Understanding Airbnb metrics is key to determining your success. Learn more about the three metrics that you need to consider before investing.
We’re nearing the first half of 2023. Yet, general knowledge about investing has not changed the slightest bit. It still represents a lucrative form of earning generous profits and creating a stable passive income.
Table of contents:
- Is Airbnb Profitable in 2023?
- 3 Key Airbnb Metrics for Investors
- The Easiest Way to Calculate Key Airbnb Metrics
- 3 Ways to Upgrade Airbnb Experiences
- FAQs
Investors seeking a steady income, wealth, portfolio diversification, or long-term financial security are interested in investing in Airbnb.
With this investment venture, there is always potential appreciation, which means higher profits for the investor. Apart from increased value, investors can generate a steady flow of income through rental payments.
The million-dollar question is, how does one know which investment property is the next hit?
Well, the good news is that investors can predict the success of their next investment based on key Airbnb metrics. With the help of investment tools that do the math for you, an investor’s decision-making process is much more straightforward.
Watch our video below to learn about the most important real estate investing metrics:
To learn more about how Mashvisor’s three key metrics can help you predict the success of your next Airbnb investment, read on.
Related: Four Things to Consider Before Purchasing an Airbnb Investment Property
Is Airbnb Profitable in 2023?
No doubt about it!
As we know it, the US real estate market has had its fair share of growth and challenges over the years. However, even after the consequences of COVID-19, the housing market managed to enable investors to stay afloat and generate income in their field of business.
Airbnb, in particular, has fundamentally changed the real estate market. Choosing Airbnb as your next investment opportunity is an excellent chance to gain experience (especially if you are a beginner investor).
Consider this fact from Market Splash: Over 150 million people choose Airbnb when booking their vacation stays.
This fact alone is sufficient evidence that investing in Airbnb will be a lucrative business opportunity in 2023.
Related: The Ultimate Beginner’s Guide to Airbnb Analytics for Hosts
3 Key Airbnb Metrics for Investors
Blindly investing in an Airbnb for sale that “seems” profitable is a no-go. There are still some key property metrics that you need to consider beforehand.
Understanding these key Airbnb metrics allows you to assess whether investing in a particular property makes financial sense. These metrics are not limited to one evaluating the potential success of only one property, though – they’re also used to compare the profitability of multiple properties for sale in a particular real estate market.
Without further ado, here are the three key metrics that provide excellent guidance for investors looking to gain experience in the Airbnb investing field:
1. Airbnb Occupancy Rate
Airbnb occupancy rate is the ratio of the number of nights an Airbnb rental is booked to the total number of nights it was available for booking and reservation throughout the year.
The rate is usually determined by considering different factors, such as location, seasonality, level of customer service, and reviews.
If you are looking to invest in this property type, Airbnb occupancy data is crucial for determining your potential rate of return. This data is critical in its co-depending factors as well: Airbnb rental income, cash flow, Airbnb cap rate, and Airbnb cash on cash return, which we’ll discuss in a second.
Logically speaking, a higher occupancy rate means higher chances for success. Although there’s no ideal occupancy rate for your Airbnb property, we can single out that anything above 65% is considered desirable.
If your potential Airbnb is showing similar signs, it is likely that it will generate more profit and generally be in high demand for the upcoming season.
Below is the official formula for calculating the occupancy rate:
Occupancy Rate = (Total Booked Nights / Total Available Nights) x 100
Regarding Airbnb, the average length of nights of stay depends – it can be from one to four days, or from five to seven days (bearing in mind the tenant’s visit purpose). Also, when it comes to canceling, the guest’s cancellation rate is much more common than a host’s.
The best part? You don’t have to do 80% of the work that was once required. With advanced investment tools, evaluating and assessing the potential of your Airbnb has never been easier.
Make the most of your investment strategy and rely on Mashvisor’s Airbnb calculator to do the math for you.
Mashvisor’s Property Finder features a unique calculator that utilizes key Airbnb metrics for accurate computations.
2. Airbnb Rental Income
Before you invest in Airbnb, there’s one more thing – you should learn how to estimate your anticipated monthly income.
By definition, Airbnb rental income is the amount of money an Airbnb investment property will generate periodically. Again, logically, the higher the Airbnb rental income, the higher your rate of return.
However, Airbnb rental income is influenced by a number of factors: occupancy rate, average daily rate, length of stay of your tenants, as well as any additional fees that you might charge.
Here’s how to calculate Airbnb rental income:
Rental Income = Number of Booked Nights x Average Daily Rate
If you’re a beginner investor, then you should definitely note down the following:
Keep in mind that the formula mentioned above stands for the gross income – this is before deducting all the extra expenses and fees tied to your hosting obligations. Moreover, monitoring your rental income regularly is crucial to maximize your profits.
Read Also: How To Calculate Cap Rate for Potential Income Property
3. Airbnb Cash on Cash Return
Airbnb cash on cash return is used to determine the return on investment of Airbnb for sale. It is the annual pre-tax cash flow of an Airbnb rental property as a percentage of the total cash you have invested.
Here’s the formula for calculating Airbnb cash on cash return:
CoC Return = (Net Operating Income / Total Cash Invested) x 100
Although investors might devote most of their attention to cash on cash return, it’s important not to neglect other factors that contribute to the profitability of their investment property. These include taxes, ongoing expenses, or potential appreciation.
Related: The Best Source for Reliable Vacation Rental Data
The Easiest Way to Calculate Key Airbnb Metrics
For years, investors have been using Airbnb investment analysis spreadsheets to do the calculations.
As it turns out, it was the least time-efficient option. Real estate market trends were changing rapidly for them to keep up.
The main problem with this old-school method is it is susceptible to human error–which is unacceptable in this business field.
Luckily, real estate investors nowadays don’t have to worry about the struggles of manually collecting and analyzing market-specific data anymore.
The most efficient and reliable way to perform a promising Airbnb investment analysis is to rely on Mashvisor’s Airbnb calculator.
Airbnb Rental Calculator
Bedrooms
Bathrooms
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This calculator uses Airbnb rental data from reliable sources, Airbnb analytics, and machine-learning algorithms to calculate the key Airbnb metrics in a matter of minutes.
Navigating the tool is fairly easy as well.
Investors can just type in the preferred city or neighborhood that sparks their interest and click on it for more information. When they scroll down, they’ll be able to see the rental strategy for this investment property in question and determine whether it makes financial sense to proceed.
They will get the key metrics mentioned earlier and other important analytics.
To find the best-performing property that exceeds all your expectations and generates the highest income, use our calculator to forecast all the metrics that play a vital role in your Airbnb’s success:
- inquiry to booking conversion rate
- total revenue
- nightly rate
- revenue per available room
To take full advantage of Mashvisor’s Airbnb calculator, sign up for a 7-day free trial and receive a 15% discount.
Related: Airbnb Profit Calculator: The Ultimate Real Estate Investment Tool
3 Ways to Upgrade Airbnb Experiences
Now that you’re convinced of the success of Airbnb investments and want to engage in this business venture, here are some immediately-effective tips to help you upgrade the tenant experience and make your Airbnb booked all season.
1. Focus on Unique Features
Here are a few questions that’ll get you thinking right away:
- Is your Airbnb located near a national park, beach, historic monument, or mall?
- Does your Airbnb include a jacuzzi, a pool, an equipped terrace for drinking coffee, and full-on barbecue equipment?
- Does your Airbnb have a unique design or interior (retro, for example) that can attract certain target tenants?
- Is your Airbnb equipped with necessary pet equipment, or does it contain baby equipment so parents with small children do not have to worry about extra luggage?
All of this can fall into the category of unique features that provide the possibility for a higher occupancy rate. In addition to stable Wi-Fi and kitchen equipment, make sure to include that little “extra” that makes your Airbnb stand out from the others.
2. Make Safety and Security Your Priority
By booking an Airbnb, your future tenants expect security during their stay.
Within all the additional expenses you plan in connection with your Airbnb investment, safety and security should be at the top of your list. For instance, it is always useful to allocate your budget and invest in smoke and carbon monoxide detectors, alarms, and fire extinguishers.
What certainly guarantees success for your Airbnb investment and increases your chances of more bookings is installing keyless entries. These modern entry systems directly contribute to the overall security of your property – not just when tenants occupy it.
3. Address Repair or Maintenance Issues ASAP
Airbnb investments will surely see many more tenants during the year. However, the busy season must not distract you from one key factor – cleanliness and maintenance.
As an Airbnb host, you must make your Airbnb spotless and ready to welcome its next tenants as if they were the first ones to enter the property.
Simply, this means tending to any repair and maintenance issues ASAP. Postponing minor repairs or neglecting certain parts of your property can go in two directions: You can create a bigger problem, or even worse, you can harm the reputation of your Airbnb and lower the response rate.
It’s crucial to regularly visit and inspect your Airbnb in person to have the best and clearest picture of the current situation.
Also, your personal contribution is only the first step in the process. As your Airbnb makes its way onto the market over time, you will need a helping hand, which means cleaning expenses and even a property manager.
If you’re worried about the Airbnb commission fee cleaning, don’t be. According to the information, the fee is usually under 10% of the booking subtotal.
The Final Verdict on Key Airbnb Metrics
We successfully put our stamp on the discussion about three key Airbnb metrics that can assist investors in predicting the success of their next investment.
Let’s just go over the key takeaways one more time.
One thing’s for sure – the popularity of Airbnbs as an investment venture is not falling behind in 2023. Investing in this property type is especially popular with beginner investors who want to upgrade their portfolio, gain experience, and secure long-term financial security.
To make sure that they’re on the right track, Mashvisor offers its unique services. Our specially designed Airbnb calculator provides real estate investors with three key metrics that serve as reliable success predictors: occupancy rate, rental income, and cash on cash return.
The easiest way to evaluate all your metrics (not just the ones we’ve singled out) and ensure that you have a secure strategy in front of you is by relying on Mashvisor’s Airbnb calculator.
Finally, professional hosts that aim to provide the best possible experience to their tenants should definitely focus on the unique features of their Airbnb, safety and security, and regular maintenance.
Start your Airbnb-hunting with the help of the latest and most accurate investment tools provided by Mashvisor. Reach out to us and schedule a free inquiry with one of our Product Specialists.
FAQs
What Are Key Metrics for Airbnb?
Key Airbnb metrics that will help investors predict the success of their investment are: occupancy rate, rental income, and cash on cash return. These, combined with other vital analytics (cap rate, average daily rate, etc.), contribute to an easier assessment and a firm decision.
How to Analyze Data for Airbnb?
With the help of Mashvisor’s Airbnb calculator, investors can view the estimates in a matter of minutes.There’s no more need for manually collecting and analyzing Airbnb data to determine whether it’s a wise financial move.
What Should Airbnb’s Key North Star Metrics Be?
It’s safe to say that your Airbnb’s key north star metrics should be: occupancy rate, rental income, cash on cash return, daily rate, cap rate, and so on.
