such as 'Cancel free of charge up to 14 days before arrival. Pay 50% of the total price if you cancel in the 14 days before arrival.'

Frequently asked questions

What is the difference between a strict and a flexible cancellation policy?+
A flexible policy offers guests a full refund for cancellations made close to the check-in date, attracting more bookings but increasing the risk of last-minute vacancies. A strict policy provides greater revenue protection for the host by offering limited or no refunds for late cancellations, but it may deter potential guests who desire more travel flexibility. The choice depends on a host's risk tolerance and market demand.
Can I offer multiple cancellation policies for the same property?+
Yes, many booking platforms allow hosts to offer different rates tied to different cancellation policies. For example, you can provide a standard rate with a flexible policy and a separate, discounted rate with a non-refundable policy. This strategy gives guests a choice and can help secure guaranteed revenue while still appealing to those who need flexibility. This is often referred to as rate-fencing.
How do extenuating circumstances policies affect my cancellation policy?+
Platform-wide policies, such as Airbnb's Extenuating Circumstances Policy or Vrbo's Force Majeure clause, can override your selected cancellation policy. In the event of a documented, unforeseen event like a natural disaster or government travel ban, these policies typically mandate a full refund for the guest, regardless of your stricter settings. Hosts are generally bound by these overarching platform rules.
Should my direct booking cancellation policy be different from my OTA policy?+
Many hosts create a more attractive cancellation policy for their direct booking website. By offering slightly more lenient terms or a better refund structure than on OTAs, you can incentivize guests to book directly. This helps you avoid OTA commission fees and build a direct relationship with your guests. However, ensure your policies remain clear and easy to manage across all your channels.
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