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THE RESERVATION RECESSION
CHAPTER 2
17 Vacation Rental KPIs You Should Measure
Track these metrics to better understand your business
The current economic situation is challenging but there is some good news on the horizon. Bill Adams, Chief Economist at Comerica Bank, said how “this period looks more like a slump than an outright recession” at the moment.
On one hand, this puts additional pressure on vacation rental and short-term rental operators because it forces them to prioritize efficiency. This isn’t an easy task. On the other hand, there’s still time to act and strategically work on increasing bookings and profitability. It all starts with measuring the right key performance indicators (KPIs).
If you’re looking for an actionable guide about vacation rental KPIs you should keep an eye on, you came to the right place.
- Discover how measuring KPIs leads to more profitability and sustainable growth
- Understand what metrics to focus on for your short-term rental
- Learn how to map key performance indicators that matter
Read other chapters in The Reservation Recession.
17 vacation rental KPIs and how to calculate them
As we mentioned above, this article will take you through the most important KPIs for your vacation rental or short-term rental business (e.g. Airbnb). Not only that, but it’ll help you understand these metrics, offer simple calculations, and suggest how to improve performance in some areas.
We grouped the KPIs into five different categories to provide more clarity and ensure you have a nice overview of all metrics.
1. Operational efficiency
- Staff to unit ratio
- Cost per unit
2. Guest experience
- Number of guest messages and calls
- Number of add-on services upsold per guest
- Number of complaints
- Guest surveys
- Review ratings
- Repeated bookings
3. Marketing and outreach
- Direct bookings
- Occupancy rate
- Social media engagement
4. Revenue and profitability
- Average Length of Stay (ALOS)
- Average Daily Rate (ADR)
- Revenue Per Room (RevPAR)
- Net Operating Income (NOI)
5. Portfolio growth
- Property Acquisition Cost (PAC)
- Homeowner churn rate
Operational efficiency
1. Staff to unit ratio
What is it: Staff to unit ratio is the average number of full-time employees allocated to the total number of your units.
Why this KPI matters: You may have too many full-time employees in charge of your units. This means that you’re wasting or underutilizing your resources.
Pro tip: Sometimes a part-time engagement would make more sense business-wise, or you could provide your staff with other tasks. Payroll expenses can be reduced by investing in technology that automates procedures since fewer administrative tasks get allocated to employees.
2. Cost per unit
What is it: Cost per unit is the sum of total fixed and variable costs divided by the number of your units. Think cleaning and maintenance fees, mandatory supplies for guests such as paper towels, shower gels, soap, etc.
Why this KPI matters: You need to set a baseline for what’s acceptable in terms of cleaning times, track consumables (e.g. how much toilet paper is used per turnover), and see if there are some recurring issues tied to certain units. When you identify that the problem exists, you are already halfway through solving it.
Pro tip: If some units require more maintenance compared to others, maybe it’s time to assess whether a renovation is needed. The capital expense might seem painful in the moment but it will save your short-term rental or vacation rental money in the long run. Use tools to measure clean times to get a clearer picture of the averages.
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Guest experience
3. Number of guest messages and calls
What is it: Number of messages and calls from your guests per month.
Why this KPI matters: This KPI matters for several reasons. Firstly, you can do a more granular analysis and identify what are the most common questions your guests ask you. You can then use this information to create guides or other types of content, like FAQs, that will answer guest questions and so eliminate the need for your team to constantly reply to the same types of query.
Secondly, you can explore which channels have proven to be the most effective when it comes to engaging your guests. Knowing this can help you use tech solutions (e.g. chatbots) and offer automated replies so that your guests enjoy instant gratification and your staff doesn’t have to repeatedly answer the same questions over and over again.
Pro tip: Think about creating a seamless guest experience by ensuring your guests have everything they need upfront. Automate as much as you can so that they always feel like they are well taken care of.
4. Number of add-on services upsold per guest
What is it: Average number of add-on services upsold per guest. Add-on services can include room upgrades, booked events, extended stays, restaurant reservations, etc.
Why this KPI matters: Quantifying the number of upsells can inform your marketing and advertising practices. Is there a way you can better present those additional services? How can they complement the existing guest experience? Can you broaden the offer? Additionally, you shouldn’t just count the number of add-on services. Analyze the data to see the actual value and urge your finance team to see what percentage of total revenue upsells account for. You can use these insights to update your pricing strategy.
Pro tip: Upselling revolves around two key things: Relevance and timing. Think about how you can create tempting offers to enhance guest experience in three key phases: Pre-arrival, during the stay, and after they check-out.
5. Number of complaints
What is it: Average number of complaints per guest.
Why this KPI matters: Expressed guest complaints are the most direct feedback you can get for your vacation rental business or short-term rental. You can track the number of complaints over an extended period of time and treat this as an indicator of how well you solve issues and adapt to guest expectations.
Pro tip: Prioritize addressing complaints as soon as they are communicated to you. Make sure you track the type of complaints as well so that you can take appropriate action. For example, if you get repeated complaints about the level of hygiene or untimely service, you need to talk to your staff and get to the root cause of the problem.
6. Guest surveys
What is it: Surveys you can send to your guests in the middle of their stay or after their check-out.
Why this KPI matters: This might not be a KPI per se, but more like a way to collect qualitative data. Think of it as a method to get an NPS score for your vacation rental property (or a short-term rental).
Pro tip: Consider sending guest surveys automatically on the second or third day of their stay. This will increase the chances of them actually answering your questions while you have the opportunity to address potential “meh” experiences and improve their impression before they check out.
7. Review ratings
What is it: Review rating scores left by guests who stayed at your short-term rental.
Why this KPI matters: Word of mouth and an honest recommendation are still the most powerful factors that help guests make an informed decision about where they will stay. Think about it: when you yourself travel and look at different listings on booking.com or Airbnb, you check the reviews to ensure you’ll make the right call.
Pro tip: Manage your reputation online and stay on top of things by constantly monitoring reviews. Go beyond quantitative data, like average OTA ratings, and see what guests say about the check-in experience you provide, what are their thoughts about pricing, what was the total number of nights they stayed, etc. All of this can help you improve for the future.
8. Repeat bookings
What is it: New bookings made from the same guests who already stayed at your vacation rental property. You can calculate the average number per guest, or keep a tab on the sum of repeated bookings.
Why this KPI matters: Repeated bookings are equivalent to repeated customers. However, this KPI should be taken with a grain of salt. Not all guests are keen on visiting the same location repeatedly, especially if we’re talking about a more expensive destination. This doesn’t mean they didn’t enjoy their stay, of course. You can see it this way: repeated bookings are a strong indicator of guest satisfaction, but the absence of them is not an indicator of guest dissatisfaction.
Pro tip: You should reward the loyalty of your guests by providing discounts or special offers. To increase the chance of getting them to book again, send a tempting offer shortly after their check-out.
Operto Guest lets you create simplified and impactful guest journeys.
From a digital front desk, guides, and messages to easy upsells and personalized recommendations, it’s a guest app like no other.
Marketing and outreach
9. Direct bookings
What is it: The number of bookings made directly through your property website.
Why this KPI matters: This KPI signals the level of your brand awareness and how well your website is optimized for conversions. A lot of factors come into play when it comes to deciding to book a rental. Benchmarking should be done by your marketing team or a dedicated channel manager responsible for optimizing the booking experience on the website.
Pro tip: Introduce dynamic pricing to ensure a better booking conversion rate. Non-aggressive pop-ups, discount offers triggered by user behavior, and different ways to create urgency (e.g. by announcing a low number of available rooms) are all tactics you can use to increase direct bookings.
10. Occupancy rate
What is it: Occupancy rate is the ratio of rented units to the total amount of available units.
Why this KPI matters: This KPI is very important and useful, and you should analyze it from a critical standpoint. Firstly, it can inform your pricing strategy. For example, if you notice that vacation rentals of other property owners from the area don’t have as high an occupancy rate as you do, it can mean two things. One option is that your rental is very popular. The second one is that it is too cheap compared to the rest of the market.
However, to make the most of this KPI, you need to observe it in the context of revenue, as shared by Damian Sheridan from the Book Direct Show: “Profitability! Too many PMs fixate on occupancy levels. The ultimate goal must always be a healthy profit.”
Pro tip: If you want to do some benchmarking, the optimal occupancy rate for hotels is considered somewhere between 70% and 90%. The sweet spot for your short-term rental depends on your location, the type of guests you want to attract, the optimal number of days you’d like to accommodate your guests, etc.
11. Social media engagement
What is it: Social media engagement is measured by looking at a series of different metrics that indicate user engagement. Think likes, comments, shares, referral traffic, profile visits, etc.
Why this KPI matters: The visibility you get across social media combined with the way you communicate with your followers, can set the tone for guest experiences.
Pro tip: Use social media not only to promote your rental business but also to build a community around your brand. You should never let your social media activities turn into a one-sided conversation. Leverage the digital relationships and turn them into new bookings.
Revenue and profitability
12. Average length of stay (ALOS)
What is it: Average length of stay (ALOS) is also known as average number of nights. You calculate it by dividing the total number of nights booked by the total number of reservations.
Why this KPI matters: ALOS is the key metric for better managing your operational costs and knowing how to organize your staff. You will be able to effectively organize cleaning and maintenance work around your guests’ stays. In addition, by seeing the numbers you can come up with tactics on how to encourage your guests to stay longer. Longer stays mean lower administrative costs.
Pro tip: Design special offers to encourage guests to extend their stay or book more days in advance. Use surveys to collect data about the travel reasons and see how you can better accommodate them.
13. Average daily rate (ADR)
What is it: Average daily rate (ADR) is calculated by dividing one unit’s total revenue by the number of nights it was rented.
Why this KPI matters: By taking a closer look at the Average daily rate, you can see there are some upselling or cross-selling opportunities. Here’s what Wil Slickers from Hospitality.FM had to say about the best way to approach revenue management: “Stop looking at topline revenue and shift your focus to company and property profitability. That’s going to be the only thing that gets you through a recession. You’ll have the upper hand on your competition because they’ll just look at topline.”
Pro tip: We already mentioned dynamic pricing as a useful tactic to encourage more spending. Additionally, you can look at the Average daily rate (ADR) and try to map trends (e.g. do people on staycations spend more on room service, how do couples on honeymoons behave, etc.). Revenue management tools can help you organize these insights. Review them at least every quarter.
14. Revenue per available room (RevPAR)
What is it: Revenue per available room (RevPAR) is calculated by multiplying your average daily rate by your occupancy rate.
Why this KPI matters: Although it’s more popular in the hotel industry, RevPAR offers a more holistic view of your short-term rental performance.
Pro tip: Use this metric to see the bigger picture and assess the overall performance of your rental business. Then switch to a microscopic view to come up with fresh ideas on how to upsell services.
15. Net operating income (NOI)
What is it: Net operating income (NOI) is the revenue that a property earns once the operating expenses have been deducted.
Why this KPI matters: This is the key metric for calculating your vacation rental profitability and figuring out how to improve the efficiency of your business model.
Pro tip: This is one of the most important metrics that your finance team needs to track. Ensure all your teams work well cross-functionally. That’s how you will prevent a siloed organization and make smarter business decisions.
Portfolio growth
16. Property acquisition cost (PAC)
What is it: Property acquisition cost (PAC) refers to the total costs associated with acquiring new property for rental. This includes the cost of the property itself, but also attorney’s fee, credit report, taxes, appraisal fees, mortgage insurance, and more.
Why this KPI matters: You invest in expanding your property portfolio with the intention of earning profit in the long run. The numbers have to make sense so that you ensure good ROI.
Pro tip: Make sure you take into account all the upfront costs you’ll need to commit to before actually buying the property. Acquisition costs need to be inserted in your financial projections and carefully thought through.
17. Homeowner churn rate
What is it: Homeowner churn rate is a metric that tells you how many clients you’re retaining versus how many you’re losing. So the higher the churn rate, the more your retention rate suffers. You can easily calculate the homeowner churn rate by dividing the total number of your clients with lost ones and then multiplying by 100.
Why this KPI matters: Monitoring homeowner churn rate is the key to measuring the health of your short-term rental business. Having low turnovers helps you save time and money, and grow more steadily. That’s one key ingredient to scaling your property management business.
Pro tip: Don’t wait for homeowners’ dissatisfaction to grow. Just like you ensure amazing guest experiences, you should invest some time into checking in with how your homeowners feel.
What gets measured, gets managed
As you can see, there are many useful metrics you can use to inform your next business step. It can be challenging to organize all these insights in a way that’s actionable so make sure to start small. Figure out what makes the most sense for your short-term rental and what data would be the most valuable to you at the current phase of your growth. It’s surprisingly easy to get blinded by data instead of informed by it. To prevent that from happening, consider investing in tech solutions or consultants that can help you stay on top of things, automate tasks, measure things properly, and avoid making rookie mistakes.
One dashboard to rule them all
Operto Connect helps short-term rental businesses to increase efficiency by allowing them to centralize all their property management operations.