What Is Airbnb Occupancy Rate?
If you’re investing in short term rentals, it’s an absolute must to understand Airbnb occupancy rate. In this blog, we’ll break down exactly what it is, how to calculate Airbnb occupancy rate, and how Mashvisor can help.
What Is Airbnb Occupancy Rate?
No matter the rental strategy you go for, occupancy should always be a factor you consider. When investing in short term rentals, Airbnb occupancy rate is a core vacation rental metric all investors and hosts are advised to understand. Real estate investment is all about maximizing profit and maintaining positive cash flow. The occupancy rate is one of the metrics which helps investors know they are achieving just that. Traditionally speaking, occupancy is the ratio of time a rental property is occupied to the time it’s made available for rent.
So the Airbnb occupancy rate can be calculated in regards to the number of booked nights divided by the total number of nights that your Airbnb listing was made available for booking and reservation. When calculating the Airbnb occupancy rate, total available nights would include both the reserved nights and the unreserved nights.
Basic Calculation for Airbnb Occupancy Rate= Booked Nights/ Total Available Nights
So you see the basic trend of what the occupancy rate reflects is a measure of how often your investment property is occupied by guests.
Factors That Affect the Airbnb Occupancy Rate
We quickly mentioned that occupancy is an important metric to be considered when estimating the return on investment from your short term rental. But why? Well, the occupancy rate will depend on the location, seasonal changes, marketing strategy, guest reviews, or more depending on your situation. It differs from property to property and from location to location. Based on these factors, real estate investors can determine what a good occupancy rate is for their rental property and their investment situation.
Now because rental income is directly related to occupancy, typically the higher your occupancy rate, the more revenue you’ll generate. Speaking of rental income, your nightly rate can play a big role in how occupied your unit is. This is why a well-planned pricing strategy is very important for Airbnb investors.
With that said, there are two main things that will affect how high your occupancy rate is:
Smart Pricing
Regardless of the type of real estate market you’re in, research will help you set the right rental rate that will keep your occupancy rate high. Look up Airbnb comps in your area to get a feel of what the typical pricing for a similar rental is in that market. However, sometimes this alone won’t cut it if you want a competitive price. There might be something your Airbnb rental has that justifies a higher price than the average nightly rate. Or you can go in the opposite direction and lower your nightly rate to attract potential guests to your listing.
Related: How Do I Price My Airbnb Property?
Seasonal Markets
This is an issue beginner real estate investors in the vacation rental industry oftentimes deal with. If you’re investing in popular holiday markets that only have traffic during their vacation seasons (ranging from winter ski resorts to summer beach houses), your Airbnb occupancy rate calculation should account for those seasonal changes. Note that because in these markets occupancy levels can vary drastically from the busy months to the off-season, an annual Airbnb occupancy rate which is low does not have to necessarily mean low-income generation. These locations typically only have a couple of months to generate the bulk of their revenue for that year, so hosts need to market their rental properties at a strategic price for optimal profitability.
Then there are locations that are busy year-round. These housing markets experience a constant flow of visitors (whether coming for business or vacation). In this case, real estate investors can work on setting a sustainable nightly rate for high occupancy.
Related: How to Choose the Right Location for Rental Properties
The Easiest Way to Find Airbnb Occupancy Rate Data
It’s clear that you need to figure out the Airbnb occupancy rate if you want to have a profitable rental property. And if you’re looking for the most accurate calculation, Mashvisor’s occupancy calculator is the best tool for the job. Let’s break down why that is.
It All Starts with Data Collection
Operating since 2014, Mashvisor has about 5 years of historical performance for Airbnb listings in the US real estate market. Our servers have been collecting key data regarding all aspects of Airbnb rental performance; think calendar bookings, host info, guest reviews, and more since the day the listing was active on Airbnb. Mashvisor’s database is currently storing info on around 1,700,000 listings. We collect data on all types of Airbnb listings (private room or shared room and entire house or apartment).
Related: What’s the Best Airbnb Analytics Platform for 2019?
Our Criteria for Finding Airbnb Occupancy Rate
We don’t just use all the data acquired on all of the Airbnb listings in the housing market. There is a set of criteria we run the listings through before including them in our Airbnb occupancy rate calculations:
- The listing must be an active one on the Airbnb website. In the case it’s inactive, we check to see if it has been active in the past 3 months for it to be included.
- While data is collected on these room types, shared or private room listings are not included in our Airbnb occupancy rate calculation.
- To qualify, the listing must have at least 3 reviews.
Airbnb listings are filtered for each neighborhood in which our database has stored information on. This allows us to calculate the Airbnb occupancy rate for each listing. We can then find the rental rates for each neighborhood.
Mashvisor’s Occupancy Calculator
As mentioned, our tools calculate the occupancy rate for each rental property on a monthly and annual basis. Having access to day to day performance, nightly availability, and nightly price allows us to keep tabs on Airbnb rental performance in each neighborhood.
Remember those complications regarding available nights and seasonal changes? Well, we also make sure booked nights are actually booked, and not just blocked by the host from booking (as this shows the listing as booked). With this, we can more accurately calculate nightly rates based on days this listing was actually booked. Each listing’s Airbnb occupancy rate accounts for seasonality because we take the average occupancy of the previous twelve months and include that in our analysis.
We Calculate More Than Just the Occupancy Rate
Our calculator uses the Airbnb occupancy rate and gives you a lot more data for your return analysis. For example, after finding the Airbnb occupancy rate and nightly price rate, we calculate the rental income rate for each listing and the overall neighborhood. Starting with the gross rental income, we factor in the cleaning fee, hosting fee, and vacancy rate. Note that our analysis is only done for neighborhoods that have at least five active Airbnb listings. Our users can also find Airbnb occupancy rate by city on our blog as we do provide that data as the average rental rate of all listings there.
A reliable tool like the Airbnb occupancy calculator is essential for any short term rental investor. Start using our services right now with a 14-day free trial.
Related: Using Data- The Best Way to Get Rich in Real Estate
Originally published at https://www.mashvisor.com on August 31, 2019.
