Airbnb's Cancellation Policy Overhaul

Airbnb's Cancellation Policy Overhaul: What Hosts Need to Know About the New Rules

Meta description: Airbnb retired Strict cancellation, added a 24-hour free cancellation window, and launched dynamic policies. Here's what changed and how to adapt your strategy.

If you manage properties on Airbnb and noticed more cancellations in the past few months, you're not imagining it. Airbnb made sweeping changes to its cancellation framework in late 2025 — changes that fundamentally alter how hosts protect revenue and manage their calendars.

The short version: the Strict cancellation policy is gone for new listings, every booking now comes with a mandatory 24-hour free cancellation window, and a new "Reserve Now, Pay Later" feature is encouraging guests to book speculatively. For operators who built their revenue strategy around predictable bookings, this is a significant shift. But Airbnb also introduced a new tool — dynamic cancellation policies — that gives hosts more control than they've ever had over date-specific flexibility.

Here's what actually changed, what it means for your bottom line, and what you should do about it.

What Changed

Starting October 1, 2025, Airbnb retired the Strict cancellation policy for all new listings. Existing hosts with Strict policies were automatically transitioned to "Firm" unless they manually opted out before the deadline. The practical difference: under Strict, guests received a 50% refund only if they cancelled more than seven days before check-in. Under Firm, guests get a full refund up to 30 days out and 50% between 7 and 30 days.

Alongside this, Airbnb introduced a mandatory 24-hour free cancellation window for all stays under 28 nights, provided the guest books at least seven days before check-in. This applies regardless of the host's selected policy. A guest can book your property, hold your calendar, and cancel within 24 hours with a full refund — and there's nothing the host can do to prevent it.

A new "Limited" policy also entered the lineup, offering guests a full refund up to 14 days before check-in. And through the Winter 2025 Release, Airbnb launched dynamic cancellation policies, which let hosts assign different cancellation rules to specific date ranges. Hosts can now pair flexible policies with low-demand periods and tighter policies with peak dates — a feature the industry has requested for years.

Why This Matters for Hotels and STR Operators

The most immediate impact is on revenue predictability. Under the previous Strict policy, a host could reasonably expect that bookings made for peak dates would stick. The 24-hour free cancellation window changes that. Any booking made more than a week before check-in now comes with a no-risk exit for the guest. For properties in high-demand markets during events, holidays, or peak seasons, this creates a window where speculative bookings can block the calendar and then vanish.

The problem compounds with Reserve Now, Pay Later, which Airbnb launched in Q3 2025 for US users. Approximately 70% of eligible users opted in, and the feature lets guests book with nothing upfront. When you combine zero upfront cost with a 24-hour free cancellation window, the barrier to booking — and cancelling — drops to almost nothing. Airbnb has acknowledged that cancellation rates increased after the launch, though it characterizes the net impact as positive for hosts.

The second-order effect is on pricing strategy. Airbnb claims hosts on the Firm policy earn 10% more on average than those who were on Strict, attributing this to increased booking volume from flexibility-seeking guests. But this aggregate figure obscures significant variation. A high-demand property in a supply-constrained market doesn't need more flexibility to attract bookings — it needs protection against late cancellations that leave calendar gaps during peak periods.

Dynamic cancellation policies partially address this. A host managing a ski chalet, for example, can now set a stricter policy for Christmas and February school holidays while offering flexibility during shoulder weeks to attract price-sensitive guests. This is a genuine improvement over the previous one-size-fits-all approach. But it requires active management, not passive reliance on a single policy setting.

Risks and Blind Spots

Airbnb's framing positions these changes as guest-friendly improvements that ultimately benefit hosts through higher booking volume. What it doesn't emphasize is the operational burden this places on professional property managers.

Dynamic cancellation policies are powerful, but they add complexity. A property manager running 50 listings across multiple markets now needs a cancellation strategy for each date range on each property. Without a systematic approach — or PMS integration that automates this — the administrative load is substantial. Airbnb's tools are designed for individual hosts, not operators managing portfolios.

Cash flow risk is another underreported concern. With Reserve Now, Pay Later, guests don't pay upfront, which means host payouts are delayed. If a guest cancels after booking, the host receives nothing — but their calendar was blocked during the interim. For operators who depend on predictable monthly cash flow to cover mortgage payments, cleaning crews, and maintenance, this introduces a new layer of uncertainty.

There's also an algorithmic consideration. Airbnb's search ranking rewards listings that convert well and receive positive reviews. More flexible cancellation policies tend to generate more bookings, which feeds the algorithm. Hosts who resist the flexibility push — by holding onto the Firm policy when their competitors move to more flexible options — may see their visibility decline. The system incentivizes flexibility even when it doesn't serve the host's financial interest.

What You Should Do Now

Review your cancellation policy settings immediately. If you were automatically transitioned from Strict to Firm, verify this is the right choice for your property type and market. For properties in high-demand markets, Firm remains the most protective option available.

Implement dynamic cancellation policies for any properties with clear seasonal demand patterns. Set your tightest available policy for dates you expect to sell out — holidays, local events, peak season weeks — and use more flexible policies for periods where you need to compete on conversion.

Adjust your pricing to account for increased cancellation risk. If 5–10% more bookings are now likely to cancel, your pricing should reflect this. Consider building a small cancellation buffer into peak-date rates, similar to how hotels factor no-show rates into their overbooking strategy.

Monitor your cancellation rate monthly. Track whether Reserve Now, Pay Later bookings cancel at higher rates than standard bookings. If the data confirms this pattern, factor it into your revenue projections and consider tightening minimum stay requirements during high-demand windows.

What to Watch Next

Airbnb has signaled that it will continue refining cancellation tools based on host feedback. The dynamic policy feature is still in its early rollout, and additional options — such as non-refundable rate discounts, which Booking.com already offers — could follow. Keep an eye on Airbnb's Spring 2026 Release for further changes.

The interaction between Reserve Now, Pay Later and cancellation rates is worth tracking closely. If the data shows net-negative outcomes for hosts in certain markets, industry pressure could push Airbnb to add guardrails — such as limiting the 24-hour free cancellation window for repeat cancellers or during high-demand periods.