Host: You, do nothing.
The guest can cancel on their own at any time. Some guests contact airbnb and then airbnb will send a confusing message to you, the host, asking if you approve the guest cancellation request...if you approve it, it will record as a host cancellation and you will be penalized.
The guest does not need host approval to cancel. They can just cancel. If they want their airbnb fees back, they can take that up with airbnb. You, have nothing to do in any of this.
You could agree or not agree to refund them any part of their stay, but this also should be done between you and airbnb, not direct to the guest.
Hope this helps.