Airbnb and the Consumer Protection Act

Are Airbnb’s cancellation policies in conflict with the CPA?

A client recently asked us if her Airbnb host was within his rights to offer no refund if a reservation was cancelled more than 48 hours after booking (the booking was made a month in advance and was for 30 days). While Airbnb allows its hosts to set their own cancellation and refund terms, which must be fully disclosed before booking, she wondered how the site’s policy squared with the Consumer Protection Act in South Africa. Airbnb may be headquartered in the US, but surely hosts must comply with the laws of their own country? We promised to look into it.

Cancellation policies

Airbnb offers hosts a wide variety of options when it comes to cancellation policies, from flexible to strict, with two flexible and strict additional categories for long-term bookings. There are two further super-strict options but these are by invitation only and only available to certain hosts under special circumstances, so we’ll ignore these for the purposes of this article.

In the interests of brevity, we’ll explain only the circumstances under which guests are entitled to a full refund under each of the cancellation options. After that, there are also sliding scales of refund which can be found on Airbnb’s website.

The flexible option is the most…well, flexible (for the guest). Guests have until 24 hours before their booking to cancel for a full refund. The moderate option allows guests to cancel up to five days before check-in for a full refund. These choices are great for guests, but less secure for hosts. A booking cancelled so close to check-in is unlikely to be replaced by another booking, and the host is likely to lose money. It’s easy to see why these are not popular options with hosts.

The firm option allows for a full refund, but only if the booking is cancelled at least 30 days before check-in. In that time frame the host is likely to secure another booking, especially in more popular parts of the country. It’s a safe option for hosts, less so for guests, because many Airbnb bookings are made less than 30 days in advance of travel.

The strict option requires guests to cancel within 48 hours of booking, and the cancellation must occur at least 14 days before check-in, for a full refund to be granted. After that, if they cancel between seven and 14 days before check-in, they will be liable for 50% of the fee. Less than 14 days before check-in incurs the full cost of the booking.

Strict long-term

Our client was subject to the strict long-term option: this applies to all stays of 28 days or longer and overrides the standard cancellation policy. To receive a full refund, guests must cancel within 48 hours of booking, and the cancellation must occur at least 28 days before check-in. After that, the host will be paid 100% for all nights spent, plus 30 additional nights. The flexible long-term option applies to stays of 28 days or longer and overrides the standard cancellation policy. Guests must cancel at least 30 days before check-in for a full refund. After that, they are liable for the cost of all nights spent, plus 30 additional nights.

Non-refundable

A recent development on the site is differential pricing for a non-refundable option. Guests can save money by choosing this. It’s really only suitable for bookings made very near to time of travel where the only possible cause for cancellation is an unlikely unforeseen event. This is a bit fairer for guests, as they have some agency over the policy that will apply, but the terms of the refund still fall into one of the categories above. There is no guarantee that a 100% refund will be offered, so guests must read the terms and conditions carefully before choosing their option.

Secure income vs. fairness 

It is understandable – and reasonable – that hosts wants security of income. For some hosts, the extra income earned through Airbnb enables them to finance a child’s university fees, or fund home repairs. For others Airbnb is a business, and represents a significant portion of annual earnings, though that wasn’t the ethos behind its founding. But the irony is that cancellation policies tend to be stricter in areas of high demand, like Cape Town, than in less popular areas. A Cape Town host, particularly in summer, is unlikely to struggle for a new booking if a guest cancels. Furthermore, most hosts offer substantial discounts for long-term bookings. So they will earn more from four or five shorter bookings than they will from a month-long booking. Yet it is the longer-term guests who suffer the most in the event they have to cancel.

The refusal to refund the fee for cancellation a month in advance hardly seems fair. In a booming city like Cape Town, it’s almost a certainty that the host will find someone else to book the space – especially if the property is at the lower end of the price range. And the guest may have a perfectly legitimate reason for needing to cancel. Hosts in less touristy areas are more generous with their refund policies, perhaps because each booking is more precious and they don’t want to put potential guests off.

Consumer Protection Act

We come back to our client’s original question: are such strict cancellation policies compliant with the Consumer Protection Act (CPA)?

Section 17 of the CPA is the legislation that applies. It states that a consumer has the right to cancel any advance booking, reservation or order for any services to be supplied.

A supplier who accepts a reservation may:

(a)  require payment of a reasonable deposit in advance; and

(b)  impose a reasonable charge for cancellation of the order or reservation.

It is worth noting that the Airbnb fee paid by the guest is not strictly speaking a deposit. It is an advance payment. Only for long-term stays booked well in advance does Airbnb offer the option of making multiple payments, but the first month at a minimum is paid in advance.

The word reasonable is the key here. Airbnb’s cancellation policies mainly benefit the hosts. Section 17 further discusses what an unreasonable charge is.

A charge is unreasonable if it exceeds a fair amount in the circumstances, having regard to:

• the nature of the goods or services that were reserved or booked
• the length of notice of cancellation provided by the consumer
• the reasonable potential for the service provider, acting diligently, to find an alternative consumer between the time of receiving the cancellation notice and the time of the cancelled reservation
• the general practice of the relevant industry

Furthermore, a supplier may not impose any cancellation fee in respect of a booking, reservation or order if the consumer is unable to honour the booking, reservation or order because of the death or hospitalisation of the person for whom, or for whose benefit the booking, reservation or order was made. Yet Airbnb’s Extenuating Circumstances policy, whereby a guest can receive a refund for cancellation regardless of the host’s policy, only applies to extreme events like natural disasters or declared emergencies. It does not allow cancellations for: “unexpected disease, illness, or injury; government obligations like jury duty, court appearances or military duties; travel advisories or other government guidance (that fall short of a travel ban or prohibition); cancellation or rescheduling of an event for which the reservation was made; and transportation disruptions unrelated to a covered event like road closures, as well as flight, train, bus and ferry cancellations”. The first reason in this list directly contravenes the CPA, if hospitalisation is involved.

Enforcing the CPA

In light of the above, the notice periods most hosts impose for cancellation penalties, and the potential for the host to find an alternative guest, the majority of Airbnb’s cancellation options can be deemed unreasonable and not in line with the CPA. However, if a guest wants to enforce this on a host, they have to file a complaint with the National Consumer Commission (Commission) and refer the dispute to the Consumer Tribunal (Tribunal), or approach an industry ombud. The following persons are entitled to do this:

• A person acting on their own behalf
• An authorised person acting on behalf of another person who cannot act in their own name
• A person acting as a member of, or in the interest of, a group or class of affected persons
• A person acting in public interest with the leave of the Tribunal or court
• An association acting in the interest of its members

The effort and hassle involved in bringing an action as a private individual is more than most Airbnb guests are likely to want to take on. It is far easier to accept the terms offered by the host. As most Airbnb hosts (though not all) are private individuals and not professional hoteliers, they are not an “industry” represented by an ombud. And guests are not members of any association. Unless a large group of disgruntled Airbnb guests decides to get together and raise an action, we are unlikely to witness any change in South African hosts’ terms and conditions.

Therefore, for the time being, if you want to book Airbnb accommodation, be sure to read the host’s cancellation policy carefully. The CPA may be on your side, but there is little you can do to enforce it.

Contact us

Airbnb stays do not fall under rental housing or eviction legislation. But if you need advice on the eviction process or if you are facing unlawful eviction, contact one of our eviction attorneys on 086 099 5146 or sdippenaar@sdlaw.co.za

Simon Dippenaar & Associates, Inc. is a firm of specialist eviction lawyers, based in Cape Town and now operating in Johannesburg and Durban, helping both landlords and tenants with the eviction process.

Further reading:

The Consumer Protection Act and Rental Agreements

SD Law

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