In the short-term rental (STR) market, occupancy rate is often highlighted as a key performance metric. While it’s important, focusing solely on occupancy can be misleading and even harmful to your property’s overall profitability.
If you want to maximize revenue from your Airbnb, VRBO, or vacation rental, it’s time to look beyond occupancy rate and focus on metrics that truly drive success.
Why Occupancy Rate is a Misleading Metric
What is occupancy rate? It’s the percentage of nights your vacation rental is booked over a set period. At first glance, a high occupancy rate might seem like a sign of success, but it doesn’t always mean higher profits. Here’s why:
1. Occupancy is Easy to Manipulate
If you drop your nightly rate significantly, you’ll fill your calendar quickly—but at a cost. Low rates often attract:
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Budget-conscious guests who may not treat your property with care
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Lower-quality bookings that lead to higher maintenance costs
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Reduced revenue potential, leaving money on the table
2. Higher Occupancy Isn’t Always Better
Contrary to popular belief, 100% occupancy is a red flag. The most profitable short-term rentals typically maintain an occupancy rate between 65% and 75%.
Properties in this sweet spot optimize their daily rates, attract better guests, and maximize their overall revenue.
3. High Turnover Increases Costs
More guests mean:
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Higher cleaning and maintenance expenses
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Increased risk of property damage
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More frequent complaints and negative reviews
Instead of chasing maximum occupancy, focus on strategies that increase revenue per available night (RevPAN) while attracting high-quality guests.
What Metrics Matter More Than Occupancy?
To truly measure the success of your Airbnb or vacation rental, track these key performance indicators (KPIs) instead:
1. Average Daily Rate (ADR)
Your ADR reflects how much you earn per booked night. A higher ADR means you can generate strong revenue even with moderate occupancy.
Tip: Use dynamic pricing tools to adjust your ADR based on demand, seasonality, and competitor rates.
2. Revenue Per Available Night (RevPAN)
RevPAN combines occupancy rate and ADR to provide a holistic view of your property’s performance. A well-priced rental with 70% occupancy often earns more than a fully booked property with ultra-low rates.
3. Return on Investment (ROI)
The ultimate goal of any STR investor is profitability. Instead of chasing bookings, focus on ROI-driven metrics like:
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Total monthly revenue
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Net operating income (NOI)
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Guest acquisition costs
The Optimal Occupancy Rate: 65%-75%
For most short-term rental properties, an occupancy rate between 65% and 75% is the sweet spot. Here’s why:
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Higher nightly rates attract quality guests
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Dynamic pricing allows you to maximize peak-season earnings
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Lower turnover reduces operational stress and costs
Maximize Profitability and Not Just Occupancy
While occupancy rate is an important metric, it’s overrated when viewed in isolation. The key to short-term rental success is balancing pricing and occupancy to achieve maximum profitability.
If you want to boost your revenue, attract quality guests, and scale your STR business, focus on ADR, RevPAN, and ROI, not just filling your calendar.
Ready to optimize your Airbnb or short-term rental? Implement smart pricing strategies, monitor key metrics, and watch your profitability soar.
