How To Calculate Your Property’s Occupancy Rate

The short-term rental industry can be lucrative, but you need to have the right strategies and knowledge to succeed. One of the things property owners or managers need to know is how to calculate the occupancy rate. This tells you the ratio of booked nights in the rental compared to the total number of nights available for rent.

Not only does the occupancy rate help you determine how successful your property is, but it also helps identify ways to improve. If your occupancy rate is low, even if you’re in a popular holiday destination, you’ll need to make changes to try and increase it.

But before you move on to improving your short-term rental occupancy rate, you need to calculate it first. Here’s everything you need to know about how to calculate your property’s occupancy rate. 

The formula for calculating your occupancy rate

Luckily, you don’t need to be a math whizz to calculate your property’s occupancy rate. All you need to do is divide the total number of days your rental was occupied by the total number of days it was available to be booked. You then multiply the answer to this equation by 100 to provide the final number as a percentage. 

You might be able to understand this formula a bit easier if we look at it as an example. Let’s say you have a vacation rental that was booked for a total of 150 days for the whole of the last year. However, you didn’t have any limits on when it could be booked, so the total number of days it was available was 365 days in the year. 

If this is the case, your formula would look like this: (150/365) X 100 = 41%.

This means that for the past year, your property had an occupancy rate of 41%. This is less than half the year, which means you might want to look for ways to improve the number. However, if your number is around 60% and higher, you can be satisfied you’re making the right moves in bringing guests in. 

What factors affect the occupancy rate of a property?

So, what actually determines if a short-term rental has a high or low occupancy rate? Here are the main factors to consider:

Location

One of the main factors that will determine how many bookings you get for your short-term rental will be where it is based. For example, if it's in the middle of nowhere with zero shops or activities, it’s unlikely many people are going to want to book to stay there. However, if the property is in a bustling tourist hub like New York, there’s going to be a higher demand and more chances of receiving bookings. 

Property condition

People want to stay somewhere where they feel comfortable. Often, they want a property that feels like a home away from home but with a touch of luxury. Therefore, you need to ensure your rental is in good condition. Those that have amenities that are out of order or uncomfortable furniture are more likely to receive bad reviews and, therefore, receive fewer bookings in the future.

Rental rates

Price is always going to be a big factor in whether a guest chooses your vacation rental over another in the same area. If you have a property that offers the exact same amenities in the same location for a higher price than your competitors, then you’re going to see fewer bookings. Those that stand out from the crowd with a better rental rate are most likely going to be the ones with higher occupancy rates.

Marketing strategies

Guests need to be able to find your short-term rental to book it, so you need to invest in some solid marketing strategies to receive bookings. If you place your property on sites like Airbnb and Vrbo, as well as use other methods such as search engine optimization, you’ll no doubt see a higher occupancy rate. Without properly marketing your property, no one will see it, and you won’t receive many bookings, lowering the overall percentage for the year.

What is the average occupancy rate for real estate property?

So, after you’ve calculated your property’s occupancy rate, how do you know if it’s actually a good percentage or if you need to make changes to improve it? It’s always good to have an average occupancy rate to compare it to. For example, back in 2023, the average percentage was 56.73% in the United States. 

The top markets in the United States are all Hawaiian islands, such as Oahu, Kauai, and Maui, all having averages reaching the high 70s, and Maui was very close to reaching 80% occupancy. 

Aside from Hawaii, there are numerous other US states boasting high occupancy rates, including:

• Massachusetts with 61.8%
• South Carolina with 61.7%
• Washington with 60.6%
• Colorado with 60.6%

Basically, if you reach an occupancy rate of over 60%, you’re outperforming the national average and can be happy that you’re performing well. If you’re around 40% or lower, you might want to consider making some improvements. 

Occupancy rate vs vacancy rates: What’s the difference?

When you’re in real estate or renting out a vacation property, you’re most likely also going to hear the term “vacancy rate”. This is very similar to the occupancy rate. In fact, it is basically the opposite. Instead of finding the percentage of how much your property has been booked out for the year, you’ll be finding a percentage of how much the property was vacant for the year.

You can calculate the vacancy rate of a property by dividing the total number of vacant days the property had in the year by the total number of days the property was up for rent. You’ll then multiply this number by 100 to reach your percentage. 

How to improve your occupancy rate

If you’ve calculated your occupancy rate and are not happy with it, there are a few steps you can take to improve it:

Price

Check the price of what you’re charging per night for your rental and compare it to competitors in the area that offer the same sort of property and amenities as you. Is it higher than all of them? If this is the case, you might need to lower the price. 

Marketing

You can never do too much marketing. If your current marketing strategy isn’t getting you the bookings you want, you may need to go back to the drawing board to re-evaluate. Sometimes, talking to an expert can help you out as well. 

Upgrades

Guests always want the best, so if your property is a bit outdated or you aren’t offering the best amenities in the area, you might want to consider adding some upgrades. This could be as simple as adding WiFi for guests who like to work from home, or introducing something like a hot tub, catering to guests who are looking for somewhere to relax. 

Final thoughts

The occupancy rate ultimately tells you how successful your short-term rental is and if your investment is worth it. Put simply, it tells you how many guests are booking to stay with you. However, that’s not all it says. It also tells you whether you need to make any improvements to help improve your business.
For some additional help in calculating rates, automating processes, and offering an overall better guest experience, you can use Hospiria’s property management software. Take a self-guided product tour today and take yourself through all the features our property management software has to offer.