Leveraging Airbnb Profit Through Data

Airbnb profit seems straightforward, but knowing all the leverage you can get out of your data is important. Several years ago, we helped an Airbnb property manager find useful data in his business that he could leverage for potentially more profitability. This property manager had pared down his locations due to the pandemic (Covid-19), leaving only three. Therefore, we were able to take all of this Airbnb data, and other financial data, and his spreadsheets, and make a major redesign.

We built some regular data statistics, such as occupancy rates, and, with the reservations, we could build a fairly robust forecast of future profitability. However, there were two things we could show him from a leverage standpoint that were critical to his future profitability, being even better. 

The first thing we did was break his expenses into fixed and variable buckets for analysis. For example, he paid rent on the properties he managed. Think of this also, for Airbnb managers out there that own their own properties – you have to pay a mortgage. The mortgage amount is pretty set; only taxes, which can go up or down, and insurance, which can inevitably go up, are affected. 

Since he paid rent, I considered it a fixed expense. In a mortgage, you may likely consider the base mortgage to be fixed, but insurance and property taxes could be variable. Those are usually fairly easy to break out. Do you see where I am going here? Knowing your fixed expenses lets you determine your break-even point each month. How many days of the month does it take you to recoup your fixed costs? For his locations, it took about 10-15 days to cover the fixed expenses for each location.

Then, as a natural extension of this analysis, I noticed that there is a fixed cleaning fee after every stay. At this time, that was $120. So, if a person stayed one night, a cleaning fee was charged after that night; if a person stayed 3 nights, 5 nights, or 10 nights, the same per-stay cleaning fee applied. So what does that mean?

Well, if you are charging $130 a night for the stay, and your cleaning fee is $120, that is only a $10 profit margin. However, if a person stays two nights, the revenue is $260, the cleaning fee is still $120, and you have a margin of $140. See how much better that is? Plus, it getts better and better the longer the stay!

Ultimately, I asked him if there was any way that he could incentivize people to stay longer. If he could keep one-night stays to a minimum, that would help with his per stay fixed expenses.

Can you see how break-even analysis and fixed and variable expenses can assist you in profitability analysis? Do you need help building data models for your Airbnb properties? Book time with us to discuss! CLICK HERE to see our account manager profiles.