Gross operating profit for vacation rentals is typically between 68% and 72%. Limited-service hotels usually have a profit margin of 46% to 52%, while full-service hotels have a profit margin of 29% to 33%. If you rent out a property for the entire year, you can expect an occupancy rate of around 50%. However, this rate can increase to 70%-80% during peak times and drop to 30-40% during low seasons.
If you're just starting out in the vacation rental business, you should aim for a 10% return on your investment. In the past, managing a vacation rental was a labor-intensive process that required cleaning bathrooms and finding bookings. But modern management companies are making it easier than ever with new technologies that provide comprehensive services. The travel industry is constantly evolving, and home-sharing platforms and vacation rental markets are leaving their mark.
Vacation rental expenses are often overlooked, but they are essential for success. If you're just getting started in the vacation rental space, you should look for reasonably priced properties. Eric Breon realized he could make 650% more revenue by managing his family's beach house himself, which inspired him to create a simpler and more cost-effective experience for vacation rental owners. Demand for vacation rentals is growing rapidly, and by 2025, one in five people will have stayed in one.
Online listing companies like Airbnb make it easy for guests to book, and new technology-driven management companies make it easier than ever for homeowners to market and maintain their properties.