Break-even occupancy for a short-term rental: a worked example, and what a few direct bookings change

Short version: break-even occupancy is the share of nights you need to book so your rental income covers your costs. Below the line you lose money every month. Above it, each booked night adds profit. Knowing your own number tells you how much room you have when a slow month comes, and what a handful of direct bookings is really worth.

Every number in this article is an example for a made-up cabin. Your costs, rates and fees will be different, so plug in your own.

The formula

You need two numbers first:

• Fixed costs you pay whether anyone stays or not: mortgage or rent, property tax, insurance, internet, base utilities, HOA dues, software subscriptions and a maintenance reserve.
• Costs per booked night: platform fees, card processing, supplies like coffee and toilet paper, and the extra electricity or propane a guest uses.

Then:

1. Contribution per night = average nightly rate − costs per booked night
2. Break-even nights = fixed costs ÷ contribution per night
3. Break-even occupancy = break-even nights ÷ nights available

Worked example: a made-up cabin

Why 15.5%? Airbnb's help center says most hosts on its single-fee structure pay 15.5%, and the remaining hosts typically pay 14% to 16%. Check the fee on your own payouts.

To keep the math readable, the example assumes the cleaning fee you charge covers what you pay your cleaner, so cleaning is left out. In real life Airbnb's host fee is also charged on host-charged fees like cleaning, so your actual margin is a little lower.

Step 1, contribution per night: $180 − $27.90 − $10 = $142.10

Step 2, break-even nights: $2,700 ÷ $142.10 = about 19 nights

Step 3, break-even occupancy: 19 ÷ 30 = about 63%

So in this example the cabin needs about 19 booked nights a month just to cover its costs. The 20th night is the first one that earns anything.

The margin above break-even is thin

Say the cabin books 21 nights this month, which is 70% occupancy. That sounds healthy.

21 nights × $142.10 = $2,984.10. Minus $2,700 of fixed costs leaves $284.10 for the month.

That's two nights above break-even. One cancelled weekend and the month is at zero or below. This is why small changes in cost per night matter more than they look.

What a few direct repeat bookings change

Now say two returning guests book three nights each directly with you instead of through Airbnb. On a direct booking there's no Airbnb host fee, but you pay card processing. The example uses 3%; check your processor's real rate.

Direct contribution per night: $180 − $5.40 (3% processing) − $10 = $164.60. That's $22.50 more per night than the Airbnb night in this example.

Same month, same 21 booked nights, but 6 of them direct:

• 15 Airbnb nights × $142.10 = $2,131.50
• 6 direct nights × $164.60 = $987.60
• Total $3,119.10 − $2,700 = $419.10

Scenario (example)	Booked nights	Monthly result
All Airbnb, at break-even	19 nights booked	about $0
All Airbnb	21 nights booked	$284.10
Airbnb plus two direct repeat stays	21 nights booked, 6 of them direct	$419.10

Occupancy didn't change. Profit for the month went up by $135, about 48%, because two stays skipped the platform fee.

The break-even point itself barely moves. If a quarter of all nights were direct, the average contribution would be about $147.73 a night, and break-even would drop from about 19 nights to about 18.3 (from roughly 63% to 61%). Direct bookings help most with the margin you earn above the line.

Costs that direct bookings add

A direct night isn't free money. Be honest with yourself about these:

• Card processing. Use your processor's real fee, including any fixed fee per payment.
• Your website or booking tool. Add its monthly cost to your fixed costs. A quick test: divide that monthly cost by the extra you earn per direct night ($22.50 in this example). The result is how many direct nights a month you need just to pay for the tool.
• Occupancy taxes. Airbnb collects and remits some occupancy taxes in places where it has arranged to, and its help center says hosts remain responsible for other tax obligations. On a direct booking nobody does it for you, so check what your state, county and city require. This isn't tax advice.
• Protection and payments. Airbnb says bookings paid outside Airbnb lose its AirCover protection. Check that your own insurance covers short-term guests, and decide how you'll take deposits.
• Your time answering enquiries and handling payments.

Also keep in mind that Airbnb's rules limit how you can invite Airbnb guests to book directly. We cover what's allowed in how to get repeat guests to book directly without breaking Airbnb's rules.

Run your own numbers

1. List a year of fixed costs and divide by 12, so a once-a-year insurance bill doesn't distort one month.
2. Use your real average nightly rate from last year's payouts, after discounts.
3. Add up costs per booked night, using the fee shown on your payouts.
4. Work it out per season. A lake cabin that's full in July and quiet in February has a different picture each month. You can also do it for the whole year: annual fixed costs ÷ contribution per night ÷ nights you're open.
5. Compare with what you actually booked. The gap between your real occupancy and your break-even is your safety margin.
6. Try one change at a time: a higher cleaning cost, a lower winter rate or two direct stays a month, and see what moves.

Frequently asked questions

Read next

• What a small motel, cabin or B&B website needs so guests book directly: a checklist
• How to get repeat guests to book directly without breaking Airbnb's rules