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At $2,060 a month in costs, a $150 rental has to be booked 54% of the time just to break even.
The short answer: Break-even occupancy is the share of nights you must be booked to cover your costs. Divide your monthly fixed costs by what one booked night earns after fees and the cost of a turnover, then divide by the days you can sell. At $2,060 a month of fixed costs and a $150 rate, that is about 16.5 booked nights, or 54% occupancy.
Most owners know their nightly rate and how "busy" they felt last summer. Few know the one number that decides if a rental is working: the share of nights it must be booked just to cover its bills. Here is how to find it.
What is break-even occupancy?
It is the occupancy at which you neither make nor lose money in a month. Below it, you pay to own the rental. Above it, you profit. The idea is the standard break-even analysis used in any business, applied to nights.
How do you work out your break-even occupancy?
- Step 1: add up your fixed costs for a month. Costs you pay whether or not anyone stays: mortgage or rent, insurance, utilities, internet, software, property tax or HOA, permits. Example: $1,400 + $150 + $250 + $60 + $200 = $2,060.
- Step 2: work out what one booked night earns. The nightly rate, less the booking site's fee, plus what is left of the cleaning fee after the cost of the turnover, shared across the nights of a stay. With a $150 rate, a 15.5% fee, 3-night stays, a $75 cleaning fee and $70 of cleaning, laundry and supplies, one night earns about $124.54.
- Step 3: divide. $2,060 ÷ $124.54 = about 16.5 booked nights a month.
- Step 4: turn it into a share. A month has about 30.4 days. 16.5 ÷ 30.4 = 54% occupancy.
Block days for yourself? Take them off the days you can sell first. 5 blocked days leave about 25.4 to sell, and your break-even share goes up.
How does your rate change the answer?
The same costs and stays, at different rates:
- $120 a night: you need about 68% occupancy.
- $135 a night: about 61%.
- $150 a night: about 54%.
- $165 a night: about 49%.
- $180 a night: about 45%.
A $30 difference in rate moves the target by about 14 points. That is why a small price rise, or a small fee cut, can matter more than a big push for bookings.
What is the lowest nightly rate you can charge?
Turn the question round. Pick the occupancy you expect, say 60%, and work out the rate that covers your costs at that occupancy. With the same costs, that rate is about $136 a night. At $150 and 60% you would clear about $213 a month before income tax. Treat that lowest rate as a floor: never let a discount, a last-minute deal or a long-stay offer take you under it. See how weekly and monthly discounts work.
What moves your break-even most?
- The booking site's fee. At 15.5% it is the biggest variable cost. A booking on your own website costs about 2.9% plus 30 cents in card fees (Stripe). Every booking you win direct lowers the average fee, so it lowers your break-even.
- A property manager. At a 20% management fee, the same rental needs about 76% occupancy instead of 54%. Check whether your contract also takes a share of cleaning fees.
- Your cleaning fee against your real cleaning cost. If you charge less than a turnover costs, every stay earns a little less. See how to set a cleaning fee.
- Fixed costs. Software and subscriptions add up. Look at each line once a year.
Direct bookings are the lever you control. Our booking site fee calculator shows what your fees cost each year, and how many direct bookings pay for a website shows the payback.
Ready to lower your fees? Your own booking website is ready in 7 working days or it is free, and you pay half to start and the other half only when you go live. Pay your first installment, or compare every plan on the pricing page.
Not sure what is possible for you? Ask us
On a call, we will:
- Go through your fixed costs, rate and fees with you and work out your break-even and your lowest rate.
- Look at how many direct bookings you would need to bring your break-even down, and tell you honestly if that is realistic for your place.
We will tell you honestly what is realistic. We do not promise results, because nobody honest can.
Common questions
- What is a good occupancy rate for a vacation rental?
- There is no single answer, because it depends on your costs and rate. The number that matters is your own break-even occupancy: the share of nights you must be booked to cover your costs. Anything above it is profit.
- How do I find my minimum nightly rate?
- Pick the occupancy you expect, then find the rate at which your monthly income equals your monthly costs at that occupancy. With $2,060 of monthly costs and 60% occupancy, the example rental needs about $136 a night.
- What counts as a fixed cost for a vacation rental?
- Costs you pay whether or not anyone stays: mortgage or rent, insurance, utilities, internet, software, property tax or HOA fees, and permits. Cleaning, supplies and booking site fees are not fixed. They come with each stay.
- Does break-even include income tax?
- No. It is before income tax and before one-off costs such as repairs or furnishing. Ask an accountant how your income is taxed where you live.
Sources and helpful links
- Investopedia: break-even analysis — the idea behind the method
- Airbnb: how host fees work — the single fee
- Stripe pricing — card fees on your own site
- Launch VRO break-even calculator — try your own numbers
