Cancellation Policy

A cancellation policy sets the rules for refunds, deadlines and any fees when a booking is cancelled, changed, shortened or a guest does not show. It covers both guest‑ and host‑initiated cancellations and should be clear about notice periods, deductions and how no‑shows are treated.

Under the Australian Consumer Law, terms must be disclosed upfront and fees can only reflect a genuine estimate of costs, not penalties. On platforms such as Airbnb and Booking.com, hosts select a standard policy, refunds are administered by the platform, and host terms may be overridden by extenuating‑circumstances rules or non‑refundable rate settings.

Policy types and examples

Airbnb in Australia offers Flexible, Moderate and Firm policies. Flexible provides a full refund up to 24 hours before check‑in. Moderate provides a full refund up to five days before arrival. Firm provides a full refund up to 30 days out, a 50% refund for cancellations made 7–30 days before arrival, and no refund within seven days of check‑in.

On Booking.com, common rate types are Fully Flexible with free cancellation until a set deadline, Partially Refundable where a percentage fee applies within the window, and Non‑Refundable where no refund applies after booking. Regardless of platform, cancellation fees must be transparent and represent a genuine estimate of loss such as lost bookings and re‑letting or admin costs, otherwise they risk being unfair contract terms.

Impact on bookings and revenue

More flexible policies on major OTAs often boost conversion and occupancy for short lead‑time domestic trips, but they typically increase guest cancellations and revenue volatility. Tighter policies can reduce churn but may deter early‑stage browsers and lower your funnel conversion.

Host‑initiated cancellations on Airbnb attract monetary penalties, an automatic public review, blocked calendar dates and loss of Superhost eligibility, which can reduce revenue even if the dates later rebook. Excessive or one‑sided fees are unlawful under Australian Consumer Law and operators may need to refund where limited costs were incurred, reducing any retained cancellation revenue.

Platform rules and Australian Consumer Law

If a host cancels or fails to provide the stay, guests are entitled to a refund or remedy under the Australian Consumer Law. Change‑of‑mind cancellations by guests are not guaranteed, but any fee charged must be reasonable and reflect actual costs. From 9 November 2023, unfair contract terms can attract civil penalties, and statements such as “no refunds in any circumstances” risk enforcement.

Platform terms cannot exclude ACL rights. Platforms may also override host rules in defined events, such as Airbnb’s policies for major disruptive events that allow refunds or penalty‑free cancellations for emergencies or government restrictions, which can supersede your chosen policy.

Notice periods, fees, and refunds

Hosts can charge a cancellation fee or keep a deposit only to cover reasonable costs and must take steps to mitigate losses, such as rebooking cancelled dates. If the host cancels, guests are entitled to a refund. From 9 November 2023, cancellation terms must be proportionate to actual costs and clearly explained to avoid unfair contract term penalties.

Major platforms use notice‑based refund windows to balance risk. On Airbnb, for example, full refunds may apply up to 24 hours, five days, or 30 days before check‑in depending on the policy chosen, with reduced or no refunds closer to arrival.

Metrics: cancellation rate and lead time

On Airbnb, Superhost status requires a host‑initiated cancellation rate at or below 1%. Cancellations by the host can trigger fees, blocked calendar dates and the loss of Superhost eligibility, so maintaining reliability is critical to revenue and visibility.

Lead times influence which policy suits your market. Domestic trips are often booked within four weeks, with capital‑city short‑term rentals averaging roughly 20–30 days lead time and regional or coastal markets averaging 30–50 days. Aligning your cancellation terms with typical booking windows supports pricing strategy, occupancy and cash‑flow predictability.

Conclusion

A well‑designed cancellation policy balances conversion, occupancy and risk while complying with Australian Consumer Law and platform rules. Choose notice periods and fees that reflect genuine costs, prepare for platform overrides in extraordinary events, and protect your metrics by avoiding host‑initiated cancellations.

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