Pricing a vacation rental isn't just about looking at how much the neighboring accommodation charges, copying the rate recommended by a platform, or applying a discount to fill the calendar.
Before deciding how much to charge per night, you need to know one essential figure: the minimum profitable price of your accommodation. This is the rate below which a booking may generate work, occupancy, and income, but not enough profit.
Quick Reading Gatavia
The minimum nightly price must cover the variable costs of the booking, a proportional part of the fixed expenses, and the profit margin you expect to obtain.
To calculate it, you need to know the commissions, cleaning, laundry, supplies, maintenance, insurance, taxes, financing, and the actual number of nights you can sell.
If you don't know your minimum profitable price, you may be losing money on each booking without realizing it.
When there are open dates, it is common to lower the rate to secure bookings. At first glance, any income may seem better than leaving the property empty.
However, every stay generates costs: platform commission, cleaning, laundry, supplies, welcome products, wear and tear, management, and potential incidents.
A booking can increase occupancy while simultaneously reducing the profit of the accommodation.
The minimum profitable price is the minimum amount you must obtain for a night or a stay to cover the costs of the accommodation and achieve the margin you have established.
It should not be confused with the lowest price you are willing to advertise. It is a figure calculated with real data.
Minimum Profitable Price = stay costs + portion of fixed expenses + desired profit
The published rate should be higher if commissions or promotions still need to be deducted.
Competitors can help you understand the market, but they do not know your costs.
Two properties located on the same street may require very different minimum prices.
One may have a mortgage while the other is fully paid off.
The cost depends on the size, capacity, and provider used.
Pool, garden, air conditioning, or jacuzzi increase expenses and maintenance.
Commissions and discounts can vary depending on the platform.
Your neighbor's price indicates how much they are attempting to charge. It does not demonstrate how much they earn or if their accommodation is truly profitable.
Variable costs are those that appear or increase when a guest checks in.
They typically include:
Before paying commissions and covering fixed costs, that reservation already needs to generate at least 190 euros.
Fixed costs exist even if you have no reservations.
Among them you may find:
Important: to analyze cash flow, you must take into account the full financing fee. To analyze the economic and tax result, it is advisable to differentiate between interest, capital repayment, and tax treatment.
One of the most common mistakes is to divide annual costs by 365 nights.
A tourist property does not usually sell every day of the year. There can be low season, blocked days, maintenance, owner use, or demand limitations.
Fixed cost per night sold = annual fixed costs ÷ expected nights sold
Imagine a property with 12,000 euros in annual fixed costs and a reasonable forecast of 180 nights sold.
€12,000 ÷ 180 nights = €66.67 per night
Each sold night should contribute approximately €66.67 to cover the proportional part of fixed expenses.
If you ultimately only sell 120 nights, each night would have to bear a larger share of the fixed expenses. This is why the projected occupancy must be realistic.
Repairs do not occur every month, but they eventually emerge.
Appliances, air conditioning, furniture, pool, garden, and equipment suffer wear and tear. If you do not set aside a portion of the income for these situations, a significant repair can wipe out the profit of several months.
Covering all expenses does not mean the property is a good investment. If the final result is zero, you have worked to keep the activity without obtaining a return.
The price must include a margin that compensates for:
The break-even price covers the costs. The profitable price covers the costs and leaves a profit.
Cleaning and laundry costs occur per stay, not necessarily per night. Thus, the minimum price also depends on the duration of the reservation.
Let's imagine the following data:
€125 + 2 × (€18 + €67 + €10 + €35) = €385
Minimum price for the stay before commissions: €385.
The average minimum price would be €192.50 per night.
125 € + 5 × (18 € + 67 € + 10 € + 35 €) = 775 €
Minimum price of the stay before commissions: 775 euros.
The average minimum price would be 155 euros per night.
A long reservation needs a lower average price per night because the cleaning cost is spread over more days.
If a platform deducts a commission, it’s not enough to simply add that percentage to the minimum price.
To find out the price you should publish, you can use this formula:
Published Price = Required Net Income ÷ (1 − Commission Percentage)
If you need to receive 775 euros net:
775 € ÷ 0.85 = 911.76 €
You should publish the stay for approximately 912 euros to receive 775 euros after the commission.
You should also check for any discounts, promotions, or programs that further reduce the amount received.
A pricing strategy needs more than one figure.
Rate below which you should not sell under normal conditions.
Rate adjusted to demand, competition, season, and features.
Highest amount that the market will likely accept during that period.
The minimum price is calculated from your costs. The recommended and maximum prices also depend on the market.
The minimum stay can protect the margin when turnover costs are high.
A property with 120 euros in cleaning costs may struggle to turn a profit on one-night bookings, even at a high rate.
This doesn't mean that you should always require long stays. The condition should adapt to demand and the actual cost of each guest change.
Under certain circumstances, a lower margin may be acceptable, but it should be a conscious decision.
For example:
Lowering the margin is not the same as selling below cost. Before applying a discount, you need to know what minimum amount you need to receive.
Other accommodations do not have your expenses, financing, or profitability objectives.
A platform can help you estimate demand, but it does not necessarily know all your costs.
The advertised price does not always match the amount the owner ultimately receives.
You should use a realistic estimate of nights sold, not the total theoretical availability.
Electricity, cleaning, insurance, and other costs can rise. Your minimum price should also be reviewed.
A fully booked property at insufficient prices can generate less profit than a property with lower occupancy but a better average rate.
If you manage multiple accommodations, you should not apply the same minimum price to all.
Each property can have:
Gatavia App helps you control income, expenses, bookings, and profitability so that you can set prices based on real data and know how much profit each accommodation generates.
Calculate the profitability of my propertyYou should add the variable costs of the stay, the proportional share of fixed expenses, a provision for maintenance, and the profit you wish to obtain. Then you must adjust the rate to cover commissions and discounts.
You can use it as market reference but not as a minimum price. Each property has different expenses, financing, occupancy, and objectives.
Yes. The cleaning and laundry costs are distributed over more nights when the stay is long, which can reduce the average minimum price per night.
Divide the net income you need by one minus the commission percentage. This will give you the price you need to publish to receive the desired amount.
The best combination is the one that generates the highest profit. High occupancy with excessively low prices can be less profitable.
Yes. The minimum price depends on costs, capacity, financing, consumption, expected occupancy, and the characteristics of each accommodation.
The market helps decide how much you can charge, but your numbers determine how much you need to charge.
Knowing the minimum profitable price allows you to apply discounts wisely, protect profits, and avoid bookings that fill the calendar but empty the profitability.
