Modify Moderate Cancellation Policy
Now that Airbnb has provided a number of options for "risk-free" cancellations before a reservation - including 48 hours to cancel, 3 free a year, the Extenuating Circumstances Policy, split payments, delayed payments, and making the guest agree explicitly to the cancellation policy prior to booking - it's time to modify the middle cancellation policy to be more strict as the date of the reservation is pending. Today the end of the grace period is at 5 days. Even your algorithym admits that open reservation dates with less than a week to go are a detriment and Smart Pricing drops those open dates to the minimum long before then. So a cancellation at 6 days will likely go unfulfilled and the host, after holding that reservation for weeks or months, will receive nothing. With all the options for the guest to cancel prior to 5 days out or penalty free if they have a legit issue fitting the Extenuating Circumstances policy, the penalty phase of Moderate cancellation should start at 14 days. 2 weeks prior is plenty of time to know if you are not going on a holiday and want to cancel penalty-free. It will also protect hosts who are popular and could book in advance had the guest not blocked the time. 2 weeks to try to rebook is a reasonable amount of time to get another booking so if the host should, indeed, rebook, the guest would get a full refund, otherwise they would be partially penalized as they are today.