This article was written by our expert who is surveying the industry and constantly updating the business plan for a short-term rental.
Starting a short-term rental business requires understanding the financial landscape to make informed decisions.
This guide breaks down the key revenue metrics, operating costs, and profit margins you need to know before launching your short-term rental property. We'll cover everything from average nightly rates to seasonal fluctuations, giving you the complete financial picture.
If you want to dig deeper and learn more, you can download our business plan for a short-term rental. Also, before launching, get all the profit, revenue, and cost breakdowns you need for complete clarity with our short-term rental financial forecast.
Short-term rentals typically generate $4,000-$7,500 monthly gross revenue with nightly rates of $160-$350 and occupancy rates between 46-70%.
After deducting all operating expenses, platform fees, and management costs, net profit margins range from 25-45%, with self-managed properties earning 5-15 percentage points higher margins than professionally managed units.
| Metric | Range | Key Details |
|---|---|---|
| Average Nightly Rate | $160-$350 | Varies by location, season, and property quality |
| Occupancy Rate | 46-70% | Professionally managed properties reach up to 90% in peak season |
| Monthly Gross Revenue | $4,000-$7,500 | Based on typical occupancy and nightly rates |
| Operating Expenses | 30-50% of gross revenue | $1,500-$3,500/month including cleaning, utilities, supplies |
| Platform Fees | 3-25% of booking value | Airbnb: 3-15% host fee; Booking.com: 10-25% commission |
| Management Fees | 15-40% of rental income | Full-service property management if outsourced |
| Net Profit Margin | 25-45% | Self-managed units typically 5-15% higher than managed |
| Seasonal Revenue Swing | 40-100% increase in peak | Occupancy can spike 20-40% during high season |
How much do short-term rentals charge per night?
Short-term rentals charge between $160 and $350 per night on average in major markets worldwide.
These rates vary significantly based on your property's location, quality, and the current season. Urban destinations and tourist hotspots command higher prices, while rural areas typically see lower nightly rates around $100-$150.
Properties with unique features, professional photography, and excellent reviews can charge 20-30% above market average. During peak seasons or special events in your area, you can increase rates by 40-100% while maintaining high occupancy.
Dynamic pricing tools help optimize your rates daily based on local demand, competition, and events. This pricing strategy typically increases annual revenue by 10-20% compared to static pricing.
Remember that your nightly rate directly impacts occupancy—pricing too high reduces bookings, while underpricing leaves money on the table.
What percentage of nights are short-term rentals typically booked?
Short-term rentals achieve average occupancy rates between 46% and 70%, with professionally managed properties consistently hitting the higher end.
Your property type significantly impacts occupancy—entire homes average 65%, while private rooms hover around 50%. Studio apartments and one-bedroom units in urban areas often exceed 70% occupancy year-round.
Peak season occupancy can reach 90% for well-managed properties in desirable locations. Winter months typically drop to 40-50% occupancy unless you're in a ski resort or warm-weather destination.
Properties listed on multiple platforms see 15-25% higher occupancy than single-platform listings. You'll find detailed market insights in our short-term rental business plan, updated every quarter.
Top-performing properties maintain 70%+ occupancy through professional management, instant booking features, flexible cancellation policies, and maintaining superhost status.
How much money does a typical short-term rental make monthly?
A typical short-term rental generates between $4,000 and $7,500 in gross monthly revenue under current market conditions.
This revenue calculation assumes average nightly rates of $160-$350 combined with occupancy rates of 46-70%. Properties in premium locations or with exceptional amenities can exceed $10,000 monthly, especially in cities like Miami, San Diego, or Nashville.
Seasonal variations cause significant revenue fluctuations—summer months and holidays can double your typical monthly income. A property earning $4,000 in January might generate $8,000 in July during peak tourist season.
Your actual revenue depends on several controllable factors: pricing strategy, listing quality, guest communication speed, and property amenities. Properties with hot tubs, pools, or unique experiences consistently earn 30-50% above market average.
Most profitable short-term rentals earn 2-5 times more than comparable long-term rental properties in the same area.
What makes occupancy rates go up or down in short-term rentals?
Several key factors directly impact your short-term rental's occupancy rate, determining whether you hit 40% or 90% bookings.
Location remains the strongest predictor—urban centers and tourist destinations maintain 65-70% occupancy, while oversaturated or rural markets struggle to reach 40%. Properties within walking distance of attractions, business districts, or beaches see 20-30% higher occupancy.
- Property presentation and reviews: Professional photos increase bookings by 40%, while properties with 4.8+ star ratings and 10+ reviews achieve 15-25% higher occupancy than new listings
- Pricing strategy: Dynamic pricing that adjusts for demand, events, and seasonality maintains steady occupancy while maximizing revenue—static prices lose 20-30% potential bookings
- Instant booking and flexible cancellation: Properties with instant booking enabled see 25% more reservations, while flexible cancellation policies increase bookings by 15-20%
- Response time and communication: Hosts responding within one hour get 50% more bookings than those taking 24 hours to reply
- Seasonality and local events: Major festivals, conferences, or sporting events can triple normal occupancy rates for 1-2 weeks
- Local regulations and restrictions: Cities with strict short-term rental laws see 30-40% reduced availability and occupancy
- Amenities and unique features: Properties with pools, hot tubs, workspace setups, or pet-friendly policies maintain 10-20% higher year-round occupancy
What does it cost to operate a short-term rental each month?
Operating expenses for short-term rentals average 30-50% of gross revenue, typically $1,500-$3,500 monthly for mid-market properties.
These costs vary based on your property size, turnover frequency, and local market rates. High-turnover properties with daily bookings face significantly higher cleaning and supply costs than those with weekly or monthly stays.
| Expense Category | Monthly Cost Range | Details & Frequency |
|---|---|---|
| Cleaning Services | $200-$350 per bedroom | $30-75 per turnover, varies by property size and local rates |
| Utilities | $250-$300 | Electricity, water, gas, internet—20-30% higher than residential use |
| Supplies & Amenities | $50-$150 | Toiletries, coffee, linens replacement, welcome items |
| Property Insurance | $100-$150 | Short-term rental specific coverage, 25% more than homeowner's |
| Maintenance & Repairs | $100-$150 | Preventive maintenance, minor repairs, emergency fixes |
| Pest Control & Landscaping | $40-$80 | Monthly service for pest prevention, lawn care if applicable |
| Software & Tools | $100-$150 | Channel manager, pricing tools, guest communication platforms |
How much do Airbnb and Booking.com charge hosts?
Platform fees significantly impact your short-term rental profitability, with Airbnb charging hosts 3-15% and Booking.com taking 10-25% commission.
Airbnb's fee structure varies based on your chosen model—most hosts pay 3% while guests pay around 14%, but you can opt for host-only fees of 15-16%. Booking.com operates differently, charging hosts the full commission of 15% on average, though this can reach 25% for properties wanting preferential placement.
These platforms justify their fees through massive marketing reach, secure payment processing, and customer service handling. Your total platform costs typically range from 15-20% of booking revenue when factoring in all fees.
VRBO charges similar rates to Airbnb, while niche platforms like Glamping Hub or Plum Guide can charge 15-30% for specialized markets. This is one of the strategies explained in our short-term rental business plan.
Many successful hosts reduce platform dependence by building direct booking websites, saving 10-15% in fees while maintaining 30-40% of bookings through their own channels.
What do property management companies charge for short-term rentals?
Property management companies charge between 15% and 40% of your rental income for full-service short-term rental management.
Urban markets typically see fees of 20-25%, while luxury properties or rural locations can reach 35-40% due to specialized service requirements. These fees cover guest communication, check-ins, cleaning coordination, maintenance, pricing optimization, and listing management across all platforms.
Some companies offer tiered services—booking-only management runs 10-15%, while full-service packages including everything from professional photography to revenue management cost 25-35%. Additional one-time setup fees of $500-$2,000 cover initial property preparation and listing creation.
Management companies often charge extra for deep cleans ($200-$500), linen rental programs ($50-$100/month), or emergency callouts ($75-$150). Despite high fees, professional managers typically achieve 15-25% higher revenue through superior pricing, occupancy optimization, and guest satisfaction.
Evaluate managers based on their average occupancy rates, response times, and net owner income rather than fee percentage alone.
How much profit remains after subtracting all expenses?
Net operating income for short-term rentals averages 50-60% of gross revenue for self-managed properties, dropping to around 40% with professional management.
After accounting for all operating expenses, platform fees, and management costs, your actual take-home profit typically ranges from 25-45% of gross revenue. This means a property generating $6,000 monthly might net $1,500-$2,700 in actual profit after all expenses.
| Management Type | Expense Breakdown | Net Profit Range |
|---|---|---|
| Self-Managed | Operating: 30-35%, Platform fees: 15-20% | 45-55% of gross revenue remains as profit |
| Professional Management | Operating: 30-35%, Platform: 15%, Management: 20-30% | 20-35% of gross revenue remains as profit |
| Hybrid Approach | Operating: 30-35%, Platform: 15%, Partial management: 10-15% | 35-45% of gross revenue remains as profit |
| Direct Booking Focus | Operating: 30-35%, Reduced platform: 5-10%, Marketing: 5% | 50-60% of gross revenue remains as profit |
| Premium Properties | Higher operating: 40-45%, Platform: 15%, Premium services: 10% | 35-45% despite higher costs due to premium rates |
| Budget Properties | Lower operating: 25-30%, Platform: 15-20% | 50-60% but lower absolute dollar amounts |
| Seasonal Markets | Variable operating: 20-50%, Platform: 15-20% | 30-65% depending on season, averaging 35-45% annually |
What percentage of revenue becomes actual profit?
Short-term rentals typically convert 25-45% of gross revenue into actual profit after accounting for all costs and expenses.
This profit margin varies significantly based on your operational efficiency, local market conditions, and management approach. Properties in high-demand markets with premium pricing can achieve 40-45% margins, while competitive markets with high operating costs might only yield 25-30%.
Your mortgage or property financing isn't included in these calculations—these margins reflect pure operational profit before debt service. Properties purchased with cash or low mortgage rates obviously retain more of this profit, while highly leveraged properties might see most operational profit consumed by loan payments.
Successful operators focus on both revenue maximization and expense optimization to hit 35-45% margins consistently. We cover this exact topic in the short-term rental business plan.
The most profitable short-term rentals maintain margins above 40% through direct bookings, efficient operations, and premium positioning in their markets.
How do profits compare between self-managed and professionally managed rentals?
Self-managed short-term rentals typically earn 5-15 percentage points higher profit margins than professionally managed properties.
When you self-manage, you keep the 20-30% that would go to management fees, boosting net margins from 25-30% up to 35-45%. However, this assumes you can match professional occupancy rates and pricing optimization—many amateur hosts actually earn less total profit despite keeping more percentage-wise.
Professional managers often achieve 15-25% higher gross revenue through dynamic pricing, multi-platform listings, and 24/7 guest support. A self-managed property earning $4,000 monthly at 45% margin ($1,800 profit) might generate $5,000 under professional management at 30% margin ($1,500 profit)—less percentage but similar dollars.
The sweet spot for many owners involves hybrid management—handling pricing and bookings yourself while outsourcing cleaning and maintenance. This approach maintains 35-40% margins while reducing time commitment by 70%.
Your local market and personal availability should drive this decision—remote owners or those with multiple properties almost always benefit from professional management despite lower margins.
How much do revenues and occupancy change between seasons?
Seasonal fluctuations cause short-term rental revenues to swing 40-100% between peak and off-seasons, with occupancy rates varying by 20-40 percentage points.
Peak season typically brings 70-90% occupancy compared to 40-50% in slower months. Your revenue might jump from $3,000 in January to $6,000 in July, especially in vacation destinations dependent on weather or school schedules.
- Summer destinations (beach, lake properties): June-August revenues double winter months, with 80-90% peak occupancy dropping to 30-40% off-season
- Winter destinations (ski resorts, warm climates): December-March sees 75-85% occupancy while summer drops to 45-55%, though year-round amenities help stabilize
- Urban markets: More stable with 60-70% year-round occupancy, seeing 10-20% seasonal variation mainly from business travel patterns
- Event-driven markets: Massive spikes during festivals, conferences, or sporting events—properties can charge 3-5x normal rates during major events
- Shoulder seasons: Spring and fall typically hit 50-60% occupancy, offering opportunities for longer stays at slightly reduced rates
What revenue benchmarks exist for short-term rentals in different markets?
Revenue benchmarks for short-term rentals vary dramatically by market, with top-tier cities generating $8,000-$12,000 monthly while rural areas average $2,000-$4,000.
Major metropolitan markets like San Francisco, New York, and Miami see average revenues of $7,500-$10,000 for entire properties, with luxury units exceeding $15,000 monthly. Mid-tier cities such as Austin, Denver, or Portland typically generate $5,000-$7,500, maintaining 60-65% average occupancy.
| Market Type | Monthly Revenue Range | Typical Metrics |
|---|---|---|
| Tier 1 Cities | $8,000-$12,000 | $250-400/night, 65-75% occupancy, heavy business travel |
| Beach/Resort Towns | $6,000-$10,000 | $200-350/night, 55-85% occupancy (highly seasonal) |
| Mountain/Ski Areas | $5,000-$9,000 | $175-300/night, 50-80% occupancy (winter-dependent) |
| Mid-Size Cities | $4,000-$6,000 | $150-250/night, 60-65% occupancy, stable year-round |
| College Towns | $3,500-$5,500 | $125-200/night, 55-70% occupancy, event-driven spikes |
| Suburban Markets | $3,000-$4,500 | $100-175/night, 50-60% occupancy, longer average stays |
| Rural/Small Towns | $2,000-$3,500 | $75-150/night, 40-55% occupancy, weekend-focused |
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.
Understanding these financial metrics helps you build a profitable short-term rental business from day one.
Success in this industry requires balancing revenue optimization with expense control while maintaining excellent guest experiences that drive positive reviews and repeat bookings.
Sources
- iGMS Short-Term Rental Market Analysis
- DoorLoop Real Estate Statistics
- Lofty.ai Profitability Breakdown
- Mashvisor Airbnb Occupancy Rate
- Guesty Average Occupancy Rates
- AirDNA Occupancy Rate Analysis
- Global Property Guide Rental Costs
- iGMS Airbnb Cost Analysis
- AirDNA Property Manager Fees
- 8Figures Rental Strategy Comparison
