well, theoretically, he can stay there but his girlfriend and the dog no. So, it is not your fault he didn't ask and didn't book for her and the dog. He can stay without them or cancel and be refunded according to your/long-term policy.
But if you want to refund him you certainly can. He should contact Airbnb and cancel and then, after his reservation is canceled, Airbnb will / can call you and ask you if you are willing to refund and how much. Please don't refund him 100% so he learns a lesson about reading before booking. Keep something for yourself and your time and after all, for the period your calendar was closed