I have a Strict cancellation policy. Upcoming guest wants to cancel and it's well after the 48 hours of booking so they won't qualify for any refund. I would be willing to refund IF I can re-book those dates. I can't figure out how I would go about doing that. Back in the pre-Airbnb days this was easier.
Is there a few to have the upcoming guest cancel, re-open those dates, and wait and see if I can re-book before deciding on how much I'll refund?
Yes you should only offer any refund after the second set of guests stay.
If you want to offer a refund of the host fee (obviously not the whole fee), then tell your guest if you have a replacement booking you can consider a proportional refund for any days that you rebook AFTER the new set of guests have stayed and you have received payment @Laura5277