Hi @Lucy90
In your situation I wouldn't offer a full refund.
I would contact the guest via BNB and say something like @ 'I am sorry that you have had a last minute change to your plans, that mean my property will no longer be suitable for your stay. As you can see by my listing I only have one double bed available for a maximum of two people so cannot accomodate your request to host a third guest. '
Suggest that your guest contact BNB to let them know about their change of plans and see if they can find alternative accommodation that sleeps three.
Say that BNB will then cancel their booking in line with your cancellation policy (I don't know what it is). You can say that if you are able to relet part of all of their stay, you will consider a partial refund.
1. Don't cancel the booking.
2. Some guests send a notification to BNB to say a host has cancelled a booking - if you receive one of these - do not accept it. Decline it.
3. If you recieve a notification from BNB that the GUEST has cancelled the booking. BNB will ask you if you want to refund. Just say no. You can always offer a partial refund once/if you are able to relet.