I use firm cancellation policy. I have tried changing and folks just cancel too much and then no one rebooks. I also recently read your cancellation policy on Airbnb affects if guests can make two payments. I prefer they pay up front and a firm cancellation policy forces this! 

“Airbnb has introduced a “Reserve now, pay later” option (in the U.S.) for stays with moderate or flexible cancellation policies — this lets guests delay payment until closer to arrival. But note: this is for flexible/moderate policies and a pay later feature, not specifically the Firm policy.”

I use Firm as well. It is probably the best balanced option for most hosts.

I use the new Limited policy, coupled with the 10% Non-Refundable Discount. 

The Limited policy states: “Full refund at least 14 days before check-in. Guests who cancel 7-14 days before check-in get 50% back. After that, their trip is non-refundable.”

Hear me out on the logic, and how I turn it into an advantage and into higher revenue:

1. Guests on Airbnb can filter for listings that have “Free Cancellation.” If their check-in is 15 days away (plenty of notice by most reasonable standards), your listing will be shown in the results. If you’re on the Firm policy, you won’t even show up. You can’t get booked if you’re not in the search results.
2. I couple the Limited cancellation policy with a Non-Refundable Discount (10%).
3. Even though they are searching for listings that allow free cancellation, the price shown to them in the search results is actually the non-refundable discounted rate. Airbnb always presents the guest with the lowest possible rate first -- inclusive of discounts, promotions, etc.
4. Once they click into the details of your listing, things get interesting. They now have to decide if they really NEED the flexibility to cancel. The 10% discount for waiving the right to cancel is pretty tempting. It’s basically the same as saying, “You’ll pay 10% MORE if you think you might need to cancel later on.”
5. A lot of people will think it through and say, “For a 10% discount, I’ll carve it in stone and choose the non-refundable rate.”

So boom, you’ve just walked a guest through a thought process of initially wanting the flexibility to cancel, but then forcing them to ask themselves how likely they are to actually need to cancel. Are they willing to pay 10% MORE in order to be able to cancel later on? Probably not!

Oh and here’s the kicker: I add 10% to my Airbnb markup to offset the Non-Refundable Discount. In other words, the discounted rate is my NORMAL rate. And my NORMAL rate is NON-REFUNDABLE. If you want a refundable rate, you pay a 10% PREMIUM :-)

Here’s a problem this creates, though, and how I solve it:

• On the Limited cancellation policy, for dates less than 15 days away, the Non-Refundable Discount is not available, because you’re already within the non-refundable window of your cancellation policy.
• So for dates within the 2-week non-refundable window, ,my price is artificially 10% too high (because of the extra 10% I added to the platform markup).
• This is easily solved by configuring a Last Minute Discount of 10% on Airbnb that kicks in for dates that are 14 days away or less.
• Which has the added advantage of showing a “strikethrough price” to highlight the fact that you’ve discounted your rate as a last-minute deal :-)

I chose Limited as the cancellation policy because anything more lenient than that (Moderate or Flexible) actually allows a guest to cancel and get a partial refund in the MIDDLE of their stay. I want the non-refundable discount to be offered as long as possible, and Limited takes that up to the 2-week mark ,whereas Firm would make the discount go away at the 30-day mark. 

​@Tom how long have you had your settings adjusted to the above policy, discounts and 10% upcharge?  Are you seeing an increase in bookings and revenue from this method that you weren’t seeing before with a firm cancellation policy?

​@southhavenbnb I switched to Limited the day it came out (a month ago?). And I think I introduced non-refundable discounts pretty much as soon as they came out as well (a couple months ago?). I don't have quantitative analysis of the impact. But I've convinced myself that the logic is sound. It tickles me when I see reservations come through with people choosing the non-refundable option. Those are bookings that would have normally been refundable, and the guest has made a conscious choice to make it non-refundable. So later on when they implore me to cancel with refund, I have an extra argument, that they explicitly chose this option, it wasn't because of my policy, it was because of their own choice.

​@Tom while I’ve been very much against the NR offering, the way you have it setup is quite slick.