The Airbnb Occupancy Rate Formula — What It Is and How to Use It

If you want your short-term rental property investments to succeed, you need to understand the Airbnb occupancy rate formula and how to apply it.

Occupancy is one of the most important metrics in the vacation rental industry as it determines the rental income and the return on investment. Meanwhile, keeping a short term rental occupied is significantly more challenging than keeping a long term rental occupied. That’s why it’s a must for aspiring Airbnb hosts to learn everything there is to know about this concept.

In this article, we’ll cover everything you need to know about vacation rental occupancy, from what it is to how to calculate Airbnb occupancy rate to how to boost yours.

Let’s get started!

Related: Know Your Market: Learn About Airbnb Occupancy Rates by City

What Is Airbnb Occupancy Rate?

If you plan to list your property on Airbnb, check the occupancy rate in your location first to see if it’s a worthwhile strategy. The occupancy rate is one of the most important factors in determining how profitable your Airbnb rental property will be. It is a core vacation rental metric that all Airbnb investors should know and understand.

To put it simply, the Airbnb occupancy rate represents the percentage of days your rental property is occupied by guests in a month or a year. No investor wants their income property to be vacant. Naturally, this is because you’re missing out on potential Airbnb rental income every day your rental units go unoccupied.

It might sound intuitive to look at the occupancy as the number of days an Airbnb property is rented. However, the number of days alone does not tell you much about its performance. You also need to consider the days the listing is offered for booking.

Let’s delve into the details of the formula so you can understand what we mean by this.

How to Calculate Occupancy Rate of Airbnb Using the Formula

For an accurate analysis of your short term rental property, here’s how to check Airbnb occupancy rate:

Occupancy Rate Formula:

Airbnb Occupancy Rate = Number of Booked Nights/Number of Available Nights x 100%

What do these two factors mean exactly?

Well, the number of booked nights is pretty straightforward. They show the number of days your short term rental property was booked and rented out that year.

Meanwhile, the number of available nights can be clearly defined as the days your investment property was made available for rent that year. Now, there is an important distinction that you need to understand: The number of available nights doesn’t necessarily translate into every day of the year.

There are several reasons behind this. First, most vacation rentals are in highly seasonal markets. For example, a beach house will have a high demand during the summer. Demand for it, however, drops in the colder winter months. Real estate investors should study their markets beforehand to know how and when to market their Airbnb investment.

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 for which properties can be rented out on a short term basis. So it’s also very important to research short term rental regulations prior to investing in a market, as they can hurt your ROI if you don’t exercise due diligence.

A third reason might be that an Airbnb host reserves the property for personal use for a few weeks per year. Serving as a second home is one of the main benefits of investing in vacation rentals.

What Is a Good Airbnb Occupancy Rate?

Let’s say you’ve used the formula above and got a final answer: What does this percentage mean? Is it good, or is it bad?

Well, this all depends on a couple of factors. You shouldn’t be aiming for 100% occupancy because, realistically, that will probably not happen. And there’s no guarantee that having 100% occupancy means having the highest overall profits possible.

Generally speaking, a good Airbnb occupancy rate is considered above 50%, translating into an average vacancy rate for Airbnb below 50%. It makes sense. After all, you need to ensure that your property is booked for at least half the time you list it for rent.

As you can imagine, the occupancy will differ for each rental property as it depends on three main things:

• The real estate market you’re in
• The time of year
• The position of your listing in the overall market

Related: Is Airbnb Profitable in 2023?

Prevailing Airbnb Occupancies in the US Market in 2023

To fully understand the concept of occupancy with short term rentals, it’s important to put it in context. While 50% or more is considered good, how feasible is it?

We’ve used nationwide Mashvisor Airbnb data from June 2023 to see what occupancies prevail in the US market at the moment. We’ve focused on cities with 100 or more active Airbnb listings to make sure we include only strong Airbnb markets in our analysis.

Among cities with 100+ Airbnb listings, the average occupancy rate is 47%, below the recommended rate of 50%. The range is from 19% in East Hampton , NY, to 72% in North Bergen , NJ. Aspiring hosts should keep in mind that these are just city averages, while individual properties can score significantly higher results.

To give you a fuller picture, here are the vacation rental rates in a few more US major markets with median property prices below $1,000,000 and rental income above $2,000 per month:

• Upwest, NY: 69%
• Little Ferry, NJ: 68%
• Charlestown, MA: 67%
• Annandale, VA: 64%
• Jersey City, NJ: 63%
• Portland, OR: 61%
• Kissimmee, FL: 60%
• Boston, MA: 59%
• Sevierville, TN: 58%
• Raleigh, NC: 57%
• Providence, RI: 56%
• Albuquerque, NM: 55%
• Savannah, GA: 54%
• Orlando, FL: 53%
• Nashville, TN: 52%
• Greensboro, NC: 51%
• Philadelphia, PA: 50%
• Boise, ID: 49%
• Cincinnati, OH: 47%
• Broken Bow, OK: 46%
• St. Bernard, OH: 45%
• Lubbock, TX: 44%
• Phoenix, AZ: 43%
• Colorado Springs, CO: 42%
• Mammoth Lakes, CA: 41%
• Atlanta, GA: 40%
• Tuscaloosa, AL: 39%
• Fayetteville, AR: 38%
• Castle Hills, TX: 37%
• Atlantic City, NJ: 36%
• Destin, FL: 32%
• Big Bear Lake, CA: 30%
• Bellaire, MI: 29%
• Indio, CA: 27%
• Newry, ME: 23%

The Importance of the Occupancy Rate Formula

Now that you know how to estimate Airbnb occupancy and what rates to expect across the US in 2023, we should discuss why this is such a significant metric in real estate investing.

The reason behind the importance of the occupancy rate of vacation rentals is simple. Airbnb income is calculated on the basis of the average daily rate and the average occupancy rate that a property–or a market–is able to generate. The income, in turn, is present in all formulas for return on investment, including the cash on cash return and the cap rate.

All this means that how often an Airbnb property is rented out directly impacts its profitability. The more bookings you get as an Airbnb host, the more money you make from your investment. That’s why you should be familiar with the formula and apply it in your rental property analysis.

The Role of Rental Rates in Airbnb Occupancy

The occupancy 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. It makes sense when you think about it. Guests are always looking for lower nightly rates. So naturally, Airbnb rental properties listed at prices below the competition will definitely have higher occupancy. The tradeoff between occupancy and pricing is important in determining the highest annual profits.

When setting up the daily rate for your short term rental, you have to consider comps in the area and what they charge. As a new host, you should choose a price that’s a bit below the market average to get your first guests. Moreover, you need to apply a dynamic Airbnb pricing strategy that reflects changes in the local supply and demand.

To optimize your daily rates, you can use the Mashvisor Dynamic Pricing tool. This feature allows you to automate your pricing strategy in a way that optimizes occupancy and boosts monthly income and ROI.

To enhance the performance of your Airbnb rental, sign up for a 7-day free trial of Mashvisor.

Mashvisor’s Dynamic Pricing tool lets you customize your pricing settings based on market- or user-driven presets. Using this tool increases the chances of higher occupancy rates for your Airbnb property.

Occupancy Rate Formula and Other Airbnb Metrics

Knowing how to find out occupancy rate for Airbnb is an integral part of being able to analyze short term rental investments. However, it’s not all that’s needed. There are other metrics that you have to take into consideration in order to score profitable deals every time.

The most important Airbnb data points include the following:

• Daily rate: As mentioned above, this is the price that you charge guests for spending a day at your property. Together with the occupancy, this determines your income.
• Rental income: Airbnb income is the product of the occupancy and average daily rates. It is how much money you get from guests for booking your listing.
• Rental expenses: When running an Airbnb business, there are many costs you need to consider. Some of them include the Airbnb platform fees, cleaning, stocking supplies, management, etc. The size of your expenses will directly affect your profit.
• Cash flow: This is the difference between the money you get from guests and the money you spend managing your business. That’s what you pocket at the end of the month.
• Cash on cash return: As one of the two most popular ROI metrics in real estate, the cash on cash return measures your profit compared to the total cash investment. This factors in the way you are paying for your investment property.
• Cap rate: The cap rate calculates the return on investment based on the property value, regardless of the financing method.

In order to conduct a comprehensive Airbnb investment property analysis, you need to calculate all these numbers.

Related: 40 Best Cities for Airbnb Rental Income in 2023

Airbnb Rental Data and Mashvisor’s Calculator

Being familiar with the formula for how to find out Airbnb occupancy rates doesn’t mean you are ready to calculate this metric. Unless you are analyzing a property you already own, you need to find a reliable and accessible source of Airbnb data, too. This step is particularly important when buying a rental property because you want to know that your investment will be profitable.

The Mashvisor Airbnb occupancy rate calculator offers a comprehensive set of Airbnb rental data, including but not limited to occupancy. Indeed, it provides all the data points we listed above, both at the market and property levels.

With the help of the Mashvisor Airbnb calculator and other tools, you can not only estimate Airbnb occupancy. You can actively search for cities, neighborhoods, and listings for sale with low vacancy and high occupancy. You can also narrow down your investment property search to include opportunities with high rental income and above-average ROI.

Some of the benefits you get with the Mashvisor Airbnb analytics platform include the following:

• 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
• Property-specific occupancy rate for listings available on the platform and off-market properties

How to Enhance Your Airbnb Occupancy Rate

Once you check the Airbnb occupancy rate on a property, this doesn’t mean the value is set in stone. Indeed, there are many things that hosts can do to minimize their vacancy rate and maximize their occupancy rate.

8 Tips to Boost Your Occupancy Rate:

Here are eight proven tips for enhancing the number of bookings of your short term rental:

1. Review your Airbnb listing and make it more attractive.
2. Add more amenities that your competitors have and you don’t.
3. Offer an Airbnb experience in addition to space to stay.
4. Work on collecting positive reviews from guests.
5. Speed up and automate your communication with guests.
6. Consider lowering the nightly rates.
7. Implement dynamic Airbnb pricing.
8. Hire a professional property manager.

Related: Optimize Your Airbnb Occupancy: Use Our Occupancy Rate Calculator

Airbnb Occupancy Rate Formula: Final Words for Investors

The vacation rental occupancy rate formula is rather simple to calculate and use once you have access to the right data. Meanwhile, this is a key metric in short term rental investing as it affects all other measures. To have a top-performing investment property, you need to keep it booked and rented out for more than half the time it’s available to guests.

Looking for markets and properties that promise a high occupancy rate is challenging as it requires a lot of data and analysis. But the Mashvisor real estate investment tools can help with that.

You can search for cities, neighborhoods, and properties with low vacancy rates if you don’t know where to start. In addition, you can check the occupancy rate of any area or house if you already have certain options in mind.

To learn more about how Mashvisor can help you find the best Airbnb investments with strong occupancies, schedule a demo with our team of experts.

Originally published at https://www.mashvisor.com on April 9, 2019.