Airbnb Overrides Host Cancellation Policies and Refunds Covid Bookings in Full

On 14 March 2020, a Saturday, Airbnb extended its Extenuating Circumstances policy to every country and region except domestic travel in mainland China. Guests and hosts could cancel stays and Airbnb Experiences booked on or before that day, with a check-in date between 14 March and 14 April 2020, at no charge or penalty. The cancellation policy the host had chosen for the listing no longer decided the refund.

The guest got a full refund, and Airbnb said it would keep no fees. The host got a promise that help would follow. On 30 March 2020, chief executive Brian Chesky apologized for telling guests about the decision without consulting hosts. He extended the refunds to stays beginning on or before 31 May, and said Airbnb would pay hosts $250 million, at 25% of what a host would normally have received under their own cancellation policy.

What changed on 14 March

Every Airbnb reservation carried one of six cancellation policies, set by the host and running from flexible to super strict, CNN reported on 15 March 2020. The Extenuating Circumstances policy was the tool that let the company override those terms. Before 14 March, Bloomberg reported, its Covid-19 coverage had applied to China, Italy and South Korea, and then to the United States.

The 14 March announcement made the coverage global for reservations that already existed. Domestic travel in mainland China, the one exception, was scheduled to return to normal rules on 1 April. Luxe and Luxury Retreats reservations were not covered. Airbnb said it would not collect any fees, or benefit in any way, from reservations canceled under the policy.

Airbnb acknowledged the cost in the same statement. It said the announcement would affect hosts around the world, many of whom depended on what they earned on Airbnb, and it promised to find tools and programs to support them in the days and weeks ahead. It named none that day. It thanked hosts who had already refunded guests outside their own cancellation policies, and said that of the money guests would have spent on reservations canceled in the previous month, 86 percent had been returned to them as refunds.

Why Airbnb said it acted

Airbnb gave a reason and repeated it through the month: a guest should not travel only to avoid losing money. “We don’t want guests to feel like they have to travel because they cannot get their money back,” Chesky wrote in a tweet as the company issued its statement, as quoted by Bloomberg.

Bloomberg reported that the company had been under growing pressure from guests outside the covered countries who could not get their money back. It also named the cost: every guest cancellation Airbnb approved left a host on the other side short of the money.

Chesky's letter of 30 March dated the dilemma to 11 March, the day the World Health Organization declared a pandemic. He wrote that the decision was made to protect public health and was not a business decision.

How hosts responded

The objections began the same day. CNN reported that on 14 March Host GPO, a group purchasing organization for short-term vacation rentals, posted an open letter to Airbnb. By CNN's account, the letter argued that the decision was a break with company policy, said refunds on that scale would be devastating to hosts, and asked Airbnb to reconsider.

CNBC put figures on it on 19 March 2020. Hosts in California, Florida, Kansas, Utah, Michigan and Washington state told it the change had cost them thousands of dollars in reservations. A host with nine properties in California, Florida and Utah calculated that he had lost $36,000 in cancellation refunds in a week. He said he had no way to pay the two dozen cleaning and maintenance contractors who serviced his properties.

He had chosen a strict cancellation policy on purpose. “Some people may think we're a jerk for putting a strict cancellation policy in place, but in essence, it's our only insurance policy, if you will, against potential issues that could arise,” he said.

A host in Southern California told CNBC that Airbnb should have had insurance or a fund in place for its hosts. A host with nine properties in Kansas said he was likely to start listing them on Vrbo, HomeAway and Booking.com. Airbnb, for its part, sent a letter on 17 March to leaders of the US House of Representatives urging legislation to help hosts through tax relief or loans, CNBC reported.

How the month ended

On Monday 30 March 2020, Chesky emailed hosts, and Airbnb published the letter the same day. He wrote that he still believed Airbnb had been right to put health and safety first. Then he wrote: “I’m sorry that we communicated this decision to guests without consulting you—like partners should.” The company knew it could have been a better partner, he added.

The letter, and Airbnb's note above it, set out what would change.

• Guests with reservations booked on or before 14 March could still cancel and receive a standard refund, or a travel credit, for 100% of what they had paid. The cover now ran to stays beginning on or before 31 May.
• Airbnb would pay $250 million to hosts to help cover the cost of Covid-19 cancellations. When a guest canceled an accommodation reservation because of a Covid-19 related circumstance, with a check-in between 14 March and 31 May, the host would be paid 25% of what they would normally receive through their cancellation policy. This applied retroactively to all Covid-19 related cancellations in that period. Airbnb said it would cover the cost entirely and begin issuing payments in April.
• A $10 million Superhost Relief Fund was created for Superhosts who rented out their own home and needed help paying their rent or mortgage, and for long-tenured Experience hosts. Employees gave the first $1 million and Chesky and his two co-founders the remaining $9 million. Starting in April, hosts could apply for grants of up to $5,000 that did not need to be paid back.
• US hosts, Chesky wrote, could use small business grants, small business loans and unemployment assistance under the federal Covid-19 stimulus bill.

The 25% was a share of what a cancellation policy would have paid, and that limited it. Reuters explained that some policies required a penalty payment and others allowed free cancellation up to a certain date before check-in, so not all canceled reservations would qualify. It also reported that the aid was offered globally except for China, and that Airbnb gave no details on whether $250 million would be enough to cover all eligible cancellations. A source had told Reuters the week before that Airbnb's 2019 revenue exceeded $4.8 billion and that it had $3 billion in cash.

The Points Guy noted on 31 March 2020 that no other major vacation rental platform was offering hosts any monetary compensation. It quoted a Vermont host who had said before the announcement that she felt left out and unheard, and a host in Arlington, Virginia, who thought the refund decision was right. None of the reports of 30 and 31 March read for this story carried a host's reaction to the 25% figure.

What it meant for hosts

For a host at the end of March 2020, the practical position was this.

• A reservation booked on or before 14 March, for a stay beginning on or before 31 May, could be canceled by a guest affected by Covid-19 for a full refund or a travel credit, whatever the listing's cancellation policy said. A host could cancel it too, with no charge or penalty.
• The 25% payment was tied to the host's own cancellation policy and was due to begin in April, when applications for Superhost grants of up to $5,000 were also due to open. A cancellation that the policy already allowed for free might not qualify, by Reuters' account.
• The 14 March announcement covered only reservations made on or before that day. For people still booking trips, Airbnb advised a careful choice of cancellation policy.

Sources

1. Airbnb Newsroom, Extenuating Circumstances Policy Activated Around the World (14 March 2020).
2. CNN, Airbnb further expands its coronavirus response, hosts complain, Vrbo makes no change (15 March 2020).
3. Bloomberg (as published by TechCentral), Airbnb to offer full refunds worldwide, including South Africa (16 March 2020).
4. CNBC, Airbnb hosts are upset that the company is refunding travelers but not covering hosts' costs (19 March 2020).
5. Airbnb Newsroom, A Letter to Hosts (30 March 2020).
6. Reuters (as published by Fox Business), Airbnb paying out $250M to hosts burned by coronavirus cancellations (30 March 2020).
7. The Points Guy, Vacation rental guests and hosts are all feeling the cancellation crunch (31 March 2020).