Dede I hear what you say and you are covered by the choice not to refund as applicable to your chosen policy.
Personally I feel that it is a good idea to give a refund if you so wish. It is great that host have the choice to override their policies and think as individuals. I did not ask the reason in this conversation because I felt that Jim had considered the reason and perhaps would have informed us if the actual reason was his concern as opposed to the dilemma of not refunding which are two different issues i.e., if a guest informed me that they had a bad flue and could not travel, I know the reason, the refund policy is clear, but as a person what my conscience dictates is equally as important to me in arriving at my decision than just enforcing rules. Jim has mentioned that he is aware that he is entitled to hold the money but he is inclined to refund which would suggest latter i.e., the dilemma is tmore of a moral nature.
I most definitely do not agree that any part of money paid should be held for the sake of other host, it has absolutely nothing to do with other host; the situation is between the particular guest and particular host and to consider other hosts not involved in a particular situation in your decision is wrong and unfair on the guest.
I do not, believe that guest book an accommodation and then intentionally cancel just to be a nuisance to the host. The guest has other cost involved apart from the accommodation so wouldn't risk all that money cancelling without good reason. Yes the guest has asked for a refund in this case but s/he is still taking a risk as they may not get it and to be willing to take that risk, for me suggests there is good reason for them cancelling -I appreciate there will be occasions when guest might not be genuine but I prefer the approach of giving the benefit of the doubt. On this basis I definitely applaud Jim for considering a refund whether or not it is followed through.