Having a full calendar doesn't necessarily mean a tourist property is profitable. Commissions from platforms, cleaning, utilities, maintenance, taxes, and repairs can significantly reduce profits.
To know how much a tourist property truly earns, you can’t just look at the money that comes into the account: you need to calculate all income and all costs associated with the accommodation.
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A tourist property is profitable when the income covers all its expenses and generates sufficient profit in relation to the investment made.
To calculate this correctly, you must at least track income from bookings, commissions, cleaning, utilities, maintenance, insurance, taxes, financing, and periods without occupancy.
The correct question is not how much you bill, but how much money you have left after paying everything.
Many owners check the billing from Airbnb or Booking and think that figure represents the performance of their accommodation. However, billing is just the starting point.
You might receive 3,000 euros in bookings in a month and feel like the business is doing very well. But then there are commissions, cleaning, electricity, water, heating, repairs, insurance, mortgage, and taxes.
A property can have many bookings and still offer very low profitability.
The profitability of a tourist property measures the relationship between the profit generated by the accommodation and the money invested to purchase, prepare, and maintain it.
To correctly assess the outcome, we must differentiate four concepts.
This is the total amount obtained from bookings before deducting expenses.
This is the money left after subtracting all costs related to the activity.
This compares the profit earned with the investment made in the property.
This reflects the money that actually comes in and goes out of the account over a specific period.
Example: two properties may bill 40,000 euros a year, but not be equally profitable. If one incurs 15,000 euros in expenses and the other 28,000 euros, their results are completely different.
The first calculation consists of subtracting all operating expenses from the income obtained.
Profit = total income - total expenses
The result should be calculated monthly and also annually to avoid misleading conclusions due to seasonality.
In a tourist property, income often varies greatly between high season and low season. Therefore, analyzing only one month with good occupancy does not allow for understanding the true situation of the business.
To know the total billing, you must record all amounts related to the operation of the accommodation, regardless of the channel through which they were collected.
It is advisable to record income by date, property, platform, and reservation. This way, you can verify which channel generates the most revenue and which one leaves the highest profit after commissions.
The most common mistake is to consider only the most visible expenses, such as cleaning or electricity. Vacation rentals incur many other costs that should also be included.
Platforms may charge commissions to the owner, the guest, or both, depending on the contracting model. These amounts directly reduce the net income of each reservation.
To compare channels, you should not analyze just the selling price. You need to check how much money is actually left after deducting the respective commission.
Cleaning is one of the most significant costs of the operation. You should include cleaning service, laundry, products used, and the time spent if the owner performs the task themselves.
Electricity, water, gas, heating, air conditioning, internet, and other supplies can vary significantly based on occupancy, time of year, and guest behavior.
Appliances, furniture, pools, gardens, climate control, and equipment experience more wear and tear than those in private residences. Although some expenses may not occur every month, they should be considered in the annual analysis.
Insurance, fees, licenses, management services, management tools, and any other costs necessary to maintain the operation should also be included.
When a mortgage exists, it is advisable to distinguish between the monthly cash outflow and the financial cost. Taxes should also be correctly analyzed according to the owner's situation and applicable regulations.
Important: not all expenses have the same tax treatment. It is one thing to calculate the economic benefit of the accommodation and another to determine which amounts might be tax-deductible.
Once the annual profit is calculated, you can compare it to the total investment made in the property.
Return = annual profit ÷ total investment × 100
The total investment does not have to be limited to the purchase price. It can also include taxes, acquisition costs, renovations, furniture, equipment, and other expenses necessary to start the activity.
Following the previous example, if the total investment had been 250,000 euros:
17,500 € ÷ 250,000 € × 100 = 7 %
The annual return before financing and taxes would be 7 %.
To understand the operation of a tourist property, it is not enough to know the final result. It is also advisable to analyze the indicators that explain how it was generated.
Percentage of available nights that have been booked during the period.
Average daily rate obtained from sold nights.
Revenue obtained for each available night, whether booked or not.
Average cost associated with each stay, including commissions, cleaning, and other expenses.
These indicators allow detecting problems that are not evident by only looking at the revenue. For example, high occupancy with a very low rate can generate more work without improving profit.
High occupancy is usually seen as a positive sign, but it does not guarantee a good financial outcome.
More bookings do not always mean more profit. The key is to know which bookings, prices, channels, and periods actually generate a positive outcome.
The amount received from bookings is not profit. All activity expenses must be deducted first.
Cleaning products, replacements, travel, small repairs, and occasional purchases may seem irrelevant in isolation, but their annual total can be significant.
Analyzing only the high season may present an overly optimistic picture. Profitability should be calculated considering the entire year.
When managing multiple accommodations, it's advisable to allocate each income and expense to its corresponding property. Otherwise, a profitable property may be hiding the losses of another.
Even if the owner doesn't pay themselves a salary, managing bookings, incidents, messages, and suppliers requires time. This effort must be considered when evaluating whether the return is worth it.
Waiting until the end of the fiscal year to gather invoices and calculate the result prevents timely problem detection.
Control must be performed continuously.
The sooner you detect a deviation, the easier it will be to correct it. It may be necessary to review rates, reduce certain expenses, modify the minimum stay, or analyze which platforms generate the best results.
Gatavia App helps you track income, expenses, bookings, documents, taxation, and profitability so you can know if your accommodation is truly making money.
Calculate the profitability of my propertyYou must add all generated income and subtract all expenses related to the activity. Then you can compare the annual profit with the total investment made in the property.
Not necessarily. High occupancy with low prices, high commissions, or excessive costs can generate a lot of activity and little profit.
You should include commissions, cleaning, laundry, supplies, maintenance, repairs, insurance, fees, professional services, management tools, financing, and any other costs related to the property.
It is advisable to use both periods. Monthly tracking allows you to detect deviations, and annual calculation provides a more comprehensive view of seasonality and business results.
Revenue is the total income earned. Profit is the amount remaining after subtracting all expenses.
Yes. It is advisable to assign each booking, income, and expense to its property to see which properties are more profitable and which need adjustments.
A vacation rental should not be evaluated by the number of bookings or the money that goes into the account. The truly important figure is the profit that remains after all costs are accounted for.
Continuously monitoring the numbers allows you to identify problems, adjust prices, and make decisions based on real data, not feelings.
