We’ve reached the midpoint of the year. It’s a great time to review your short term rental property’s performance. To ask yourself, and answer, questions like:
- How is my revenue compared to last year?
- What went well for my short term rental so far this year?
- What areas could be improved on?
One major factor related to your short term rental revenue and results is your occupancy rates.
In this blog post, we’ll explore what occupancy rates are, how to calculate them, and strategies to increase them, along with an outlook for the remainder of 2024.
What Are Occupancy Rates?
Occupancy rates are calculated by taking the percentage of time a vacation rental property is booked and comparing it to its total time available for bookings.
A higher number generally indicates a healthier rental market.
How to Calculate Your Occupancy Rates
To calculate the occupancy rate, you divide the number of occupied nights by the total number of available nights and multiply by 100 to get a percentage.
The formula for occupancy Rate is = ({Occupied Nights} / {Available Nights}) x 100
Let’s walk through an example:
You own a STR in the Smokies and you like to use it for 2 weeks at Christmas, two weeks in the summer, one week in the fall, and one week in the summer – for a total of 323 days.
Which means that your short term vacation rental is available for a total of 323 days.
Formula: (total days booked/total available days) * 100
If you home is booked for 175 of those days, your occupancy rate is 54%
If you home is booked for 225 of those days, your occupancy rate is 69%
How to Increase Your Occupancy Rates?
Turno has tons of great ideas for how to increase your property’s occupancy rates.
Some effective tactics include:
- List on multiple sites
- Use high quality photos
- Write an intriguing and accurate property description
- Enable instant booking
- Use dynamic pricing
- Improve your marketing strategy
- Incentivize positive reviews from guests
We have a few other ideas for how you can increase your occupancy rates
- Elevate your amenities
- Expand your sleeping areas
- Hire a property manager for improved marketing strategies and client experience
- Consider upgrades
Market Trends in 2024
AirDNA completed a midyear market review. Here are their key takeaways from the article:
- May saw an 11.4% increase in demand and a 3.1% rise in occupancy, signaling strong recovery and growth in the short-term rental market.
- Coastal and rural locations are thriving with high demand, while urban areas face declines due to high interest rates and stricter regulations.
- Summer bookings, particularly beach reservations for July 4th, are seeing substantial growth.
“The surge in post-pandemic demand pushed short-term rental (STR) occupancy to record levels in 2021 and 2022. However, monthly occupancy has been declining ever since. Although occupancy year-to-date is still down by about 1.5%, May saw a growth rate of 3.1%—the highest monthly increase since early 2022. This was just before new supply, taking advantage of pandemic-level occupancy, started to impact individual unit performance.”
Demand for rentals is up, and supply is slowing down. The last time demand growth in May was this high was during the peak of 2022.
The market appears to be at a turning point for occupancy rates. As demand outpaces supply, occupancy rates have shown signs of recovery, which is promising for property owners who experienced declines in previous years.
“Although year-to-date occupancy is still down about 1.5%, the strong summer performance expected ahead suggests that May marked a significant turning point for occupancy growth.”
While the average daily rate (ADR) for rentals is growing, it’s at a slower pace compared to past years, this is largely due to inflation.
Pacing, which tracks future reservations compared to previous periods, shows that bookings for the second half of 2024 are trending positively. This forward-looking data indicates that occupancy rates are likely to remain strong, providing a positive outlook for rental owners.
As we look ahead to the rest of 2024, the short-term rental market shows promising signs of recovery and growth.
By adapting your strategies accordingly, you can ensure your short-term rental remains competitive and profitable throughout the year!
