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How To Select The Best Guest Cancellation Policy For Your Short Term Rental Listing


You’ve just listed your vacation rental property, bookings are rolling in, and then
life happens – a guest cancels on you.

Who knows? Maybe it’s a sandstorm, a global event, or the guest’s flight got canceled. Anything could’ve happened — and this is exactly why you need a rock-solid cancellation policy – so your rental income doesn’t suffer. 

In this blog, you’ll learn the best cancellation policies for short term rentals, and exactly how to choose the best one.

Let’s goooooo!

 

Types Of Holiday Homes Cancellation Policies

Choosing the right cancellation policy isn’t always straightforward. Like picking the perfect location for your Airbnb, your policy needs to balance protecting your income while staying attractive to guests. 

Let’s break down the different types of cancellation policies and see which one fits your property best.

 

1. Flexible Policies

Flexible vacation rental cancellation policies are the most guest-friendly option, typically offering full refunds up until 24-48 hours before check-in. These are the “cool aunts” of cancellation policies and they’re perfect if you’re just starting out or operating in a competitive area. But don’t mistake flexibility for weakness – these policies can actually boost your bookings in the right market.

Flexible vacation rental cancellation policies are best suited for:

  • New listings still building their reputation
  • Properties in areas packed with competition
  • Areas where last-minute bookings are the norm
  • Off-season rentals when bookings are harder to come by

Image showing a group of people evaluating different vacation rental cancellation policies

Photo by: Antoni Shkraba

2. Moderate Policies

Moderate holiday homes cancellation policies strike a balance between host protection and guest flexibility, usually requiring 5-7 days notice for full refunds. These cancellation policies are not too strict, not too lenient. They strike the perfect balance between protecting your interests and keeping guests happy.

Moderate holiday homes cancellation policies are best suited for:

  • Established listings with solid reviews
  • Year-round destinations that see steady traffic
  • Mid-range properties that need stable bookings
  • Balanced markets where you’re neither swamped nor struggling

3. Strict Policies

Strict vacation rental cancellation policies offer the most protection for hosts but may impact booking volumes. These policies typically require 14-30 days notice for any refund. It’s like your property’s bouncer – keeping your calendar protected but might scare away some potential guests.

Strict short rental cancellation policies are best suited for:

  • Luxury properties in prime locations
  • Properties with longer average stays
  • Venues popular during major events
  • High-demand periods (like Dubai’s winter season, Christmas, New Year, Valentines)

 

Vacation Rental Guest Cancellation Policy: What Factors Should Influence Your Choice?

The cancellation policy for your holiday home should align with your property type, location, and target market to maximize bookings while protecting your interests.

Image showing a property owner in his property

Photo by Thirdman


Here’s a comprehensive breakdown of what influences your vacation rental cancellation policy decision:

 

1. Property Location

If you’re in prime tourist areas like Downtown or Palm Jumeirah, you can afford to be stricter with your terms. 

The consistently high demand means you’ll still attract bookings, and the premium rate will also justify stronger booking protection. Plus, the steady year-round flow of tourists means you’re less impacted by cancellations.

However, if your property sits in secondary locations like JVC or Sports City, you’ll want to take a more flexible approach. These areas often need more competitive pricing strategies, and your cancellation policy should match this flexibility to attract bookings. Since these locations tend to be more affected by seasonal fluctuations, you’ll also need to adapt your policy throughout the year to maintain a healthy booking rate.

 

2. Guest Demographics

Different guest types require different cancellation approaches. 

  • Business travelers often prefer moderate cancellation terms since their schedules can change at short notice. They tend to book closer to their arrival dates and might need special corporate arrangements to accommodate their company’s booking policies.
  • Families, on the other hand, appreciate more flexible cancellation policies. With kids, pets, and multiple travel arrangements to juggle, they’ll value the security of being able to change plans if needed, which could actually help them commit to their booking.
  • Luxury travelers are a different story altogether. These guests are generally comfortable with stricter cancellation policies and aren’t as sensitive to price points. However, they do expect premium service regardless of your policy terms, so while you can be firm with your cancellation rules, your service standards need to remain exceptional.

 

3. Seasonal Demand

During Dubai’s peak season from October through March, you can afford to implement stricter cancellation policies. 

Vacation rental guests expect and generally accept firmer terms during these busy months, while higher nightly rates naturally justify stronger booking protection. The limited availability across the city, especially during major events and holidays, means you can maintain a firm stance without losing bookings.

The off-peak season from April to September tells a different story. As temperatures rise and tourism slows, you can loosen those strict policies to encourage more bookings. However, keep in mind that summer bookings typically carry a higher cancellation risk due to Dubai’s extreme heat, so structure your policy to protect against last-minute changes while remaining guest-friendly.

 

Short Term Rental Platform Cancellation Policies 

Each short term rental platform has its unique approach to cancellation policies, and knowing these differences is crucial for managing your property effectively. 

Image showing a lady browsing through Airbnb

Photo by cottonbro studio

1. Airbnb Guest Cancellation Policy 

Airbnb leads the pack with the most versatile cancellation policy options, offering six distinct choices that can match any hosting style. Here’s what you need to know:

For short stays (under 28 nights), Airbnb hosts can choose from four standard policies:

  1. Flexible: Full refund if canceled 24 hours before check-in. If canceled after this: the guest will pay for nights stayed plus one night.
  2. Moderate: Full refund if canceled 5 days before check-in. If canceled after this: the guest will pay for nights stayed plus one night, plus 50% of unused nights.
  3. Firm: Full refund if canceled 30 days before check-in. If canceled 7-30 days before: the guest will pay 50%. If canceled after this: the guest will pay 100%. Full refund if canceled within 48 hours of booking (must be 14+ days before check-in).
  4. Strict: Full refund only if canceled within 48 hours of booking AND 14+ days before check-in. If canceled 7-14 days before: the guest will pay 50%. If canceled after this: the guest will pay 100%.

For long stays ( 28+ nights), Airbnb hosts can choose from two standard policies:

  • Firm: Full refund if canceled 30 days before check-in. If canceled after this: the guest will pay for nights stayed plus 30 nights.
  • Strict: Full refund only if canceled within 48 hours of booking AND 28+ days before check-in. If canceled after this: the guest will pay for nights stayed plus 30 nights.

 

2. Booking.com Guest Cancellation Policy

Booking.com gives short term rental hosts two main cancellation options

  • Non-Refundable: The non-refundable option blocks any refunds after booking, which maximizes your earnings but might reduce booking volume – perfect for peak season when demand is high.
  • Flexible: The flexible option lets guests cancel free of charge up to 24 hours before check-in. While this means accepting lower rates, you’ll likely see more bookings and better visibility in search results, making it particularly effective for new properties building their reputation.

 

3. VRBO Guest Cancellation Policy

VRBO also offers two distinct cancellation policies for holiday homes. 

  1. Relaxed (14-day policy): The relaxed option gives guests a full refund if they cancel 14 days before arrival, or half their money back for cancellations up to 7 days prior, plus a guaranteed cleaning fee refund – ideal for family properties where plans might change.
  2. Firm (60-day policy): The firm policy requires cancellation 60 days ahead for any refund, offering no money back after that window. This stricter approach better protects luxury property owners where last-minute cancellations can be costly.

How To Choose the Best Guest Cancellation Policy On Different Short Term Rental Platforms

On Airbnb, focus on selecting policies that match your local market. Use Super Strict terms for luxury properties. But always remember to adjust your approach seasonally and keep guests informed of any changes.

For Booking.com, success comes from offering a mix. Combine flexible and non-refundable options based on demand. Keep an eye on what your competitors are doing as well and adjust accordingly.

On VRBO, tailor your policy to your property type and typical booking patterns. If guests usually book six months ahead, your cancellation window should reflect this. Like other platforms, stay flexible with seasonal changes and regularly check if your policies align with similar properties in your area.

 

How To Set Up Your Vacation Rental Guest Cancellation Policy 

Image showing a group of people trying to set up a vacation rental cancellation policy

Photo by fauxels

Ready to set up your vacation rental guest cancellation policy? Let’s break it down into simple, actionable steps that’ll protect both you and your guests.

Step 1 — Pick Your Platform Settings: Choose ‘Strict’ or ‘Flexible’ on Airbnb and Booking.com. For VRBO, you’ll need to select between their 14-day and 60-day options.

Step 2 — Write Clear Rules: Think about how you’d explain your policy to a friend. If they can understand it easily, your guests will too. Keep it simple and clear, e.g “Cancel 30 days before check-in for a full refund. Cancel 14 days before for 50% back. No refund after that.” Don’t complicate it.

Step 3 — Double-Check Local Rules: If your vacation rental is in Dubai, make sure your policy follows Dubai Tourism’s guidelines – as the government updates these pretty often.

 

Adjusting Your Holiday Homes Cancellation Policy For Dubai Seasons

Dubai’s seasons are super distinct, and your cancellation policy should reflect these changes. Let’s break down your seasonal strategy.

 

1. Peak Season Strategy (October-March)

During these golden months, your property is in high demand. Here’s how to protect your bookings:

  • Implement a 14-30 day notice period to safeguard against last-minute changes when demand is at its peak.
  • During major events like Dubai Shopping Festival, increase your non-refundable deposit to 50% of the booking value.
  • For premium periods like New Year’s Eve, consider requiring full payment 30 days in advance with no refund options.

Homevy Tip: Keep your peak season policies strict but fair. Remember, you’re not trying to punish guests – you’re protecting your business during your most profitable months.

 

2. Off-Peak Season Strategy (April-September)

Reduce your cancellation notice period to 3-5 days to encourage more bookings in slower months. You can also offer free cancellation if temperatures exceed 45°C during booked dates – this shows you understand guest concerns.

For guests booking 14+ nights, give them flexible terms to helping maintain occupancy during quiet periods.

 

FAQs on Vacation Rental Guest Cancellation Policy

 

1. What Is A Short Term Rental Cancellation Policy?

A vacation rental guest cancellation policy is a set of rules that define how and when guests can cancel their bookings, and what refunds they’re entitled to receive. Think of it as your property’s insurance policy – it protects both you and your guests from unexpected circumstances while setting clear expectations from the start.

Your holiday homes cancellation policy directly affects:

  • Your booking rates and overall revenue
  • Guest confidence in making reservations
  • Your property’s competitiveness in the market
  • Your ability to manage cash flow effectively

2. What Mistakes Should I Avoid With Vacation Rental Cancellation Policies?

  1. Don’t use legal jargon in your policy. Let the terms be clear.
  2. Don’t use different rules on each platform
  3. Don’t keep the same policy year-round
  4. Don’t misplace guest policy agreements
  5. Don’t use an unclear refund timeline
  6. Don’t ignore market-standard policies

3. What Are the Critical Components of A Holiday Home Cancellation Policy?

  • Cancellation Windows: Specific timeframes when guests can cancel for different refund amounts
  • Refund Terms: Clear breakdown of what money gets returned under various scenarios
  • Platform-Specific Rules: Requirements set by booking platforms like Airbnb or VRBO
  • Special Conditions: Any unique circumstances that might affect the policy

 

Final Thoughts on Short Term Rental Guest Cancellation Policy

The perfect policy isn’t about being the strictest or the most flexible – it’s about finding what works for your property and your guests. Whether you’re managing a luxury penthouse in Downtown Dubai or a studio apartment in JVC, your cancellation policy should protect your interests and keep your bookings flowing.

Keep testing, keep adapting, and most importantly, keep listening to your guests’ feedback.

And if you’re still unsure…just contact Homevy, we’ve got you – always.

 

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