@Jennifer And Geoffrey
If you had a strict cancellation policy when they booked why are you altering the terms of engagement now, this gives guests the notion that the cancelation policy is a movable feast and puts the rest of us Host's at a disadvantage.
Presumably your guests understood your cancelation policy when they booked, unless of course you muddied the waters by suggesting you would give them their fee back even though you do not have the fee in your procession as yet.
Let Airbnb deal with the cancellation ramifications and explain to your guest they should deal directly with Airbnb.
Regards
Cormac
ECK III
ECK VIII