Why short-term rental income is not just rate times nights
A long-term rental has one revenue line and a rent roll you can read off a lease. A short-term rental has two revenue lines, three fee layers and an expense structure that depends on how often guests arrive rather than how many nights they stay. That last point is where most host spreadsheets go wrong.
Nightly revenue is straightforward: average daily rate multiplied by nights booked, and nights booked is 365 times occupancy. Cleaning revenue is not. You charge a cleaning fee once per stay, and you pay a cleaner once per turnover, so both scale with the number of bookings — nights ÷ average length of stay. Two listings can book the same 220 nights a year at the same $185 rate and produce very different net income if one averages seven-night stays and the other averages two.
The fee layers stack in a specific order. The booking platform withholds its host fee from what the guest pays. Your co-host or management company charges on what actually lands in your account, after that platform fee. Then the operating costs — utilities, internet, restocking, insurance, permits, property tax — come out regardless of whether anyone books. This calculator applies the fees in that order and reports net operating income before debt service, which is the figure that lets you compare the property to a long-term let or price it off a cap rate.
The formula, term by term
Occupancy is measured against all 365 nights, not against the nights you chose to make available. A calendar blocked for six weeks of personal use with 100% of the remaining nights booked is an 88% occupancy property, and quoting it as 100% will mislead you about revenue. If your platform dashboard reports occupancy on available nights, multiply by the share of the year you actually list.
Average daily rate is the nightly price a guest pays before cleaning and taxes, averaged across the year and weighted by nights. Do not average your published rates — average what you actually collected, because the nights you sell are disproportionately the discounted ones.
Average length of stay converts nights into stays. At 237 booked nights and a 3.2-night average, you host about 74 stays. It is worth measuring rather than guessing: a one-night minimum in a city market can halve your average stay and double your turnover count.
The cleaning pair is the fee you charge and the cost you pay. When the fee exceeds the cost, cleaning contributes; when the cost exceeds the fee, every stay starts in a hole that nightly revenue must fill. Include consumables — coffee, paper, soap, laundry — in the cost, because they are consumed per stay too.
Platform and management fees are both percentages, but of different bases. The host-side platform fee applies to nightly plus cleaning revenue. The management fee here applies to what remains, which is the convention most co-hosting agreements use. If your manager charges on gross bookings instead, raise the percentage slightly to match: 20% of gross is equivalent to 20.6% of a payout net of a 3% platform fee.
Break-even occupancy falls out of the same algebra. Every occupied night contributes (ADR + fee ÷ stay length) after fees, less the cleaning cost per night, and the fixed costs plus debt must be covered out of that contribution. Divide one by the other, then by 365, and you have the occupancy at which cash flow is exactly zero.
Worked example: a $185 listing at 65% occupancy
A two-bedroom condo rents at an average $185 a night, holds 65% occupancy across the year, and averages 3.2-night stays. You charge $90 per stay for cleaning and pay your cleaner $75 including consumables. The platform withholds 3%, a co-host takes 20% of your payout, monthly operating costs run $350, annual property tax, short-term-rental insurance and HOA total $5,200, and the mortgage is $1,800 a month.
- Nights booked. 365 × 0.65 = 237.25 nights.
- Nightly revenue. $185 × 237.25 = $43,891.25.
- Turnovers. 237.25 ÷ 3.2 = 74.14 stays.
- Cleaning revenue. $90 × 74.14 = $6,672.66.
- Gross revenue. 43,891.25 + 6,672.66 = $50,563.91.
- Platform fee. 3% × 50,563.91 = $1,516.92. Payout: $49,046.99.
- Management fee. 20% × 49,046.99 = $9,809.40.
- Cleaning cost. $75 × 74.14 = $5,560.55.
- Fixed operating. $350 × 12 + $5,200 = $9,400.
- Net operating income. 50,563.91 − 1,516.92 − 9,809.40 − 5,560.55 − 9,400 = $24,277.04.
- Annual cash flow. 24,277.04 − (1,800 × 12) = 24,277.04 − 21,600 = $2,677.04, or $223.09 a month.
- RevPAR. $185 × 0.65 = $120.25.
Break-even occupancy: each occupied night contributes ($185 + $90 ÷ 3.2) × 0.97 × 0.80 − $75 ÷ 3.2 = $213.125 × 0.776 − $23.4375 = $165.385 − $23.4375 = $141.95. Fixed costs plus debt are $9,400 + $21,600 = $31,000. So break-even occupancy is 31,000 ÷ (365 × 141.95) = 31,000 ÷ 51,811 = 59.83%. The property clears its costs with about five percentage points of occupancy to spare.
Reading the outputs like an operator
Gross revenue is the number people quote and the least useful one. It says nothing about whether the property earns anything, and it is inflated by cleaning fees that are largely passed straight through to a cleaner.
RevPAR is the comparison metric. Because it multiplies rate by occupancy, it exposes the trade every host makes: dropping the rate to fill the calendar raises occupancy and lowers ADR, and only RevPAR tells you which effect won. If a $20 price cut lifts occupancy from 60% to 68%, RevPAR moves from $111 to $112.20 on a $185 base — barely, and you have taken on eight percentage points more wear and more turnovers to get it. Note that RevPAR here excludes cleaning fees, following hotel convention; if you want the fully loaded figure, divide gross revenue by 365.
Net operating income is what the property earns as an asset, independent of how you financed it. It is the numerator of a cap rate and the figure to compare against what the same house would produce as a long-term rental. Do the comparison honestly: the long-term equivalent has no cleaning, far lower management, lower insurance and lower utilities, so a short-term gross that is double the long-term rent is often a much smaller advantage after costs.
Break-even occupancy is the risk measure. The gap between your expected occupancy and your break-even occupancy is your margin of safety, and it should be read in the context of how volatile the market is. A property that breaks even at 60% and expects 65% survives an ordinary year and not a bad one. A regulatory change, a new competitor building, or a soft travel season all move occupancy by more than five points.
The worked example at different occupancy levels
| Occupancy | RevPAR | Gross revenue | Net operating income | Monthly cash flow |
|---|---|---|---|---|
| 45% | $83.25 | $35,005.78 | $13,914.88 | −$640.43 |
| 55% | $101.75 | $42,784.84 | $19,095.96 | −$208.67 |
| 65% | $120.25 | $50,563.91 | $24,277.04 | $223.09 |
| 75% | $138.75 | $58,342.97 | $29,458.13 | $654.84 |
| 85% | $157.25 | $66,122.03 | $34,639.21 | $1,086.60 |
Every ten points of occupancy is worth $5,181 of net operating income on this property, or $431.75 a month of cash flow. Cash flow crosses zero at 59.83% occupancy.
Regulation is the risk this calculator cannot price
Short-term rentals are licensed, capped, taxed or banned outright by a great many municipalities, and the rules change faster than the underwriting. Before you buy on these numbers, confirm the property's zoning, any primary-residence or owner-occupancy requirement, registration and permit fees, occupancy or lodging tax registration, and any HOA or condominium bylaw that restricts leases under thirty days.
Lodging and occupancy taxes are usually collected from the guest on top of your rate, and on many platforms they are remitted for you — but not everywhere and not for every tax. Where you are the one remitting, that money is not revenue; it passes through you. This calculator does not model it, so do not enter tax-inclusive rates in the ADR field.
Assumptions and what this calculator leaves out
- Seasonality is averaged away. A ski or beach property earns most of its year in a few months. A single annual ADR and occupancy will reproduce the annual total but will hide months of negative cash flow.
- No capital reserve is deducted. Short-term use consumes furniture, linens, appliances and paint far faster than an annual lease. Setting aside a portion of net operating income for replacement is standard practice.
- Lodging and occupancy taxes are excluded. They are normally charged to the guest above your rate; where you remit them yourself, they are a pass-through rather than income.
- Vacancy is not modelled separately. Unbooked nights are already inside the occupancy figure, so do not deduct a vacancy allowance a second time.
- Startup furnishing cost is not included. Furniture, linens and equipment for a short-term rental are a real capital outlay before the first booking.
- The mortgage field takes principal and interest only. Taxes and insurance are entered separately, so entering a full escrowed payment would count them twice.
Short-term against long-term, and where to go next
The right comparison is net operating income, not gross revenue. Run this page for the short-term case, then run the same property through the rental cash flow calculator as an annual lease. The short-term figure will usually show much higher gross and a much thinner conversion to net, because cleaning, management, utilities and insurance are all costs a long-term landlord does not carry. Whether the gap justifies the extra operational work is a business judgement the arithmetic can inform but not make.
Once you have net operating income, the cap rate calculator converts it into a value, and the cash-on-cash return calculator measures it against the cash you actually invested. If the property is financed, check that the net operating income clears your lender's coverage requirement with the DSCR calculator — many lenders will not underwrite short-term revenue at all, or will haircut it substantially.
For the operating side, the vacancy loss calculator handles the long-term equivalent of the occupancy input, and the operating expense ratio calculator lets you sanity-check whether your expense load is in line with comparable properties. A short-term rental usually shows an expense ratio far above a long-term one, and seeing the number often reframes the decision.