The fee will not go to the renter who’s accommodation has been cancelled. They will still benefit from the increase, though. Disincentivizing hosts to cancel last minute will make it rarer for the situation to arise in the first place.
I've seen this happen in other service apps -- hailing a taxi via Uber/Lyft, and when the driver sees that I'm a little out of downtown, about 30% of the time I'll get a text message off-platform asking me to cancel the ride because "something happened to [their] car" in between them accepting the ride and them getting to my home. My only thought is that the heavy emphasis on driver/host ratings and penalty fees drives the providers off-platform, but that leaves their users stuck shouldering the burden and nobody happy.