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vacation rental world summit 2021

Airbnb firm cancellation policy: Differences with moderate and strict

airbnb firm cancellation policy
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In June 2021, after several months of testing, Airbnb introduced its new Firm cancellation policy. Firm fits between Moderate and Strict. Airbnb’s goal is to get hosts currently under Strict to switch to Firm. It would offer more flexibility to guests, as they could get a full refund if they cancel at least 30 days prior to arrival. Airbnb’s new Firm cancellation policy will also increase the conversion rate of these listings, generating more bookings and fee revenues for the company. The move can also be seen as a way to better cater to traditional vacation rentals, whose policies are usually firmer than those urban apartments. As Airbnb wants more coastal, mountain, and rural listings, its Firm policy is a good addition and closer to what competitor Vrbo offers.

With its new Firm cancellation policies, Airbnb has now 4 main cancellation policies: Flexible, Moderate, Firm, and Strict. Yet, as we illustrate with the infographic below, Airbnb hosts now have to pick among 11 cancellation policy choices, if you had super strict, long-term, and non-refundable options.

Airbnb firm cancellation policy: Why did Airbnb introduce it?

Airbnb is framing a lot of its new product, program, and policy rollouts around the word flexibility, for instance with Flexible Dates and Flexible Search. Airbnb says that the introduction of Firm is a way to give guests more flexibility … if the most risk-averse Airbnb hosts accept to switch from Strict to Firm.

Airbnb’s Moderate cancellation policy is not the best fit for most vacation rentals

The new Firm cancellation policy falls between the Moderate and Strict policies. While Airbnb says that, because of COVID-19, a lot of guests prefer more lenient cancellation policies, the flexible and moderate policies were not the best fit for a lot of hosts.

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With Flexible, guests can cancel up and get a full refund up to 1 day. With Moderate, it is up to 5 days. In competitive urban markets, where hotel cancellation policies have more influence, a lot of hosts chose either the Flexible or the Moderate cancellation policy.

Yet, for a sizeable set of hosts, this was just too short. For instance, in traditional vacation rental markets, cancellation policies are stricter. Vrbo is an Airbnb competitor that is strong with vacation rental managers. Compare the terms of their Moderate canc

Airbnb Moderate: Full refund 5 days prior to arrival

Vrbo Moderate: Full refund 30 days prior to arrival. Bookings canceled at least 14 days before the start of the stay will receive a 50% refund.

Getting risk-averse Airbnb hosts to switch from Strict to Firm

As Airbnb’s Flexible and Moderate cancellation policies looked too risky to a lot of hosts, they turned to the next choice available: Strict.

Airbnb Strict: 50% refund for cancellations made at least 7 days before check-in. No refunds for cancellations made within 7 days of check-in.

airbnb firm cancellation policy

So, Airbnb had a big gap in its policies, between Moderate (full refund until 5 prior to arrival) and Strict (no full refund, but 50% up until 7 before arrival).

This is why Airbnb has introduced its new Firm cancellation policy:

Airbnb Firm: Full refund for cancellations up to 30 days before check-in. If booked between 30 and 14 days before check-in, full refund for cancellations made within 48 hours of booking. After that, 50% refund up to 7 days before check-in. No refund after that.

As you can see, it closed the gap between Airbnb’s Moderate and Strict. It is also closer to Vrbo’s own Moderate cancellation policy.

As we revealed, Airbnb was testing Firm under the name “Modified Strict”

Airbnb did not just introduce this new policy on a whim. The Firm policy was tested on Airbnb’s website, for several months. As we revealed in January 2021, it was then called “Modified Strict”.

To run its A/B testing, Airbnb had to enroll hosts who were using the Strict cancellation policy and get them to accept to switch it to “Modified Strict”. The hypothesis when that hosts who would give up Strict to pick Modified Strict would look more attractive to guests and get more bookings.

When introducing the firm policy, Airbnb mentions the results of this test:

In pilot tests of this policy, our data showed that Hosts who switched from Strict to Firm, saw that overall bookings were boosted by an average of 9%.

Airbnb firm cancellation policy

What does the firm cancellation policy entail? How does it differ from the moderate and strict policies?

As a host, the easiest way to understand whether you should opt-in for the new Airbnb cancellation policy is to visualize where the new firm policy stands.

How many cancellation policy choices does Airbnb offer to hosts?

Airbnb offers 11 different cancellation policies to hosts. Things have got a bit more complex than the original choice of three policies: Flexible, Moderate, or Strict. Now, we can add “Firm” to these three policies.

So, Flexible + Moderate + Firm + Strict = 4 policies

Now, as a host, you can choose to add a “non-refundable” option to each of 4 cancellation policies. For instance, you can choose to have “firm or non-refundable”. It means that, when looking at your property listing on Airbnb, guests will have a choice between using a cancellation policy (for instance, firm), which enables them to cancel after booking up until a certain point, or getting 10% discount on your price, which comes with their waiving the right to cancel and get their money back. (non-refundable).

Studies show that properties that offer both a non-refundable option AND a cancelation policy get more bookings: They are able to attract both people who want the protection of a cancellation policy and people who value a discount over the flexibility to cancel.

So, the basic policies + 4 options for an additional non-refundable option = 8 choices

Some advanced hosts and property managers have access to the Super Strict 30 Days and Super Strict 60 Days cancellation policies. They usually have to pay a higher host fee.

8 choices + 2 super strict policies = 10 choices

Finally, for bookings of 28 nights and more, Airbnb has a mandatory cancellation policy called “long term”.

So, 10 choices + 1 long-term policy = 11 choices

Flexible Cancellation Policy

Full refund 1 day prior to arrival

Flexible or Non-refundable

In addition to Flexible, offer a non-refundable option—guests pay 10% less, but you keep your payout no matter when they cancel.

Moderate Cancellation Policy

Full refund 5 days prior to arrival

Moderate or Non-refundable

In addition to Moderate, offer a non-refundable option—guests pay 10% less, but you keep your payout no matter when they cancel.

Firm Cancellation Policy – NEW

Full refund for cancellations up to 30 days before check-in. If booked between 30 and 14 days before check-in, full refund for cancellations made within 48 hours of booking. After that, 50% refund up to 7 days before check-in. No refund after that.

Firm or Non-refundable – NEW

In addition to Firm, offer a non-refundable option—guests pay 10% less, but you keep your payout no matter when they cancel.

Strict Cancellation Policy

Full refund for cancellations made within 48 hours of booking, if the check-in date is at least 14 days away. 50% refund for cancellations made at least 7 days before check-in. No refunds for cancellations made within 7 days of check-in.

Strict or Non-refundable

In addition to Strict, offer a non-refundable option—guests pay 10% less, but you keep your payout no matter when they cancel.

Super Strict 30 Days

50% refund is given if the guest cancels a reservation at least 30 days before check-in.

Super Strict 60 Days

50% refund is given if the guest cancels a reservation at least 60 days before check-in.

Long term Cancellation Policy

Guests can cancel for a full refund only during the 48 hours after booking, and only if they cancel at least 28 days before check-in.

airbnb cancellation policies

FAQs about Airbnb’s cancellation policies

Does Airbnb have a cancellation policy?

Yes, it does. It actually has 4 main cancellation policies: Flexible, Moderate, Firm, and Strict. Yet, Airbnb hosts now have to pick among 11 cancellation policy choices, if you had super strict, long-term, and non-refundable options.

What is the strictest Airbnb cancellation policy?

It is Super Strict 60 Days: 50% refund is given if the guest cancels a reservation at least 60 days before check-in.

How do I cancel my Airbnb without penalty?

Check the cancellation policy for your booking. In most cases, you can cancel and get a full refund. For instance, with the Moderate cancellation policy, you get a refund up until 5 days prior to arrival. If you have made a non-refundable reservation, then you do not get any refund.

Do you get your money back if you cancel an Airbnb?

Yes, if you cancel within the agreed upon timeline. For instance, with the new Firm cancellation policy, you get money your money back if you cancel at least 30 days prior to your intended arrival date.

What is the guest cancels after the deadline?

If the cancellation occurs after the deadline, then the guest does not get a refund.

When a firm policy might be best

Guests can get a refund if they cancel 30 days before they check-in. If you want to offer some flexibility to your guest but you need to make sure to have enough time to get a new booking should they cancel, the firm policy is a good choice. For rural vacation rentals, it can be a good option.

What are Airbnb’s extenuating circumstances?

In cases of major unforeseen events, Airbnb may force hosts to refund money to guests. Even if they have a stricter cancellation policy in place. See here for more details Airbnb’s extenuating circumstances policy in 2021.

Do guests get a refund of the cleaning fee?

The cleaning fee is refunded if the guest cancels before check-in.

When is the service fee non-refundable?

If the guest cancels less than 24 hours before check-in, the first night and Airbnb service fee are non-refundable.

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Rental Scale-Up

Thibault is the founder of Rental Scale-Up. He owns vacation rentals in St. Barths and Bali. He also leads innovative projects for companies within the vacation rental industry. Feel free to reach out to Thibaut Masson on Linkedin.

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