When it comes to running a successful holiday rental in Australia, your cancellation policy can make or break guest trust - and your bottom line: Too strict, and you risk scaring away potential bookings. Too lenient, and you could face empty nights and lost revenue.
Let’s break down what makes a cancellation policy effective and how you can structure yours for maximum bookings and peace of mind.
What makes a “good” cancellation policy?
Fair for guests, protective for hosts
Guests appreciate clarity and the chance for a refund if life throws a curveball, but hosts must protect against last-minute losses. A good policy might allow refunds within a reasonable timeframe while still enforcing partial or full charges if a booking blocks out high-demand dates.
Keeping in line with Australian Consumer Law
Under Australian Consumer Law, guests are entitled to a remedy if the accommodation isn’t as promised or can’t be provided. Your policy should reflect this legal baseline, while making it clear that change-of-mind cancellations fall under your chosen rules, not consumer guarantees.
Right at the sweet spot between too strict and too lenient
Too strict, and you’ll scare away bookings; too lenient, and you lose income protection. Many Booking.com partners use a tiered approach - offering free cancellation until a set date, then shifting to partial or non-refundable charges closer to check-in. This “graduated” model reassures guests while locking in revenue during high-demand periods such as Christmas or Easter.
Types of cancellation policies
Not all bookings are the same - and neither are cancellation policies. Here are the main approaches used in the Australian holiday rental market, with their pros, cons, and best-fit scenarios.
Flexible
Refund terms: Full refund up to 24–48 hours before check-in.
Works best for: Short-stay properties in high-demand areas where bookings can quickly be replaced. A Sydney CBD apartment, for example, can usually find a new guest within hours if someone cancels.
Why it’s good: This policy reduces booking hesitation by making guests feel “safe to commit.” It’s especially effective on platforms like Airbnb, where search filters highlight listings with flexible cancellation, giving your property a competitive edge.
Trade-off: You may face higher churn, particularly from “plan-as-you-go” travelers.
Moderate
Refund terms: Full refund up to 5–7 days before check-in; partial refund (e.g., 50%) after that.
Works best for: Coastal or regional stays where travelers plan ahead - think Byron Bay or Margaret River weekends. These bookings are made weeks in advance, but demand is steady enough that you can re-book if given a week’s notice.
Why it’s good: Moderate policies strike a balance: they give families and planners the confidence to book early while protecting hosts from late cancellations.
Trade-off: If guests cancel just before a public holiday, you may still struggle to replace them at short notice. The risk is lower than with flexible policies, but not eliminated.
Strict
Refund terms: Full refund only if cancelled within 48 hours of booking; otherwise, partial refund only if cancelled at least 14–30 days before check-in.
Works best for: High-value or seasonal properties where cancellations are costly - such as luxury retreats in the Blue Mountains or Great Ocean Road villas. This is demand is seasonal but strong.
Why it’s good: Protects hosts from substantial revenue loss. Strict policies also attract serious guests - those unlikely to book “just in case.”
Trade-off: Can deter cautious travelers, especially international guests booking far in advance.
Tiered/Seasonal approaches
Refund terms: Flexible or moderate in low season, stricter in peak holiday periods (e.g., Christmas, school holidays, Easter long weekend).
Works best for: Popular holiday regions like Byron Bay, Gold Coast, or Margaret River, where peak demand is predictable.
Why it’s good: Maximises occupancy in off-peak months while protecting profits when demand is sky-high.
Trade-off: More complex to manage and communicate.
Long-term/Extended stay
Refund terms: Full refund up to 30 days before arrival; partial refunds (or none) for cancellations within a month of check-in.
Works best for: Corporate stays, relocations, or month-long bookings in cities like Melbourne or Brisbane.
Why it’s good: Ensures that serious long-stay guests commit. Hosts avoid the nightmare of a 3-month vacancy caused by a last-minute cancellation. Airbnb, for example, requires stricter terms for stays of 28+ days for this very reason.
Trade-off: Without an option to reschedule or credit bookings, you risk losing those segments to more lenient competitors.
How to prevent last-minute cancellations?
Clear communication in listings and confirmations
Spell out refund deadlines, house rules, and check-in details upfront so guests know exactly what to expect - most cancellations stem from unclear expectations.
Smart deposit structures to deter flaky guests
Non-refundable deposits or staged payments give guests “skin in the game,” reducing casual cancellations without scaring away serious bookers.
Offering reschedules instead of flat cancellations
When life happens, give guests the option to move dates. It keeps goodwill intact while protecting your revenue stream.
How to deal with no-shows vs. cancellations?
How to best leverage your rate for maximum revenue?
At the end of the day, the best cancellation policy is the one that works hand-in-hand with your pricing. Flexible terms can fill your calendar, strict terms can protect margins - but striking the right balance depends on what the market is doing around you. That’s where Beyond’s market analysis shines, giving you a clear view of demand trends so you can adjust both rates and policies with confidence.
Curious how your property stacks up? Test it out with Beyond’s free analyser tool and see what the data says before your next season.
.png){kind=small}
.png){kind=small}
