A Complete Guide to Building a Cancellation Policy For Vacation Rentals

Which cancellation policy to pick for your property?

As a host, your priority will be to increase your bookings, especially during peak seasons. However, this can be challenging. With the pandemic and travel restrictions, cancellations might be expected. As your bookings increase, your cancellations and/or no-shows might also increase. Regardless of the situation, adopting an adaptable operational and pricing strategy and cancelation policy for vacation rentals is important. Cancellations do happen. At times, you might not be able to avoid it. It is important to then understand how to tackle these circumstances. Cancellations greatly impact your revenue with the loss of booking opportunities. It is important to devise an appropriate cancellation policy for vacation rentals.

What is the difference between a no-show and a cancellation? 

A no-show to your vacation rental is a guest who has made a reservation yet fails to arrive at the hotel. Cancellation is when a guest informs you in advance that they will not be able to check in during those dates for various reasons. Depending on your vacation rental’s cancellation policy, the guest might get a refund. A no-show is when a guest never shows up or even fails to inform you. 

What are the Different Types of Cancellation Policies for Vacation Rentals?

There are three major different types of cancellation policies for vacation rentals:

  1. Flexible
  2. Moderate
  3. Strict

But, this differs from one platform to another. Airbnb has its own take on these cancellation policies for vacation rentals. 

Each policy will also have a non-refundable clause. If a guest opts for that, they would receive a 10% discount, however, the booking would be non-refundable. Airbnb has various cancellation policies for vacation rentals to make sure that both the guests and the hosts are satisfied. Airbnb’s cancellation policies for vacation rentals are:

Cancellation Policy Description
FlexibleGuests can cancel until 24 hours before check-in for a full refund, and you won’t be paid. If they cancel after that, the host will be paid for each night they stay, plus 1 additional night.
ModerateGuests can cancel until 5 days before check-in for a full refund, and you won’t be paid. If they cancel after that, the host will be paid for each night they stay, plus 1 additional night, plus 50% for all unspent nights
FirmDepending on when they cancel in the 30-day period, the host would be applicable for either a 50% or a 100% refund. 
StrictTo receive a full refund, guests must cancel within 48 hours of booking, and the cancellation must occur at least 14 days before check-in. If they cancel between 7 and 14 days before check-in, the host will be paid 50% for all nights. If they cancel after that, the host will be paid 100% for all nights.
Long-termThis policy applies to all stays of 28 days or longer and overrides your standard cancellation policy for those stays. The host will be compensated depending on when the guest cancels their booking. If fewer than 30 days remain on the reservation when the guest cancels, the host will be paid 100% for all the remaining nights. 
Super strict 30 daysThis policy is by invitation only and available only to certain Hosts under special circumstances. Guests must cancel at least 30 days before check-in to receive a 50% refund for all nights. If they cancel after that, you’ll be paid 100% for all nights
Super strict 60 daysThis policy is by invitation only and available only to certain Hosts under special circumstances. Guests must cancel at least 60 days before check-in to receive a 50% refund for all nights. If they cancel after that, you’ll be paid 100% for all nights

In VRBO, all cancellations must be made by 11.59 pm in the property’s tie zone to fall within the purview of the cancellation policy of VRBO. While guests can apply their own policies, they usually pick one of the policies provided by the platform.

Choosing a cancellation policy for vacation rental is determined by the way the booking is made. In some cases, you have different options for your guest cancellation policy for vacation rentals. All websites work differently. Generally, policies are somewhere on the scale from flexible to strict. This is decided by the time of the cancellation request or the cancellation fee policy.

Opting for a strict cancellation policy for vacation rentals can make the cancellation process difficult. A difficult process might reduce your guests’ chance of canceling. However, keep in mind that while a strict policy might account for fewer cancellations, it might also lead to fewer bookings. The lack of flexibility might discourage your guests from booking especially in a time of high uncertainty like the global pandemic. 

Peak season is usually defined by regularly known events, holidays, or occasions. And these are usually known for a long time. Your guests might have booked weeks or even months in advance. They might not know what will happen in the future, and they might not like the idea that they could be stuck in a deal they do not like or maybe need.  

Flexible cancellation policies are much more appealing to guests as they will appeal to their need for spontaneity. It’s all about making the booking process stress-free for your guests. 

Anything you choose, you need to remember to provide the best experience for your guests while also protecting your financial needs.

How does a last-minute cancellation impact your short-term rental? 

A last-minute traveler initiation cancellation can drastically impact your short-term rentals. It leaves you with unsold rooms and a loss of income.

Impacts your profit

Sometimes, a low occupancy rate equals a reduced revenue. Even if you relist your vacation rental immediately after receiving a cancellation, you would not be able to get the money back. Last-minute bookings usually go for a lesser price than before. 

Impact your ranking

Cancellations can impact your search result rankings – on Google or other search engines and on other sites that you use to list your properties. This can have a knock-off effect on your reputation. A high booking rate garners high positive reviews and increases the visibility of your vacation rentals. 

Why is a Cancellation Policy for Vacation Rentals Important? 

Without a robust cancellation policy for vacation rentals, your vacation rental property is prone to various consequences like the loss of income. While you can have your own cancellation policy, most OTAs have their own cancellation policies for vacation rentals. Working with a revenue management expert would be wise to develop a workable cancellation policy for vacation rentals. 

Setting clear cancellation windows can encourage your guests to plan their vacations appropriately. Your vacation rental cancellation policy must be visible when guests make their reservations. 

Your guests should know two important things about canceling a booking:

  1. Cancellation deadline 
  2. Refund & Cancellation fees

It is important to add the refund & cancellation fee details because even if guests cancel within the stipulated time, you would have enough time to rebook your listing. You could even use last-minute offers to attract potential guests looking for a good deal. 

What are the Different Types of Cancellations? 

Traveler Initiated Cancellations

Your guest can cancel your reservation for various reasons: 

  1. They might have unavoidable circumstances to circumvent
  2. There might be sudden travel restrictions
  3. They might have gotten a better deal at another accommodation

Host Initiated Cancellations

You might also have to cancel a booking at times. This can happen for various reasons: 

  1. You might have had a personal booking made on those dates
  2. You might have to close the property for maintenance 
  3. There might be unavoidable, unforeseen circumstances in your locality 
  4. There might be double bookings

Most of these can be avoided by using a channel manager or a PMS to optimize your listings and automatically update your availability across platforms. 

Rather than relying on third-party platforms, you can manage the entire process independently or through your property manager or website. Here, you control how you manage your guests and your cancellations. You can get reservations through direct bookings

How to Reduce Last-Minute Cancellations?

While it might be tempting to look for options to prevent last-minute cancellations altogether. You might not be able to do so. All you can do is reduce the number of cancellations that happen.

Confirm the booking

It might be wise to confirm the reservation at the time of the booking. You can:

  1. Ask them to fill in their card details while they make the payment
  2. Collect partial payment or a deposit 
  3. Offer incentives to confirm the bookings

Incorporate length of stay restrictions

You can incorporate minimum stay restrictions or length of stay restrictions to ensure that you are protected even if a cancellation happens. Make sure to set a minimum stay requirement for your vacation rental. This way, travelers will not be able to book your property for fewer nights than you are comfortable with, preventing unnecessary declines and cancellations. You can use minimum night restrictions to increase your occupancy rate when you understand your guests’ booking patterns. Anticipate your guests’ needs for you to make the best out of the market’s potential. 

“Using the features of PriceLabs, we managed to grow our average length of stay from 3.1 nights to 4.3 nights, an increase of almost 40%. In the same period, we grew the revenue of the same listings by 10%+, even though we had lesser (but longer) stays.” – Christian Eriksen, one of the Co-Founders of Nord Collection

Read more about how Nord Collection leveraged minimum stay restrictions for their vacation rental. 

Optimize your property for peak seasons

The peak season has the most competition. For example, The Emirates welcomed 32% more travelers in 2021 than in 2020, according to Dubai’s Department of Economy and Tourism (DET). While you can add custom rates for busy seasons, holidays, or special events in your locality, you can go the extra mile for your guests. You can offer special amenities such as a special candlelight dinner during Valentine’s day for couples. 

PriceLabs Portfolio Analytics can help you have a real-time reporting system that tracks high-level metrics for your property. You can get a quick snapshot of your property’s financial health. We dive further in and provide insights on listing level performance and metrics. With our Market Dashboard, you can compare your property with others in your neighborhood.

Stay connected with your guests

A guest has made a booking. Send them an email welcoming them to your property right after the booking is confirmed. You can go the extra mile by personalizing the message, which would help make them feel special. As a bonus, you can also store their data for their future stay. You can try capturing personal details such as – their email, phone numbers, birthdays, anniversaries, likes and dislikes, etc. You can update a CRM to trigger automated emails for your guests to constantly stay on their radar. Automation tools recommended are PMS with chat automation like Hospitable, Lodgify, Beds24, etc. 

You can utilize Airbnb tips and tricks to make sure you provide an impeccable guest experience to reduce cancellations. 

Rely on technology

If your calendar is constantly updated, your risk of a double booking can be reduced considerably. You can always update your calendar manually. However, you do risk the limitation of human capabilities. So, it might be easier to have software for vacation rentals that helps you do this automatically. 

How to Cancel Guests’ Reservations as a Host?

What can you do when you have no choice but to cancel a booking? There are a few things that you can do to both: keep the guest happy and maintain a good ranking. 

Keep your guest informed

The sooner you cancel, the lesser the impact. Guests might not like having their booking canceled at the last minute. Just like how you might not like last-minute cancellations. Contact your guest immediately and explain the situation properly: 

  1. Be honest with the traveler 
  2. Give them the full picture. 
  3. Apologize for the inconvenience caused

Provide incentives to the guest

Your guest might have been looking forward to an amazing vacation at your short-term rental. If they are provided with incentives, they might come back another time. 

You can provide: 

  1. A 20% discount – this is a reasonable amount that is still profitable for you 
  2. Free amenities for their next visit 
  3. A booking for another date

Understand penalties

Depending on the OTAs you use to list your properties, you might face certain penalties. 

  1. In Airbnb, you will have to pay a fine and face other consequences. If you keep canceling a lot of booking requests, even three in a row may lead to suspension.
  2. In VRBO, the reason for the cancellation has to qualify for a waiver; otherwise, it can impact your ranking metrics.

Guest Cancellation Message Template

Greetings {Name} 


I regret to inform you that we will not be able to service at {rental name} during {dates}. This is due to {the reason for cancellation}. 
We value our guests and their vacation plans. As a valued member of our vacation rental, we offer: 

1. 20% discount for your next booking at {rental name}
2. Free {swimming pool/ any other amenity at your vacation rental} access 

I sincerely apologize for the inconvenience caused. We hope to see you again in the future. 

Thank you for understanding. 


{Your sign}

{Your accomodation sign}

What to do when Guests Cancel their Reservations? 

A guest might cancel their reservation for various reasons. They might be looking for an alternative option or might be stuck in an irreversible situation. What do then do to ensure you have a repeat guest on your hand? 

Communicate with them and offer them incentives to transform a guest into an ambassador. Get in touch with the guest who wants to cancel. Ask them why they want to cancel. Depending on the reason, you should be able to offer an alternative. Let your guest know that they can postpone their trip instead if they wish. They wouldn’t have to pay the cancellation fees, and your metrics will also not be affected. 

Message Template for Rescheduling

Greetings {Name} 


I’m sorry to hear that you will no longer be able to stay with us at {Rental name} from {arrival date} to {departure date}. Have you considered moving your trip to a different date in the future? 

We would love the opportunity to serve you in the future. If you do oblige to move your trip, please let me know. We would be more than happy to accommodate you. Let me know what you think! 

Looking forward to meeting you. 
Have an amazing holiday. 

Thank you. 


{Your sign}

{Your accomodation sign}

Sometimes, guests might not be up to rescheduling their trip; they might ask you to cancel the bookings on your end. But as we know, canceling a booking on your end impacts your listing performance and ranking metrics. 

Guests want you to cancel bookings because canceling on their end can result in them paying cancellation fees. So obviously, it is not in your best interest to cancel the booking on your end. However, you can gently encourage them to cancel the booking on their end. 

Message Template for Nudging Cancellation

Greetings {Name},


We regret that you do not wish to reschedule your stay with us.  We really do look forward to hosting you. 

We can’t cancel our end without negatively impacting our property. We kindly request you process the request from your end. We understand that unforeseen circumstances exist, and we want to stay by your side. If you are making a trip to the city, please find attached an amazing itinerary for your stay here. 

Enjoy your stay at {location}.

Please cancel the booking on the platform to ensure that you are not billed automatically.

Here’s an article that explains how you can do that {attach an article from the help center here}. 

We hope that you choose our property for your stay in {location name} the next time. 


{Your sign}

{Your accomodation sign}

Regardless of the situation of cancellation, you should be ready to adapt your strategy to make sure it is beneficial to both you and your guest. Cancellations happen, all you can do is try your best to avoid them. 

It is best to have an ironclad cancellation policy in place to protect yourself. Flexible or strict whichever way you decide to go, this is the kind of protection that your revenue requires. 

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