I stick to my cancellation policy. I heard a phrase once on here that said buyers are liars and I believe that is true. You have to do what's right for you. I just had a guest who canceled saying she was ill, but didn't cancel her reservation on the app or website. Because she did not cancel her reservation, the dates were not opened back up.
She called Air B&B after the reservation was over and wanted a full refund. I told Air B&B that that would be fine if she could provide documentation. She did not provide any . Then she went on the air B&B website and reviewed me saying a whole bunch of crap about how it's about the money not the hospitality blah blah blah. I called Air B&B and they will probably remove the review.
I believe the reason that she did not cancel on the website was because she thought that if she did she would not receive a refund.
My opinion therefore is not to issue a refund. Another option would be to ask some probing questions to figure out what the holdup is. Nobody wants to be nosey however if you have a bit of a right to know since they're canceling this hours before check in.