@Polly53
There you go, that's one of the penalties hosts get when they cancel a confirmed guest reservation!
You never, but never cancel a guests booking, and Polly, you never accept responsibility if the guest requests you cancel! You will always be penalised if you do!
https://www.airbnb.ca/help/article/990/i-m-a-host--what-penalties-apply-if-i-need-to-cancel-a-reserv...
If a booking cannot proceed you must always get onto customer support and explain your situation, they are pretty good and will handle it so it is done as a neutral cancelation where nobody is penalised.
As you are relative 'newbies' where hosting is concern with only 4 guest reviews it may pay to phone the Airbnb office in Aukland on +64 4 4880 888 and ask for their advice on how they can release you from this penalty.....they may be able to help!
Good luck Polly.
Cheers......Rob