From the blurp about guests from the EU, it looks like Airbnb is paying the discount amount to hosts, so if the guest does not cancel, the hosts gets the same amount whether guest takes advantage of this or not. In exchange, the guests assigns his/her refund rights to Airbnb. Hence if you have a flexible policy and the guest cancels, Airbnb will get the refund the guest was going to get, paid for by the host and the host won’t be the wiser. I am no lawyer and hope I am misinterpreting this…
Effectively, this would mean Airbnb is willing to pay money (to hosts) do financially profit from guest cancellations, while happily taking advantage of its power to force hosts to bear this financial risk of cancellations. Actually, even worse, I think, for giving the discount to the guests, Airbnb makes the guests bear financial risk of cancellations, thus financially benefitting every time a guest cancels such a discounted rental. Hosts might not even be aware of what’s going on behind the scenes.
In which case hosts like @KKC with flexible policies would end up ´paying’ the most to Airbnb (despite their cash flows remaining the same as in the case where guests would be reimbursed when they cancel).
If this is profitable, they sure will push hosts even harder towards more flexible cancellation policies. And since Airbnb effectively gets to set the discount, why would it not be profitable? The main thing that works against airbnb is that people tend to dislike risk, so the discounts that Airbnb would have to give to guests (and pay to hosts) might have to be larger on average than the inflows they can get from cancelled trips. Especially when guests who would have cancelled if they could have gotten their money back now prefer to travel grudgingly, because they already paid. And a new wave of disgruntled travelers has been created. Plus, there is selection bias, that is people who know they have a high risk of having to cancel will pay full price, while those that are less likely to cancel will go for the discount. I wonder if the discount is guest-specific, i.e. depending on guests’ cancellation history.
Why is the blurb only addressed to guests from the EU? Probably because the guests would otherwise be protected by European laws against this, while these (and many other protections) don’t exist in other jurisdictions.
Sorry for the long post, but writing this down sort of forced me to think about it. And the more I thought about it, the more absurd this all became. I really hope I misread or misunderstood this! First I thought Airbnb was insuring itself against cancellations, but they never carried that risk to begin with. So now it looks like a typical speculative monetary gamble on behalf of Airbnb. Maybe they can bundle and sell the cancellation payouts to third parties and make even more money? The possibilities. Yet so wrong!
Wish they would work on travel insurance for guests (or cancellation insurance for hosts) instead. UNLESS they are trying it out this way and ultimately will offer this to hosts…
I am going to stop now.