Strict vs. Flexible: Which Airbnb Cancellation Policy Should I Choose? (Episode 487)

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487. Solo

Introduction and Listener Spotlight

Sarah Karakaian: [00:00:00] Hello. Welcome back to another great episode. [00:01:00] My name is Sarah Karakaian.

Annette Grant: I’m Annette Grant and together we are Thanks for Visiting.

Sarah Karakaian: Let’s start this episode like we do each and every week, and that is sharing one of you our incredible listeners who is going to strshare.com, sharing as much as you can about your short term rental so that we can celebrate you here on the podcast and on our Instagram account every Sunday.

Annette, who are we sharing this week?

Annette Grant: This week we are sharing El Alma a-Frame. I’m gonna spell that to help everyone. E-L-A-L-M-A-A frame El llama alama A-frame. Wow. That was a tongue twister for me, but this A-Frame is gorgeous. It’s in Alma, Colorado outside of Breckenridge. I want you to take a peek at their Instagram.

They’ve done a really great job of doing lifestyle Photoshop Photo. Photos, um, videos just like reels, and the design is [00:02:00] gorgeous. It is so well. Done. And I like in their, one of their posts they put details matter. We know that attention to detail is what separates us from the rest. We’ve carefully curated each property to make sure you are surrounded with style and comfort.

Just, I love them explaining I, I throughout their Instagram like. Tell me exactly like, yes, that is who we are. We have attention to detail and it shows in their listing. They have some other things that just really give off that vibe too. They have a record player, cozy blankets. They have amazing mountain views and they’ve just taken this 1970s a-frame and infused it with that.

It’s got that classic cabin charm, but it’s modern and comfortable on the inside. So well done. They actually also have another property too, and this host is a real estate investor. I went to her, I love going to the bios, uh, and seeing what she does. She has midterm rentals in Austin. She likes, she’s a realtor.

She’s a house flipper, so it’s fun to put all the, as much information [00:03:00] as you can in your Airbnb bio also.

Debate: Strict vs. Flexible Cancellation Policies

Sarah Karakaian: All right, Annette, I need to know deep down, are you team strict cancellation policy? Or are you team flexible?

Annette Grant: Ooh, this is like a heated debate.

Sarah Karakaian: It is a heated debate. Cancellation policies historically are highly debated in terms of is there some sort of hack behind your decision and what it does to the algorithm, and it is something that we’re gonna cover today, the different cancellation policies that.

Airbnb offers, what happens when guests cancel and what you as a host need to be prepared for. And of course, the reality of guests asking for expectations, it happens no matter what. And so we thought today we would share with you at least what we do in our business when we have a strict or even a moderate cancellation policy, or even a flexible cancellation policy.

And a guest cancels after the [00:04:00] time has passed and even knowing that they’re asking for something that they did not, you know, they did not agree to, and how we respond in those situations. So if you’re ever curious how other hosts handle those requests from guests, we’re gonna go over that today and just know this as we get into the content.

There is no right or wrong answer. It is your business.

Mm-hmm. It is your decision. You just need to be able to back it up with your reasons why. So that you know that your decision is based on either data or some sort of business, uh, setup that makes sense for you and your team. But let’s get into it.

Understanding Airbnb’s Cancellation Policies

Sarah Karakaian: So let’s go over all of the different cancellation policies that Airbnb offers us as hosts.

Annette Grant: And those are gonna range from flexible to Yes. Super strict. Alright, and this is coming from Airbnb’s policy page. Now here’s a quick breakdown of each option we have flexible that is a full refund [00:05:00] up to 24 hours before check-in. Moderate, a full refund up to five days before. Check-in firm is a full refund up to 30 days before check-in a partial refund after, and then the strict, which is a full refund, up to 48 hours after booking if at least 14 days before check-in.

Otherwise, 50% refund until up to seven days before a check-in. And then we have super strict, and this is by application only. And these are even stricter rules. And these are usually for specialty properties.

Sarah Karakaian: So as you are gearing up to whether it’s list your property on Airbnb or you’re already listed and you just picked a cancellation policy ’cause you were overwhelmed, today’s video is going to be for you because we are going to share with you what policies, uh, actually [00:06:00] do to your booking velocity. So how often you can get booked and whether or not, whether or not being flexible means more bookings or if you can stay strict to protect your income and still get booked.

There is a theory out there that Airbnb boosts listings that have strict cancellation policy. Annette, is this true?

Annette Grant: No. Like there is no confirmation from Airbnb that a certain cancellation policy is going to boost you in the algorithm. And we hear it every day. Hosts are looking for a hack to boost their property in the algorithm. You know what? I’m just gonna give you a hack right now. Be an awesome host. There are no hacks.

Sarah Karakaian: Yes.

Annette Grant: but we could sit here all day long and talk to hosts that had a strict one, got more bookings, made it more flexible, got more bookings. You could go from house to house, from host to host and review those policies and we’re not going to be able to [00:07:00] let you know one or the other.

Sarah Karakaian: So there is something where I know a lot of hosts who want to maybe move to a more moderate or strict policy, but they’re afraid that if they do that guests won’t book.

Well, I can tell you that of the listings that end up on the first page, more often than not 50% of them have a strict cancellation policy. Meaning that if you are a good host. You deliver on what you promise your guests they will get when they stay with you and your policy, your cancellation policy is in line with what’s what’s needed by the market, right?

Then You have every opportunity to land on the first page of searches with other hosts who have more flexible cancellation policies. Here’s what I can tell you. You can search and find out whether your direct competitors, what cancellation policies they have. Mm-hmm. And either decide to do what they’re doing or still knowing all that, do what’s best for you and your business. If you have a [00:08:00] really large property that it, it, it takes a, like your booking window, like it, it takes a while or people wanna plan ahead to book it. And so canceling close the date would truly have a big financial impact to your business. You might wanna choose that strict cancellation policy.

Mm-hmm. However, we really specialize in our market in downtown Columbus, in small one bedroom, two bedroom properties. They are easy for us to fill up last minute so we can offer flexible or more moderate policies because it doesn’t impact our business if a guest can’t show up even though they book. So you really have to do what’s best for you and just know no matter what you choose, if you’ve got a great property.

With pricing that’s in line with the market and a cancellation policy that makes sense. You have every opportunity to get boosted by the Airbnb algorithm and end up on those first page searches.

Handling Guest Cancellation Requests

Annette Grant: Let’s dig into the, to the reality of having a strict cancellation [00:09:00] policy that you have to enforce. Just because you have it doesn’t mean that, I mean, yes, it’ll be enforced, but it doesn’t mean you’re not gonna have guests, they’re gonna ask you. For a refund, ask you for a more flexible policy.

Sarah Karakaian: I mean, that goes for like any rule you set, right?

Annette Grant: Exact act. Every single rule, there’s going to be someone that wants to get up. You’re

Sarah Karakaian: not pet friendly, they’re gonna ask you anyway. Yeah, right. Like,

Annette Grant: yeah. Let’s talk about some refund specific situations.

Number one, maybe you’re in a ski town and it forgot to snow, alright? And they’re not able to ski. Uh, another one, maybe you’re in a beach town and there’s a hurricane coming through and they’re scared of the hurricane and rightfully so, and we don’t really wanna talk a. Too long about these topics, but these are real life, life things that happen.

There might be a death in the family. Yeah. Uh, you know, maybe someone’s just got a sudden illness, can’t make it on the trip. Car broke down. Maybe again, maybe a [00:10:00] flight got canceled. There are so many things that can happen as us being humans, lifeing, that you need to be prepared as a host. To have these inquiries come, you know, come, come at you and want that flexible refund, even if you’ve set the strict refund.

Sarah Karakaian: So let this today, this discussion, let it be that time in your life, that space as a host to make these decisions. When these questions come to you to break your cancellation policy, this is whether you’re a moderate policy or even if you’re flexible and they’re trying to cancel hours before arrival.

Right? Exactly. Which has happened. You should still prepare yourself. Are you going to stand firm? Are you going to bend the rules? Or maybe you’ll do like a, a mixture of both of. What we can do is offer you a discount on a future stay with us. Right. Some sort of credit on a future, stay with us. Mm-hmm. And here’s what I can tell you too, even if you decide on, on what [00:11:00] your policy is for your company.

There might be a scenario that pops up where it’s your policy to stand firm, but something in your gut tells you to bend the rules a little bit. Right? But anyone listing out there right now who, maybe you’re running a co-hosting business or a property management business, and now you’ve got people who help you with reservations.

You don’t wanna leave them stranded on making a decision where they have to get ahold of you mm-hmm. To make that call. And so having maybe a decision tree for your team. Because it’s not it. It could be as simple as black and white, right? Whether we’re strict or we bend the rules, or maybe it is a little bit more flexible, where depending on the story they give you and the timeframe before the stay or maybe the amount of revenue that is on the line, whatever that might be for you and your business, develop a decision tree as best as you can to empower your team to make the call for you.

Annette Grant: And again, let’s get to that reality. You may have. Your decision tree, you [00:12:00] know that we’re gonna stick, we’re gonna stick to our plan and be prepared. You could have a, if you stick to your plan, stick to your policy, the guests could come back with an emotional appeal. They still don’t like your an don’t like your answer. They could really, really dig in, you know, like, how can you live with yourself? This is my hard earned money. Or maybe, you know, again, there was, whatever the circumstance might be, you have to be prepared that just standing firm in whatever your cancellation policy is doesn’t mean the, the guest is gonna say, okay, thank you.

Sometimes they might, but be prepared for those emotional appeals and they can get. Real. So we wanna give you some scenarios Yeah. Where we’ve held firm, um, for, because they can still leave you a review. Alright. And we know a lot of people hosts get really nervous about people holding, like the reviews hostage.

Real-Life Scenarios and Decision Making

Annette Grant: So for instance, um, the boss, Bruce Springsteen, had a concert coming to [00:13:00] town and it was a week day performance. And again, our properties really cater to couples. They were, we were fully booked with all these couples coming to town to see the boss, you know, see him, uh, in concert and he canceled day off, off,

day off.

Sarah Karakaian: Like people were driving to town,

Annette Grant: like they were like en route when he unfortunately had to cancel and. That was when we stuck to, we decided to stick to our, stick to the policy. Yeah. That was so out of our control. It wasn’t Mother Nature, it was actually the performer. And a lot of those folks, you know, of course they asked, but then they, they turned their frown upside down like, you know what, we’re still gonna come, we’re still gonna go out to dinner.

We’re still gonna have a good time. So a lot of them, we could still just say hold firm, and they were just good with it.

Sarah Karakaian: And I can tell you the decision tree on that one was. It was such a big concert that I feel we were a hundred percent booked across, you know, some 30, 40 properties and every reservation that night [00:14:00] would’ve been like, our entire portfolio would’ve been at 0%.

Mm-hmm. And that kind of loss, we could not take on, right? So that you know, it, it’s, it’s that revenue impact where that might help you decide what you can and cannot do. But I pro like we are honest with you, like no one left us a bad review for sticking to our cancellation policy and everyone still showed up and had a good time.

So, and we couldn’t believe it. We thought like 10% of them would, would push back or leave us a, a, not a great review. But we didn’t experience that in this case. But let me tell you another story. Let me tell you at a time that I did bend the rules, but only because I got guilted into it. Mm-hmm. This is a very real story.

I was managing a property that is Insta-famous and it’s a beautiful property and it it, it’s an expensive property because it’s unique and we have a strict cancellation policy. ’cause if you cancel close to arrival day, we. I mean, we probably maybe could rebook it, but probably not for the same rate, or it’s just a lot of work to rebook it with the right guest.

Mm-hmm. Like it, [00:15:00] it’s, it’s, it is what it is. This guest asked for a refund. I think it was just a couple days, like before they was meant to arrive. Whole sob story, I forgot what the sob story was. And I wrote back, I have a template of an email with. Our stand firm policy because this is what we decided as a team for this property we would do.

And it’s very kind, it explains to them, you know, we manage this property for a family and it takes this amount of, I mean, I really provide a lot of transparency.

Annette Grant: I, I know exactly why they couldn’t come. It was not a death, it was not a sudden illness. It was a, uh, I remember now too, a like. They had gotten pregnant in in the time and like, you know, it wasn’t, it wasn’t something where it was like, you know, traumatic like, like a Yeah.

Trauma. Yeah.

Sarah Karakaian: Even still, people make up stories and yeah, it doesn’t matter really what it was, but you still start, but you’re not wrong, but you’re not, it was one of those things where like, well, you, you knew that this could happen anyway. Right? It’s okay. Um, but I, I sent the email where I stood firm. When I tell you they wrote back and they were like, you know what we’ll do, [00:16:00] we will create a website. Dedicated to your company name. Mm-hmm. So hosting company.com and the entire website will be dedicated to how terrible you are as a human being.

Annette Grant: Isn’t that called blackmail?

Sarah Karakaian: Yes. I don’t even know if like, it’s called blackmail. Okay. And I could not believe it. Like they were ready to tear down our small company and like he told me that he would get on Twitter where he had a quite a lot of, I, I, I, you know, apparently a lot of following.

Mm-hmm. And he was gonna tweet out the URL and really tear me down and I like, so I then picked up the phone and I called this guest and they answered the phone and I shared with them, I am so disappointed that we can’t come to an agreement where you honor the rental agreement that you signed and that the family who’s expecting this revenue to come in can no longer count on this revenue. Um, and your choice is to retaliate in a way that would affect me and [00:17:00] my family and my business just for upholding that contract. But, you know, I, I, I don’t want the threat that you’re bringing onto us. And, um, I do wish you well, and I went ahead and canceled the reservation. On his behalf. And it was just one of those moments where you’re like, there are humans out there like that.

And I could have fought it like it probably is blackmail.

Annette Grant: And, and honestly, in fairness to this gentleman, he probably thought you were being one of those humans not being fair. Like we thought he wasn’t being fair.

Sarah Karakaian: So everyone’s perspective is like, it is what it is. Yeah. Guess what?

Annette Grant: We are humans. Human life is every day, but we’re gonna go over a few things.

You can, um.

Tips for Balancing Protection for Hosts and Guests

Annette Grant: Again, how to kind of balance protection for you and the guest. Number one there is travel insurance. Yes. Okay. Airbnb offers it direct booking site. You can, um, uh, you can offer it too. So that’s always a nice way if someone wants to cancel, say, oh, did you purchase travel insurance? Mm-hmm. And that’s the first thing, they’re like, oh shoot, I knew I should have done that. ’cause if you’re like me, I know every time I book a [00:18:00] flight it asks me, do you want the tra? And I go, Nope. And I know I made that. I didn’t, I didn’t get the travel insurance. So that’s always something that you can offer. The next thing is offering a rebooking instead of the full refund. So we like to give these options so they can see like you’re, you’re working with them here. And then the other one that I really, really works well is letting the guests know if I can rebook it, I will gladly refund you and that one works and feels very fair. Um, you know, everyone’s kind of winning at that point in time.

Again, it depends on your workload, it depends on what’s going on in your life, but we just kind of wanted to give you some of those alternative options to just fully, you know, not having to do the, like, refund the entire reservation. So you, those are all food for thought for you.

Guest Messaging Examples

Sarah Karakaian: Okay, so for fun, we dug into guest messaging and we’re gonna share some real exchanges with guests, with you, [00:19:00] just to get a feel for how we handle it in our business. Again, I can’t stress this enough. If you’re like, Ugh, I would never handle it the way Sarah Annette did. That’s okay.

Annette Grant: You do you,

Sarah Karakaian: because now you are, by hearing how we do it, you are like, Nope, that’s not for me. I like the way I do it. Or we could share with you how we do it, give you a behind the scenes look in our business, and you can say, you know what? Mm-hmm. I kind of like the way I do it this way, but I also like an element of this, doing it this way. So that’s what this whole. This is gonna be about, alright, this one is from Amira. This is this. This is a good one to learn from. Good morning, Sarah. I hope you are well. My name is Amira and I’m interested in your beautiful unit for the dates June 9th through the 22nd. I just have a couple questions regarding the unit is refundable and about parking at checkout. It said that this unit is non-refundable. But on the q and a page, under the price and availability tab, it says full refund after 24 hours. I just wanted to get clarification on if it’s refundable or non-refundable. So this is a good one because with the flexible cancellation policy, at [00:20:00] least as of right now, they can choose to make it fully refundable by getting a a little bit of a discount at booking or non-refundable. So they have that option,

Annette Grant: like how risky are they?

Sarah Karakaian: How risky are they? Right, right. So we responded with Good Morning, Amira. We would love to host you. We offer two options at checkout. You can toggle to which one you prefer. One is a refundable option and the other is a non-refundable option with a slight discount.

I think, did I say that right? The first time? Non-refundable, they get a slight discount. Mm-hmm. Okay. Yeah. Um. We offer free off street parking. It is on a parking pad behind the home. So just know that when you choose these cancellation policies, different online travel agencies might even offer a more nuanced mm-hmm option. And sometimes this confuses guests. And so we have to educate them on why that is.

Annette Grant: Clarify.

Sarah Karakaian: Clarify. And sometimes they’ll pick the option where they get to the, the discount and they still wanna [00:21:00] cancel. Mm-hmm. And you have to remind them that they chose it. Dear Sir or Madam,

Annette Grant: and again, you chose that. And again, depending on when

they booked it, they might have forgotten.

Sarah Karakaian: Okay, here, here’s an option from Robin, or in a scenario with Robin where we decided to stick to our policy. So Robin, the Booker says, I’m aware of your policy, but figured I asked if I could get a refund.

I made a reservation an error before reading your entire guide. Is it possible to get a refund or a partial refund? Because I would, it would allow me to find other accommodations. Thank you. Either way. And we responded. It depends on what cancellation policy you selected upon checkout. Let me look up what you selected.

I see you select the non-refundable options, so we would not be able to refund. And then Robin says, I wasn’t aware there was another option. Okay. Thanks for the response.

Annette Grant: And this is where, as a host, you don’t wanna automate everything. Okay? And this is where you wanna read. Actually read the messages, read through what the guest is saying.

So this person here, like the way I’m consuming this, you [00:22:00] know, is he was like, would it be possible? Right? Um, thanks. Either way. Partial. Yeah, it would be great. I could help me either way. So they kind of, the way I’m saying is like, oh, he already knows that he chose. The non-refundable strict one. So again, you can kind of like see the way the guest is message you, and this is throughout every message a guest sends to you. You wanna read through it and there is a narrative there in the words that they choose.

Sarah Karakaian: All right, let’s get another example. This is from Angie. Hi there. We currently have a medical emergency and are unable to come on the dates we booked. Am I able to get a refund or credit for another stay with you guys in the future? We have to come back next month to Columbus and would like to stay with you in the event we are unable to get a refund. I apologize. We responded. Hi, Angelica. So sorry to hear about the emergency. That is, that is key there in hospitality to, to acknowledge what they said. Right. So I heard you, there is an emergency. Mm-hmm. Mm-hmm. I just looked at your reservation. I [00:23:00] see you booked the non-refundable option. Let me get with my team and see what we can do. And so Angie says, okay, thank you. I hope you guys are understanding. And so even though Angie said, I hope you guys are understanding, I. I am willing to wager because I know our little decision tree, that there was enough time before guest arrival.

We’re probably in our high season where with our small properties, we know we can get it rebooked. She is saying, I have to come back next month. Yes. So it’s like, hey, this is a potential rebook recurring, but guess. Mm-hmm. So we responded, hello, we are able to refund you. What will we need? What we need to happen is that you will need to cancel air BB on your end. Remember, if you cancel as the host, it is a ding on you. Mm-hmm. So if the guest. Wants to cancel because of their schedule changes, make sure they take that action and then I’ll be able to reach out to the Airbnb support team saying that we are refunding you a hundred percent of your stay, which Angie says. Perfect. Thank you so much.

So in the end, like we said at the beginning, it’s your business. You can choose whatever fits with what you are wanting, [00:24:00] but we encourage you to rethink things. If you picked your cancellation policy based on some hack you saw in some free Facebook group or whatever that. You can win if you have a strict cancellation policy.

Mm-hmm. You can win if you have a flexible cancellation policy

Annette Grant: and always be prepared because you’re gonna have a guest that is going to question your policy and always want you to go against whatever the policy is that you choose. So you’re not gonna be immune to guest inquiries on your policy.

Sarah Karakaian: No, and I, you know, I can’t lie that I have never I’ve been like, I know I didn’t agree to this, but lemme just ask anyway. Yeah. Like I feel like we’ve all done that. But when you’re on the host side or the business owner side of those questions, you can get so emotionally charged and upset. But if you really just go from the perspective of, hey, you gotta ask and then being able to empower your team like we discussed of how to make those decisions, then you’ll be all set.

But either way, choose what’s best for you and your business.

Conclusion and Final Thoughts

Sarah Karakaian: And with that, [00:25:00] I am Sarah Karakaian.

Annette Grant: I’m Annette Grant, and together we are Thanks for Visiting.

Talk to you next week.