How to choose the best vacation rental cancellation policy

A well-considered cancellation policy can make your vacation rental more competitive, boost your reviews, and ultimately, impact your bottom line.

However, there’s no consensus on the best cancellation policy for a vacation rental. The effectiveness of a strict, moderate, or flexible cancellation policy can depend on your market, the travel season, and the platform you use to get bookings.

First, let’s take a look at what platforms like Vrbo and Airbnb offer as standard.

Airbnb’s cancellation policy options

Airbnb offers a menu of different cancellation policies you can choose from on their site. In addition to the main policies outlined below, Airbnb also has options for long-term stays, a non-refundable option for a rate discount, and Super Strict 30- and 60-day policies by invitation only and under specific circumstances.

Flexible Cancellation Policy

Guests can cancel until 24 hours before check-in for a full refund.

Moderate Cancellation Policy

The moderate policy allows cancellation until five days before check-in for a full refund and after that, a 50% refund.

Firm Cancellation Policy

Guests can cancel at least 30 days before check-in for a full refund and between seven and 30 days before for a 50% refund. For cancellations less than seven days before check-in, the guest pays 100% for all nights. If the cancellation occurs at least 14 days before check-in, the guest also has the option of canceling within 48 hours of booking for a full refund.

Strict Cancellation Policy

Guests must cancel within 48 hours of booking and at least 14 days before check-in to receive a full refund. If guests cancel between seven and 14 days before check-in, they must pay 50% for all nights, and if they cancel after that, they must pay 100% for all nights.

Vrbo’s cancellation policy options

Vrbo lets hosts set an individualized cancellation policy but suggests different options on its website.

Nonrefundable

Guests must pay 100% of the booking regardless of when they cancel.

60-day policy

Guests must cancel at least 60 days before check-in for a full refund. Guests pay 100% of the reservation for cancellations with less than 60 days notice.

60/30-day policy

Guests can cancel at least 60 days before check-in for a full refund. Guests are eligible for a 50% refund if they cancel at least 30 days before check-in. There is no refund for cancellations of less than 30 days.

30/14-day policy

Guests can cancel at least 30 days before check-in for a full refund. If guests cancel at least 14 days before check-in, they get a 50% refund (minus service fee). Cancellations of less than 14 days before check-in are ineligible for a refund.

14/7-day policy

Guests can cancel at least 14 days before check-in for a full refund. If guests cancel at least 7 days before check-in, they get a 50% refund (minus service fee). Cancellations of less than 7 days before check-in are ineligible for a refund.

Custom policy

Hosts may set a custom cancellation policy with different terms and fees. (It’s best to include this policy in your listing so that guests don’t need to ask you about it.)

Deciding which cancellation policy is right for you

For bookings on Vrbo or Airbnb, their algorithms can make your property more or less visible based on a number of factors, which could include your cancellation policy.

“Airbnb has always said that they would favor listings that are most competitive and highest value for travelers,” said podcaster Sarah Karakaian on the Thanks for Visiting hosting hotline. “Oftentimes, depending on your market, the most flexible cancellation policy, they’re going to give you some love because it’s most flexible for the guest.”

However, this doesn’t mean you should make your cancellation policy flexible solely to attract guests.

Other factors to consider when choosing your cancellation policy

In addition to the platform considerations above, there are other factors to consider when picking your cancellation policy.

What are other hosts’ cancellation policies in your market?

If strict cancellation policies are the norm in your market, you also can have a strict cancellation policy without losing potential guests. This is especially true in markets like Scottsdale, Arizona, that host big events like bachelor and bachelorette parties and sporting events because larger groups tend to plan ahead, said Annette Grant, Sarah’s co-host on the Thanks for Visiting podcast.

What types of travel most often occur in your destination?

If your market tends to see large groups of travelers in big properties, those types of trips take longer to plan, making last-minute openings at a large property hard to fill. Consider a stricter cancellation policy in places and properties like these.

“It is really important to know your market, know the type of traveler that is attracted to your home,” Annette said. “Obviously, if it’s a one-bedroom versus a five- or six-bedroom, there’s going to be a different plan and timeframe in which people are planning their trips out.”

On the flip side, places where shorter trips with solo travelers or smaller groups are more popular may be better suited for flexible cancellation policies.

In the Columbus, Ohio, market where Sarah and Annette operate vacation rentals, hosts generally need to keep a flexible cancellation policy, but there are exceptions to that rule, Sarah noted.

What types of guests travel to your specific vacation rental?

Your property is probably best suited to a smaller subset of travelers to your destination based on its size, location, and characteristics, like property size mentioned above. These factors can help determine a fitting cancellation policy.

For example, “If you’re a property that has some really awesome amenity and you offer more than your competition does, you are able to go a little stricter on your cancellation policy,” Annette said.

Should your cancellation policy change depending on the season?

Some seasons or narrow periods of time may warrant a strict cancellation policy. For example, in mountain towns during ski season, it might be prudent to prohibit last-minute cancellations.

“We had [a flexible cancellation policy] but changed it to strict last year,” wrote Kelsey Shelton, a host in Wrightwood, California, on an Instagram post by vacation rental podcaster Natalie Palmer. “Like you, we are in a mountain town, and people would cancel days before if there wasn’t any recent snow. Hard to rebook at that point!”

Setting your own cancellation policies for direct bookings

If you use a direct booking site, i.e. your website, you have much more freedom in crafting your cancellation policy. At a minimum, your customized cancellation policy should include:

The maximum number of days before check-in that the guest is eligible for a full refund
Your cancellation fee structure after that date
How the cancellation fee will be charged
How much of the cleaning fee will be refunded (generally this should be 100% if no cleaning was done)

Final Tip: Try a few cancellation policies and see what works best for you

Test different cancellation policies to see how they work for different times of year or different guest profiles. For example, adopt a stricter policy during high season and then offer a more flexible one during low season. Then look at how your listing performs and adjust your cancellation policy accordingly.

•••