Vacation Rental Profitability: What Actually Stays in Your Pocket

Guide for vacation rental hosts · approx. 11 min read · Auf Deutsch lesen

"We did €48,000 last year." That is the sentence you hear at every hosts' meetup. What nobody mentions is what was left of it — because most hosts genuinely don't know. And the real number tends to come in 40 to 60 percent lower than expected.

Revenue is the least useful number in short-term rentals. It tells you nothing about whether your property carries itself, whether a second unit would make sense, or whether you should simply close in November. This guide walks through the four metrics that actually matter, the costs missing from almost every calculation, and how to find your break-even occupancy — the number that tells you, on any pricing decision, whether you are earning money or merely staying busy. You can run your own figures right here: the calculator below is free and needs no sign-up.

Which numbers do I need for profitability?

Forget annual revenue for a moment. These four metrics describe your business completely, and each answers a different question.

1. Occupancy — and why it is almost always calculated wrong

Occupancy is the share of nights your property was booked. Simple in theory, rarely done cleanly. The most common mistake: dividing by 365.

Available means nights you actually intended to sell. If you renovate for four weeks in November and stay in the apartment yourself over Christmas, those are not vacancies — they were never on the market. Counting them makes your performance look artificially poor, and you end up making pricing decisions based on a number that doesn't exist.

The reverse also applies: don't flatter yourself by declaring every weak week "owner use". The test is always — would I have sold this night if someone had booked? If yes, it is available.

2. ADR — your average rate per night sold

Average Daily Rate is revenue divided by nights booked. It shows what you earn per night actually sold.

One caveat: use revenue that genuinely belongs to you. If tourist tax and a cleaning fee are baked into the booking total, they don't belong here — tourist tax is a pass-through, and the cleaning fee covers a cost. Include them and your ADR looks higher than it is, which is usually followed by confusion about the thin margin.

3. RevPAR — the most honest number of them all

RevPAR (revenue per available night) merges occupancy and rate into a single figure:

Why this is the key operational metric becomes obvious in a comparison. Two apartments, 300 available nights each:

A looks like the success story — 80 % occupancy sounds like a strong year. In fact B earns more revenue at 25 points lower occupancy. And that is only half the story: A had 145 arrivals instead of 100, meaning 45 more cleanings, more laundry, more messaging, more wear. After costs, B wins almost every time.

This is why "increase occupancy" is a dangerous goal on its own. You can fill any property through price — the question is what that costs you.

4. Net profit — the only number that ultimately counts

The first three metrics all describe the revenue side. Profit only appears after costs — and that is where most hosts have their blind spot.

Which costs get forgotten in the calculation?

When hosts overestimate their profitability, it is rarely an arithmetic error — it is missing line items. These are the usual suspects:

• Maintenance and reserves. The biggest gap. A rented apartment wears out three to five times faster than one you live in. Mattresses, sofa, crockery, paint, washing machine — not every year, but they come. Setting nothing aside doesn't make a year profitable; it just defers the bill. 4 to 6 % of revenue is a realistic figure.
• Your own time. At 60 arrivals and 1.5 hours each, that's 90 hours a year for guest communication and check-in alone. Value them at €25 and there go €2,250 of your "profit". Whether you count them is a deliberate choice. Ignoring them by accident is not.
• Cleaning you don't charge for. Many hosts skip the cleaning fee because it hurts conversion. The work doesn't disappear — it just leaves the invoice.
• Payment fees. 1.5 to 3 % goes to card processors, PayPal or your payment provider. On €34,000 that's up to €1,000.
• The cost of empty months. Heating, standing charges and insurance run in November too. Fixed costs know nothing about low season.
• Furnishings as a running expense. The new TV isn't a free capital item — it is money that left your account this year.

Gross or net? The VAT trap

The most common systematic error: comparing gross income against net costs. Accommodation is taxed at reduced VAT rates in most European countries — 10 % in Austria, 7 % in Germany. On €34,000 gross, roughly €3,090 of that (Austria) is VAT: money that was never yours.

If you are VAT-registered, work consistently in net figures: income excluding VAT, expenses excluding input VAT. If you fall under a small-business exemption you charge no VAT but also cannot reclaim input VAT — in that case use gross on both sides. The error always comes from mixing the two.

Which regime applies to you depends on turnover thresholds that change from time to time. That is the one point where a short conversation with your accountant always pays for itself — this article is not tax advice.

At what occupancy do I start earning? (break-even)

The single most practical metric comes almost for free once you have separated fixed from variable costs: how many nights must you sell to cover your fixed costs?

The calculator above shows this directly. Why it matters: it answers the question every host faces each spring — "Do I take €65 a night, or leave it empty?"

The answer depends only on contribution. If an extra night costs you €6 in utilities and the arrival costs €73 in cleaning and laundry, then a two-night booking at €65 net gives you 130 − 12 − 73 = €45 contribution. That is above zero — worth taking, as long as it doesn't crowd out a more valuable booking. Run the same maths on a one-night stay: 65 − 6 − 73 = −€14. That booking costs you money.

This is exactly why blanket rules like "20 % off every spring" are dangerous, and why minimum stays are often worth more than discounts. With your own numbers in mind you decide this in ten seconds instead of by gut feel.

Why calculate per property instead of on average?

Hosts with several units usually know only the combined total. That regularly hides one property subsidising the others:

At portfolio level, 21 % looks respectable. In reality the chalet — the property with the highest revenue and by far the most work — earns almost nothing. You only see patterns like this if you assign both income and costs per property. Costs that genuinely can't be assigned (software, accounting) are better left as "shared" than distributed arbitrarily — otherwise you invent a precision that isn't there.

Common thinking errors about profitability

• "I hit 85 % occupancy, so it was a good year." Or you were simply too cheap.
• "The guest pays for cleaning." Only if the fee covers the real cost — including the arrivals you clean yourself.
• "Direct bookings are always better." They save commission but cost marketing, a website, payment handling and time. Often still better — but not automatically.
• "The channel eats 15 % of my profit." It eats 15 % of revenue. At a 30 % margin that is half your profit — a meaningful difference.
• "Next year will be better." Without changed numbers that is a hope, not a plan.

How often should I run the numbers?

Once a year for the tax return is too late — by then every decision has already been made. A three-tier rhythm works well:

• Monthly (5 minutes): record receipts, compare occupancy and RevPAR against last month and last year.
• Quarterly (20 minutes): check profitability per property, review cost categories, adjust rates for the coming season.
• Annually (1 hour): the full calculation including reserves and your own time — plus the honest question of whether every property earns its keep.

Almost all of the effort sits in collecting the costs. That is precisely where most hosts stall: receipts pile up in a box, the analysis gets postponed, and in February a whole year gets reconstructed from bank statements.

Frequently asked questions

What is a good return on a vacation rental?

It depends mainly on two things: whether the property is financed, and whether you count your own labour. A mortgage-free apartment with no owner wage applied often reaches 45 to 60 % operating margin on net revenue. Add loan payments and a realistic hourly rate and many hosts land at 15 to 30 % — with individual properties at zero. Industry benchmarks say little; your own year-over-year trend and the comparison between your properties say a lot.

How do I calculate occupancy correctly?

Nights booked divided by available nights, times 100. Available means nights you actually intended to sell — owner use and blocked periods do not belong in the denominator.

What is the difference between ADR and RevPAR?

ADR is revenue per night sold; RevPAR is revenue per night available. RevPAR therefore accounts for empty nights, which makes it the fairer basis for comparing properties, months and years.

Should I calculate gross or net?

Net if you are VAT-registered (income excluding VAT, expenses excluding input VAT). Gross on both sides if you fall under a small-business exemption. What matters is not mixing the two.

Is a booking below my normal rate worth taking?

As long as the contribution is positive and it doesn't displace a more valuable booking, yes. Calculate net revenue minus variable costs: utilities per night plus cleaning and laundry per arrival. For very short stays the result is often negative — there, minimum stays help more than discounts.

How much should I set aside for maintenance?

4 to 6 % of annual revenue is a realistic guideline for wear and replacements — towards the upper end for older properties or high occupancy.

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