If you’re considering investing in real estate short-term rentals, then one of the things that you will want to learn about each property is its Airbnb occupancy rate.
One of the best determinants for whether a short-term rental is a good investment or not is its Airbnb occupancy rate. However, the relationship between a property’s occupancy rate and its profitability isn’t always as simple as (high occupancy rate = high returns).
Sometimes, a property with a low Airbnb occupancy rate might generate more returns than a property with a high Airbnb occupancy rate.
Additionally, some real estate investors might own vacation rentals with low occupancy rates out of their own choice, as these owners might choose to reside in the properties they own during certain seasons of the year and rent them out for a limited time for the rest of the year.
There are several reasons why a short-term rental might have a low Airbnb occupancy rate, and these reasons aren’t always a negative. So, how can you tell whether an Airbnb property is a good investment or not based on its occupancy rate?
What Does Airbnb Occupancy Rate Mean?
The Airbnb occupancy rate is the number of days in a year that the property is expected to be rented out to tenants. The occupancy rate is typically expressed as a percentage, which represents the percentage of time that the property was rented out or will be rented out.
Sometimes investors use the vacancy rate instead, which is the opposite of the occupancy rate and refers to the number of days that the property remained vacant.
However, when you look at a property’s Airbnb occupancy rate, you should keep in mind that this rate can be calculated in two different ways depending on the source that you’re using.
One way for calculating the occupancy rate is to simply look at the number of days the property was occupied by a tenant, divide it by the number of days in a year, then multiply it by 100.
This method can be effective if we assume that all Airbnb properties are the same, and they’re all available for renting out all year long.
However, some cities have Airbnb regulations that only allow the owner to rent out the property as a short-term rental for a limited number of days in a year. Also, as mentioned above, and especially for vacation rentals, the owner might not make the property available for renting in certain seasons for any number of reasons.
Knowing this, it becomes obvious that the first way for calculating the Airbnb occupancy rate will rarely be accurate. In these cases, the occupancy rate is calculated by taking the number of days the property has been rented out and dividing it by the number that the property was made available for rent instead of the whole year. This will give you a more accurate result for the realistic rate at which the property has been occupied.
Where Can I Find Data for the Airbnb Occupancy Rate?
While Airbnb’s website can be used to see which days the property has been rented out or was made available for rent, you will still have to go to each property’s page and go over its calendar month by month to learn this info.
Using Mashvisor’s search tool and heat map, you can view the occupancy rate of each property by simply hovering over it on the map. Additionally, the platform provides you with the average Airbnb occupancy rate for each market or neighborhood, and you can use it to compare properties and see which ones have the highest occupancy rates in their markets. These properties will typically have the highest demand, and you can look at them to see why they perform so well and whether or not you can replicate their success with a different property.
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The heat map feature is an especially unique feature that allows you to use a colored map overlay to see which areas on the map have the highest or lowest Airbnb occupancy rate based on their color. It’s very simple to use: green means high occupancy rate, red means low occupancy rate. This makes it extremely useful to use when trying to decide which neighborhood you want to purchase a property in and rent it out as a short-term rental.
Airbnb Occupancy Rates and Seasonality
As I mentioned in the introduction, a lower occupancy rate might not always mean lower profits. Depending on the location that you want to invest in, a property with a low occupancy rate might generate much higher returns than a property with a high occupancy rate.
This is due to two reasons:
Firstly, also as mentioned above, some cities enforce laws that limit the number of days that you can rent out the property as a short-term rental. For example, in a city where you’re only allowed to rent out the property for 40 days in a year, if that property has an occupancy rate of 50%, it will still be rented out for less days than a property with an occupancy rate of 40% but that is located in a city with no Airbnb restrictions.
Secondly, some areas are known for their seasonality. Vacation rentals, in particular, are short-term rentals that are located in areas that perform extremely well during the summer or the winter, but might not gain any attraction for the rest of the year. Since these properties are located in areas that gain a very high demand for vacation rentals during the high seasons, they can usually be rented out for much more than properties that are gaining mediocre attraction year-round.
For example, if you own a vacation rental on a beach, you should expect a very high demand during the summer season, allowing you to rent out the property for a high nightly rate. This property, however, might not have a high demand at all during the other seasons, which means that you will have to greatly reduce its nightly rate and hope that it does get rented out every once in a while. But the boost in the property’s rental income during the summer season will have made up for it.
The Airbnb occupancy rate might seem like a very simple metric when you’re looking at properties to invest in. However, the metric has much more to it than the eye can tell. In most cases, and in order to gain the most value out of this metric, you will need to learn much more about the property, such as its location, seasonality, and other details that the owner can tell you about in order to gain a better understanding of what the property’s occupancy rate actually means for that specific property.
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If you’re looking for a reliable source to learn about the Airbnb occupancy rate of investment properties that you’re interested in, Mashvisor can be a great tool to use as it will provide you with a large set of data that goes along with the occupancy rate so that you can learn more about it and how to utilize it. The platform also includes other features that can all help you make wise investment decisions, as well as an occupancy rate calculator that tells you how Airbnb reviews can affect the Airbnb occupancy rate, and how many reviews you need to have in order to increase the property’s occupancy rate.