Vacation rental hosts and short-term rental management businesses should make monitoring vacation rental key performance indicators (KPIs) a habit. The good news is that it does not have to be a daily occurrence, such as guest communication.
This advice is based on the real-world experiences of property management professionals who were kind enough to share their best recommendations. Let’s take a look at the indicators you should track to guarantee you’re on track to meet your strategic objectives.
What Are Metrics for Vacation Rentals?
Vacation rental metrics (or key performance indicators) enable you to monitor the progress of critical procedures for hosts and short-term rental management. From occupancy rate to net revenue, various vacation rental key performance indicators (KPIs) will indicate if your rental firm is still on pace to fulfill its objectives.
How Can Measuring Key Performance Indicators Help You Manage Your Property Better?
Monitoring important property management KPIs may assist you in sustaining company efficiency and growth. Because they provide quantifiable proof, they ensure that hosts’ and property managers’ judgments are not affected by their own emotions. In brief, monitoring KPIs enables you to identify development areas, making achieving your goals easier.
Which Key Performance Indicators Should Every Property Manager Monitor?
1. Rate of Occupancy
Divide the number of booked nights by the number of available nights and multiply by 100 to get your occupancy rate.
You should compare your occupancy rate to the area’s average. This will provide you with a decent indication of your performance and if your price is reasonable. It may indicate that your rates are too low if they exceed the regional average.
If you manage many properties in various locations, it’s important to keep in mind that monitoring occupancy rates might be tricky in certain areas, as Thibault Masson, Managing Director of SaintBarth.com, explains below:
“We look at occupancy rates over ten months, not a twelve-month one.” September and October are hurricane seasons, so we consider the villas closed during that period. These are the months when we, the owners, come in and do maintenance.”
RevPar is an abbreviation for revenue per available room. This statistic is critical for any host since it provides a complete view of your financial performance.
Divide your gross rental earnings by the total possible rentals for your evaluation period. Another way to get the average daily fee is by multiplying it by the occupancy rate.
While monitoring your occupancy rate is critical, RevPar may provide a more thorough picture of your profitability:
“The most critical key performance indicator for Lifty Life is Revenue Per Available Room” (RevPar). RevPar is a straightforward formula that combines the Average Daily Rate (ADR) with occupancy. RevPar provides a full picture than each statistic alone does and is a more useful KPI in general. We utilize it to assess our performance against rivals and compare our assets’ performance.”
Connor Griffiths, president and chief executive officer of Lifty Life Vacation Rentals
3. Typical Duration of Stay
This measure indicates the average number of nights a visitor has booked. Divide the total number of booked nights for the month by the total number of reservations to arrive at this figure.
The average duration of stay is critical to monitor since excessively brief visits might raise your operational expenses, thus making your endeavor less successful.
“There are several metrics to monitor. While occupancy rate is critical since it influences cash flow, it is equally critical to measure the average duration of stay. This may affect your net operating income since shorter stays need more frequent cleanings. Ascertain that you include all operational expenditures when calculating your net profits.”
Deidre Woollard is the Editor-in-Chief of Millionacres.com.
4. Daily Rate on an Average
This measure provides information on the average daily rate for each property. While it might give an accurate estimate of your profits potential, it is critical to keep in mind that it does not include your running expenses.
Divide the entire money your bookings generate for a particular property by the total number of nights booked to arrive at this figure.
When using a dynamic pricing mechanism, Thibault Masson, Managing Director of SaintBarth.com, emphasizes that calculating your average daily fee becomes even more critical:
“We monitor our Average Daily Rate to see how our revenues are changing, much more now that we use a dynamic pricing mechanism. Nonetheless, we compute our Average Weekly Rates for business reasons. Companies that operate luxury vacation rentals continue to bill customers based on a seven-day stay. Additionally, we utilize AWR to bargain with our villa distribution partners and some of our visitors.”
5. Earnings from operations
Your net operating income is the amount earned by your property after deducting operational expenditures such as cleaning fees, insurance, etc.
To determine it, multiply your total revenue by your operational expenditures.
“By monitoring your net operating income, you may have a more precise picture of your costs. It may be time to review your expenditures if there is a considerable disparity between your total revenue and net operating income.”
Tatiana Karadjova, BnbCare’s Operations Manager
6. Revenue generated by each property
Hosts and property managers who are responsible for many properties must understand the revenue generated by each. By calculating the income generated by each property, you may determine which properties are the most cost-effective.
Divide your gross rental earnings by the total number of available properties for your evaluation period.
7. Revenue from Vacation Rentals as a Whole
Your total income is the sum of all bookings made within a specific time. This information may assist you in determining the possible profit you can earn in the future. Calculate it by adding up all visitors’ charges (nightly rates, cleaning fees, taxes, etc.).
8. Satisfaction of the Guests
While there are no algorithms for calculating visitor happiness, it is critical for hosts to monitor their rating on Airbnb, Booking.com, and VRBO, among others, and to solicit as many reviews as possible by offering an exceptional guest experience and requesting evaluations from guests.
9. Conversion rate of inquiries to bookings
While receiving inquiries is beneficial, they are ineffective if you do not acquire any reservations. If your inquiry-to-booking conversion rate is poor, it might mean that you are taking too long to answer or that your property does not live up to guest expectations.
To get your inquiry-to-booking conversion rate, multiply the number of unique inquiries received by the total number of bookings for that property.
Which Tools Should You Use to Monitor Your Property Management KPIs?
You can keep track of all your Airbnb data by creating a separate KPI spreadsheet with several tabs for each measure. Spreadsheets are straightforward to use and may be shared among team members.
However, it may become less understandable if you want to add a large amount of data. Additionally, since everything must be entered manually, it needs work and time to keep it current with the newest measurements.
2. Vacation Rental Management System
However, utilizing vacation rental software with powerful reporting capabilities may transform your experience as a host or property management. For instance, vacation rental software such as Lodgable provides real-time access to the most critical data and insight into your company’s success.
Although, with readily available data, you may save significant time on decision-making and modify your strategy more quickly.