How to Calculate Occupancy Rate in Property Management

occupancy rate- Zeevou

KPIs, Key Performance Indicators, help you measure your vacation rental or property management business performance, its growth, and customers’ behaviour. Among property management KPIs, revenue management KPIs obviously revolve around revenue management analysis. Occupancy rate is one of the most fundamental aspects to measure and check as it simply shows to what extent you have been successful in renting your vacation rental properties. 

What is the Occupancy Rate Used For?

Vacation rental managers aim to keep their properties as occupied as possible with the ultimate goal of making their businesses profitable. For the same reason, vacation rental managers list their properties on many different channels and seek to increase direct bookings. These efforts are made for the sake of combating the ever-present expenses, boosting revenue, and increasing the bottom line. So, enough relevant data should be gathered to analyse the performance of vacation rentals. 

One of the metrics to check if your vacation rental business is thriving or not is measuring the ratio of the total number of bookings to the total number of properties or units within a property you manage. If you know your monthly and yearly occupancy rates, you can understand if you are making money by getting actual bookings, selling upsells or other services you offer. Long story short, knowing your occupancy rate is used in setting up your financial plan by adjusting rates, discounts, and so on and so forth. 

There are, however, disagreements around the average occupancy rate, which indicates a healthy vacation rental business. Generally speaking, the average occupancy rate is supposed to be not less than 45 percent. However, in some areas and during off-seasons, this number can decrease to 20 percent.  

The occupancy rate is the bread and butter of short-term rentals, but it is not only used in this business’ jargon. The occupancy rate is used to measure activities happening in residential areas, hospitals, care centres, and even entire cities. Occupancy rate is also used in call centres to measure the time spent on calls. The occupancy rate is simply measured by the ratio of occupied spaces to the total vacant rentable or usable spaces. 

For real estate and commercial investors, the occupancy rate is a critical factor to consider. The shopping centre occupancy rate specifies if the stores and restaurants are occupied mostly or not, which in turn indicates if that place is worth investing in or not. 

A low occupancy rate implies that the property is not paying off the operation costs and maintenance fees while it is necessary that the time and money spent bring cash flow. The occupancy rate of short-term rentals in an area shows the overall demand to see if spending time and money in a place is justified or not. 

How to Calculate Occupancy Rate in Property Management?

Calculating occupancy rates manually seems to be quite simple with a formula. You need to divide the number of occupied units by the total number of rentable units and multiply it by 100 for a given timeframe. However, some complexities show up while calculating the occupancy rate. This complexity lies in the fact that you might have properties with a variety of rooms and different numbers of guests. This means that if you have a double room booked for three nights, it is equal to a six-night booking of a single room. After this calculation, you need to divide the total number of bookings in a given period by the total number of rentable units for a given period, e.g. monthly or yearly, and multiply this number by 100. It is quite time-consuming, right?

This complexity is the reason for including the automatic calculation of occupancy reports under the revenue management tool and the occupancy calendar of Property Management Systems.

How to Increase Occupancy Rate?  

1. Invest in a Lucrative Location

Selecting a proper location to buy your vacation rental property is the first thing you need to think seriously about and decide. Invest in a place with potentials to get bookings. 

2. Take Professional Photos and Promote Your Listings

Paying for professional photography of your properties is a must if you expect the market to recognise you as a trustworthy host to book and stay with. 

3. Plan for Repeat Reservations

Get your guests’ contact information, set tempting discounts, and launch email campaigns to get repeat reservations from previous guests. 

4. Adjust Minimum Night Stay and Pricing 

If you take advantage of a dynamic pricing tool, these two tasks are done automatically without getting your time. Otherwise, monitor the fluctuations of the market and increase minimum night stay in low seasons and lower the price too. 

5. Use a Vacation Rental Income Calculator

A vacation rental property deal analyser can estimate the money return of your property by analysing various data points, such as nightly and occupancy rates. Based on this information, hosts can adjust the nightly rate and their pricing strategy to increase the chances of being booked. By staying competitive and pricing strategically, the property manager can increase the occupancy rate and maximise their rental income.

6. Invest in Direct Bookings

Set up a direct booking website, make a list of potential guests, make time for devising a marketing strategy for your vacation rental business, and aim for boosting your direct bookings. And do not underestimate the value of positive reviews as those bring more occupancy. 

Zeevou stands out in helping short-term rental managers increase their revenue, and its   Revenue Management feature is highly tailored for this goal. To know more about how Zeevou takes care of your business growth, check out the toolbox of the many premium features Zeevou offers.  

Further Reading

Scroll to Top

Drop Us a Line