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Airbnb is Testing a Change to its Cancellation Policies that Hosts will NOT like

We came across this this week and as it says, you aren’t going to like it. Higher host fees and worse still guests can cancel mid stay and get a refund – What are Airbnb thinking of?

When Airbnb has to introduce important changes or product updates, it often tests them only on a smaller portion of its user base.

For example, in the past Airbnb tested an increase in the host fees for bookings coming from paid ads, a move that was not greeted favourably by the host community.

This time, the SF based company is planning to introduce an update to its cancellation policies and a corresponding increase of the host service fees… a move that doesn’t make the host community happy.

Let’s see together what is this all about.

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How are the Airbnb Cancellation Policies going to change?

With an email sent on the 15th of September, Airbnb has informed Italian hosts that it will soon make big changes to the rules that define when and how guests can cancel a reservation.

In order to provide guests with more confidence when they want to book an accommodation on Airbnb, the company is planning to apply the following changes (the page is currently only visible to Italian hosts):

  • Each policy will have a grace period, i.e. a set period of time before a reservation when a guest can cancel and receive a full refund
  • The Moderate and Strict policies (less favourable to the guests), will be accompanied by an increase in host service fees, from 3% to respectively 4% and 5% to keep into account the extra protection from cancellations
  • Guests that cancels pre-trip will not be charged the guest service fees, making cancellations truly 100% refundable
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Feedback gathered from the community showed Airbnb that the current cancellation policies are not well understood by guests and that listings with a “flexible” cancellation policy are more likely to receive bookings.

This strategy is taking a direction similar to the one adopted by other players in the travel industry (such as Booking.com) following the idea that, by offering more favourable cancellation terms, potential guests will be more likely to book an accommodation on Airbnb.

Furthermore, with clearer terms the company is looking to better educate guests about the consequences of cancellations, reducing the hassle for hosts who often have to waste time answering questions about this topic.

A comparison with the Old Policies

Overall, the new Cancellation Policies are generally much more favourable for guests and, especially for the “strict” one, have worse terms for hosts.

When making a comparison, it’s possible to notice how the main differences between the old and the new policies lie in the introduction – for every type of policy – of a period of time in which guests can cancel a reservation without any financial loss, and in the amount paid out to the host in case of cancellation.

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  • Flexible policy: no big changes
  • Moderate policy: changes only in the cut-off time (from 5 to 7 days prior to the check-in)
  • Strict policy: changes in both the cut-off time (from 7 to 30 days) and in payout value (what used to be a 50% payout becomes 0%, what was 100% now it’s 50%)

Airbnb is openly trying to incentivize more and more hosts to adopt a flexible cancellation policy, and as a consequence the “extra level of protection from cancellations” offered by non-flexible policies will be available at a premium.

Super strict policies (30 & 60) are also changing, but given that only a super small of selected hosts has access to them, we’ll not cover their changes in details in this post.

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The Negative Effects of the New Cancellation Policies

It is true that the old cancellation policies were complex to comprehend and that these updates have been thought to facilitate their understanding.

However, while the upcoming changes will be adding extra benefits for guests making a reservation on Airbnb, the same can’t be told about hosts side, where only worsening conditions seem to have been introduced.

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The Airbnb Italian host community doesn’t seem to trust the theoretical potential increase in reservations that Airbnb is using as argumentation to justify the upcoming changes and perceives almost any adjustment as pejorative.

When analyzing the main reasons of discontent, the increase in fees (that could at first sight be perceived as the most relevant bone of contention) is actually not the main concern of Italian hosts.

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What really worries the hosts community is that by introducing a grace period for every kind policy, Airbnb is de facto granting guests the option to cancel a reservation without any consequences.

This means that a guest will have any incentive to cancel whenever they will find a better or cheaper alternative, possibly also outside of Airbnb.

While even an increase in cancellations might not affect negatively Airbnb’s long-term business (as it might be balanced by an overall higher number of bookings), such a change would have a strong negative impact on individual hosts.

In fact, especially for more professional hosts, cancelled bookings are always a disruptive occurrence, as there’s no guarantee that the slots left empty will be booked again.

Furthermore, the increased service fee combines with the possibility to cancel without penalties might increase the chances that hosts and guests will agree to circumvent Airbnb’s booking system to avoid paying the booking fees.

Gathering Feedback before a Global Rollout

Having to deal with a two-sided marketplace, Airbnb always needs to carefully balance changes that can affect both sides of the platform.

To test the waters before a global rollout, the changes highlighted here will initially only be applied to Italian listings after the 18th of October 2016.

Airbnb has not commented on the reasons why Italy was picked as the test market, but from the conversations with representatives of the company it has been confirmed that thepolicy updates will be rolled out to the rest of world.

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However, by observing the initial reactions of the community, it looks like Airbnb has miscalculated the amount of dissatisfaction that these updates would have generated among the host community (as can be shown by a petition created to fight this changes), and it might be possible that further adjustments will be applied to take into consideration of the host feedback.

If – as many other hosts – you also believe there could another ways to improve the cancellation policies, you can:

  • Leave a comment below, telling us how these changes are going to affect you and offering suggestions for improvements
  • Send an official feedback to Airbnb from this link
  • Sign the online petition on change.org

Source: http://all-about-airbnb.com/post/150660669911/new-cancellation-policies-and-increased-host-fees