If you want your short-term rental investment to succeed, you need to understand the Airbnb occupancy rate formula. This blog will cover the simple way to calculate the occupancy rate for your Airbnb investment property; it will also tell you how to use the occupancy rate formula to your advantage.
What Is Airbnb Occupancy Rate?
Occupancy rate is one of the most important factors in determining how successful your Airbnb rental property will be. The occupancy rate formula is a core vacation rental metric that all Airbnb investors should understand.
To put it simply, the Airbnb occupancy rate represents the percentage of days your Airbnb rental property is “occupied” by guests in a year. No investor wants their rental property to be vacant. Naturally, this is because every day your rental units go unoccupied, you’re missing out on potential Airbnb rental income.
It will be true to assume that the Airbnb occupancy rate formula calculates how many days your property is expected to be rented out annually. However, that alone doesn’t really tell us a whole lot about the actual performance of your rental property. Let’s delve into the details of the occupancy rate formula so you can understand what we mean by this.
How to Calculate the Occupancy Rate
For an accurate representation of your Airbnb’s occupancy, here’s how to calculate the occupancy rate:
Occupancy Rate Formula= Number of Booked Nights / Number of Available Nights
What do these two factors mean exactly? Well, the number of booked nights is pretty straight-forward: the number of days your short term rental property was booked and rented out that year. The number of available nights can be clearly defined as the number of days your investment property was made available for rent that year. This includes the number of days it was booked or occupied (because in order for it be booked it had to have been originally advertised as available).
Number of Available Nights= Available Nights + Booked Nights
Now there is an important distinction that you need to understand; the number of available nights doesn’t necessarily translate to every day of the year. You might be confused by this because why wouldn’t a rental property operator make their property available for booking every day?
Well, this could be for a number of reasons. First, most vacation rentals are positioned in highly seasonal markets- for example, a beach house will have a lot of demand during the summer months, but will drop in attractiveness in the colder winter months. Real estate investors should study their markets before choosing them so they know how and when to market their Airbnb investments accordingly. Another thing that could stop investors from listing their rental properties all year long is Airbnb regulations. Some cities have capped the number of days real estate investors can actually rent out their property as a short term rental. So it’s also very important to research short term rental regulations before investing in a market; they can really hurt your return on investment if you don’t exercise due diligence.
What Is a Good Airbnb Occupancy Rate?
Let’s say you’ve used the occupancy rate formula and got a final answer- what does this percentage mean? Is it good or is it bad? Well, that all depends on a couple of factors. You shouldn’t be aiming for 100 percent occupancy because realistically, that’s probably not going to happen. And there’s no guarantee that having 100 percent occupancy means having higher overall profits. The result of the occupancy rate formula will differ for each rental property, but the ideal occupancy rate for your Airbnb property depends on three things; 1) the real estate market you’re in, 2) the time of year, and 3) the position of your listing in the overall market.
The Role of Rental Rates in Airbnb Occupancy
The occupancy rate formula only takes into consideration booked nights and available nights, but there’s another important factor that Airbnb investors need to consider- the rental rate.
Rental rates and occupancy rates have an inverse relationship. This makes sense when you think about it. Guests and tenants are always looking for lower rent price. So naturally, Airbnb rental properties listed at rates lower than the competition will definitely have higher occupancy. The tradeoff between occupancy and rental income revenue is important here in determining higher annual profits. This is why, even if it were to happen, having an occupancy rate of 100 percent doesn’t necessarily mean higher annual returns.
The problem here is if you’re inexperienced or still haven’t gotten a hold of rental rate pricing, it can be tricky to attain a good Airbnb occupancy rate. Luckily for you, however, there’s no need for trying to figure out the Airbnb occupancy rate formula on your own. With Mashvisor’s occupancy rate calculator, most of the work is taken care of for you.
Airbnb Rental Data and Mashvisor’s Calculator
Mashvisor offers a comprehensive set of Airbnb occupancy rate data for any level of your real estate investment. This means you’ll be getting accurate and reliable data regarding:
- Map representation of city neighborhoods with Airbnb occupancy rates
- Map representation of Airbnb listings with detailed information
- Historical occupancy rates
- Nightly pricing and revenue
- Occupancy rates by bedroom and property type
- Percentile breakdown of occupancy rates
Mashvisor has multiple tools which can help in every step of the way during your real estate investment. When it comes to understanding the occupancy rate formula, Mashvisor has got you covered. The occupancy rate formula is a key part of our Airbnb profit calculator; by plugging in a couple of numbers, Mashvisor’s calculator will tell you what occupancy rate should be sustained for the success of your Airbnb investment. To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.