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Why Using Smart Cancellation Policies Drives Better Results on Airbnb & VRBO

May 20, 2025 – 5-minute read – by Katrina Greeves

When your property is listed on short-term rental platforms like Airbnb or VRBO, the cancellation policy attached to your listing is more than just a setting — it’s a critical factor in how often your property is viewed, booked, and protected from loss.

As your expert short-term rental property manager, Property Providers’ role is to apply industry insights and best practices to drive consistent, stable returns across the entire portfolio. A well-chosen cancellation policy helps us do just that.

Skip to top owner FAQs about Guest Cancellations

Prefer a video explainer? In just a few minutes, we’ll walk you through why flexible cancellation policies aren’t a risk—they’re a smart strategy to increase visibility, secure more bookings, and protect your property’s income.

A Balanced Approach

1. Flexible Policies Boost Visibility and Bookings

The most powerful way to improve your listing’s visibility is to work with the booking platform’s algorithm — not against it.

Airbnb and VRBO promote properties with guest-friendly cancellation settings. Listings with more flexible cancellation policies appear higher in search results and convert more views into bookings.

That means more exposure, more bookings, and lower vacancy rates.

2. Shorter Booking Windows Increase Risk with Strict Policies

As guest behaviour shifts, we’re seeing lead times shorten. On average, guests are booking closer to their check-in date than ever before. Five years ago, lead times were over 40 days; in 2025, we see lead times on average of 28 days.

While a strict policy may appear to offer protection, it often leads to lower booking confidence and, ultimately, fewer reservations.

In fact, stricter policies increase the likelihood of guests skipping over your listing entirely, especially when competitors offer greater flexibility.

Strict policies can decrease conversion and increase uncertainty — even if cancellations never happen.

3. Consistency Protects Your Performance

Consistency isn’t restrictive — it’s protective.

Applying a more flexible cancellation policy brings several advantages:

Higher conversion rates: Online booking platforms’ algorithms give preference to properties with flexible cancellation policies. More visibility = more bookings.
Risk management: by using policies that are tested, proven, and platform-approved, we can maximise your property’s exposure while mitigating cancellation risks.
Standardised experience: by offering a consistent approach, both owners and guests can have confidence in the bookings we arrange, which boosts satisfaction levels, increases transparency and improves overall experiences.
Operational efficiency: consistent policies allow us to streamline communication and conflict resolution processes, allowing our team to spend more time on personalised sales and service, and proactive property management.

4. Flexibility Still Offers Protection

The idea that flexibility means exposure to financial loss is outdated. Platforms like Airbnb and VRBO allow us to use Moderate or Firm policies that offer guests some flexibility and reassurance while still providing owners with a clear and fair cancellation buffer.

These policies strike the right balance between encouraging bookings and minimising disruption. If guests cancel, our team will manage this process efficiently, prioritising opportunities for re-booking.

5. Price + Policy = Greater Booking Power

According to Expedia Group’s 2023 Traveller Value Index, guests prioritise flexible cancellation and competitive pricing when choosing where to stay.

Even in the premium segment, flexibility is a key decision driver. Paired with strong value, this approach increases your property’s appeal in a crowded market.

The right cancellation policy at the right nightly rate makes your property book faster.

6. Guest Cancellation Data: Balancing Protection with Demand

Expedia’s Traveller Value Index (2023–2024) found:

Relaxed policies lead to up to 5× more bookings than non-refundable.
Moderate policies perform ~2–3× better than Strict.

VRBO’s research shows that listings with more flexible policies have significantly higher page views than those with more restrictive policies.

VRBO’s data also shows that more guests cancel with stricter cancellation policies, and even as the cancellation policy becomes more flexible, the cancellation rate remains consistent.

While Airbnb doesn’t provide the same transparency with their data, industry advice is that they advocate for the cancellation policies that provide balanced protection for both guests and owners, which is our approach too.

Final Word: Balancing Cancellation Risk with Proven Performance

While some operators experiment with policy settings, we believe in an approach that’s grounded in data, platform insights, and guest behaviour trends.

By consistently applying a balance with cancellation policies and competitive pricing, we:

Enhance booking conversion
Improve channel search rankings
Protect owner revenue
Minimise operational disruption

Your property deserves a strategy built on reliability and results — and that’s exactly what we deliver.

Cancellation FAQs

❓ What is the probability of a guest cancellation?

95% of Property Providers’ guests follow through with short term rental bookings, particularly with our guest screening, higher pricing and longer-stay requirements.

Cancellations happen, but under the policies we use, guests forfeit some of all of the payment unless they cancel 30 days or more in advance. Of those 5% of guests who cancel after payment, most of those occur well within the policy refund windows — meaning the owner impact is minimised financially in most cases as the property can be prioritised to re-book.

❓ Doesn’t this mean property owners/investors are taking on all or more of the risk?

Short-term rentals do balance risk and reward. The channel cancellation policies we select are designed to balance guest flexibility with owner protection. These are the platform-recommended policies for a reason — they work.

You’re not absorbing more risk; we are choosing a policy that keeps your listing competitive to align with guest booking behaviours, while still providing protection against last-minute (within 14 days) changes. The real risk is in not adapting to guest behaviour, which can lead to fewer bookings and reduced earnings.

❓ What happens if a guest cancels? How are you protecting Property Owner/Investors?

We use Firm (Airbnb) and Moderate (VRBO) cancellation policies, which provide a fair buffer. Guests must cancel over 30 days in advance to receive a full refund, and if they cancel before 7 (AirBnB) / 14 days (VRBO) prior, they only receive a 50% refund. If they cancel within 7 days or after check-in, there is no refund. So, there’s a strong financial penalty for last-minute cancellations. This means you’re protected, and the property can still be rebooked. Bookings over 1 month duration are slightly different – talk to us for clarification.

We actively monitor cancellations and, when needed, re-market the property immediately across all platforms to recover lost revenue. Our professional management ensures your property isn’t sitting idle.

❓ I understand guests want more flexible cancellation policies, but what’s in it for me as a property owner?

More bookings = more revenue. Higher visibility, better rankings, and increased guest confidence drive occupancy. This consistent approach allows us to manage risk at scale, while maximising your property’s income potential — especially during off-peak times.

❓ This makes sense for a short booking, but we prefer longer stays. The risk is greater — how are you managing this?

Where guests do use booking channels for longer periods, we do find they carefully consider the property and price points well before the booking is confirmed. We find that at the more premium price points and longer stays, the cancellation rate is still under 5% on average.
In our experience, guests rarely use booking channels for longer bookings. When they book direct with us, we require upfront deposits and follow clear cancellation terms, which are detailed in our guest terms and conditions. If a guest cancels, we retain part or all of the deposit, depending on timing. In addition, we pre-screen guests, collect payment securely, and manage cancellations closely to reduce risk exposure. Longer stays are treated with the same structure and controls — just with greater oversight.

❓ What percentage of people book, pay, then cancel?

Historically, fewer than 5% of guests cancel after payment, and most of those occur well within the policy refund windows — meaning the owner impact is minimised financially in most cases. Of course, some cancellations can occur, particularly if after a serious or unexpected issue where the property becomes uninhabitable.

❓ If a guest can cancel so easily, what happens if I (as an owner) want to cancel a booking?

These recommended changes to the guest booking policies do not change the obligation for owners to fulfil bookings they have accepted. There are risks and penalties for owner cancellations of channel bookings, and owners are reminded to review our owner cancellation policy carefully.

❌ Please remove my listing from Airbnb and VRBO, and other online booking channels. I only want direct bookings from Property Providers’ repeat and corporate guests.

We understand the preference for direct bookings, and we value them too. However, external channels represent a significant portion of total occupancy. Removing your property from these global platforms will impact your annual income, reduce your property’s overall exposure and increase your marketing expenses as more effort will be required to acquire and convert bookings. We’re happy to review your performance and show you the data before proceeding.

At Property Providers, our core purpose is “Helping People Live Better”. As Sydney’s most flexible residential rental agency, we are focused on Property Management and renting “Your Property, Your Way”. We have designed 6 different rental services covering all facets of Long-Term Leasing and Short-Term Stays. Unlike franchise real estate agencies, we see the value in pragmatism and flexibility. Whether you want to rent your property furnished or unfurnished, for 6 months or 5 years, we will manage your property, your way. Our bespoke marketing strategies deliver discerning international tenants who understand quality and are prepared to pay for it. If you would like to learn more, please visit our website or call us on +61 2 9969 7599

Table Of Contents

A Balanced Approach
1. Flexible Policies Boost Visibility and Bookings
2. Shorter Booking Windows Increase Risk with Strict Policies
3. Consistency Protects Your Performance
4. Flexibility Still Offers Protection
5. Price + Policy = Greater Booking Power
6. Guest Cancellation Data: Balancing Protection with Demand
Final Word: Balancing Cancellation Risk with Proven Performance
Cancellation FAQs

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Katrina Greeves

Katrina’s passion lies in bringing the right technology, processes and high-performing teams together to serve our clients better.

Always ready to support others, Katrina brings a laser focus and hands-on approach to help navigate compliance challenges, deliver digital experiences, and improve our business systems. (Learn more about Katrina.)