Poor Water Quality: Full Refund or Partial?

[Kyler J Sloan]

I was curious what you all would do in this situation: 

A guest arrives and sends pictures of water in the sinks and toilets which is colored due to excess iron levels. It was indeed a yellow-brown. 

They stayed the first night, left the next morning, and demanded a full refund, and even suggested that they be "paid for the inconvenience" in spite of having had a place to stay that first night. 

I know that last demand was absurd, but I do take the lack of water quality pretty seriously, and ultimately decided to give them a full refund. 

Would you have done differently? 

(I honestly think that a partial refund would have been justified, since they were apparently not so horrified by the place that they felt the need to go elsewhere that very night)