Good morning, @Toria2723
I think you did the right thing by giving a full refund. Some guests do invent issues to secure a refund, unaware or indifferent to the fact that this could risk getting the host’s listing suspended! By issuing a refund immediately, you’ve protected yourself from any escalation, especially as you’ve just started.
Your question is a tricky one, but I’d suggest giving it another go to see if noise is truly an issue.
Also, since your listing states it's not suitable for children (2-12 years), it’s surprising they booked with a toddler, and that this was accepted. While the stairs are mentioned in the description, it’s important to add it under Safety and property info: Guests must climb stairs. And also mark it as not suitable for children under 2 years old.
At the end of the day, there were three people in the unit, and it was probably a bit tight for them.
Hopefully, your next guest won’t have any issues with the stairs and may be less sensitive to noise.
While I don’t have a definite answer for you, I hope these points are helpful. Maybe others can offer additional insights too!
Off-topic: Is there a dining table in this unit?