Hi @Dianna2,
These are all really great questions.
First of all, if you do not make an alteration, he could BUT you would have to approve it. I am suspecting since you are not alright with this, you would decline it and he is held to the cancellation policy set at the time of booking which was probably "strict". In any event, you would not cancel. Yes, if the guest cancels, there are consequences. If you have a "strict" policy in place for this reservation and he cancels, he will not get any money back (providing he has already checked in).
Some guests have figured out a loophole in getting around having to pay if they need to cancel. Let's say a guest books a place for three weeks under a strict cancellation policy and he decides he no longer needs the listing. The guest could ask for an alteration from 3 weeks to 3 days and if the host approved it, there reservation would then be changed to 3 days. The guest would then cancel the reservation only being charged 3 days instead of three weeks.
Many hosts would either let the guest know that they are not willing to make the change and inform the guest that they need to cancel or tell the guest to cancel and offer them a refund ONLY if you can find someone for the dates that the guest is cancelling.
So, I would send the guest a message like this: "Hi _____. I am sorry but I am not able to adjust your reservation due to the fact that it will be hard to find a replacement guest. If you are not able to stay the remaining days of your reservation, you will need to cancel the reservation via your Airbnb account. If I am able to find a guest to fill the dates you cancelled, I would be more than happy to refund you for those dates."
You really are in the driver's seat here @Dianna2. Many worry about receiving a bad review if they do not make the change but in your situation, if the guest does cancel, he cannot review you anyway.
David
Superhost Ambassador ~ Host Club Community Leader ~ Experienced Co-Host