We explore the crucial considerations for property investors choosing between Airbnb and traditional renting, highlighting the impact of market dynamics, regulatory environments, and property characteristics on investment returns.

Airbnb vs Renting: Make the Right Choice for Your Investment Strategy

Airbnbs have higher potential returns but are variable and management-intensive, while traditional renting has more stable income but potentially lower returns.

Location, demand, amenities, and local regulations influence ROI for Airbnb, while economic trends and property features impact long-term rentals.

Effective strategy and dynamic pricing for STRs and understanding long-term market trends for LTRs is crucial.

Venture into property investment and sooner or later you’ll face this question: Should I Airbnb my property or rent it out the old-fashioned way?

Which choice is better? Where will I make the most return on my investment (ROI)? Let’s take the guesswork out of the equation. 

Real estate investment offers a wealth of opportunities for substantial returns, but the decision between short-term and long-term rentals demands thoughtful analysis. Grasping the elements that affect ROI for each choice is key. 

This guide aims to unpack the essential factors influencing both potential rental income and overall ROI in the Airbnb vs long term renting debate. 

Plan your STR strategy based on real booking activity and trends—plus, see how things change year over year.

Choosing between Airbnb and traditional renting takes into consideration investment goals, risk tolerance and involvement. Short-term rentals (STRs) offer higher returns but are more variable and are more demanding to manage. Long-term rentals offer more stability but may yield lower returns in markets with high STR demand. As an investor, deciding between the two involves prioritizing between potential returns vs stability. It's important to understand what drives ROI for both before deciding.

Here are key factors that influence the ROI of Airbnb vs renting: 

Location and Desirability: High tourism or business areas often mean higher demand.

Travel Demand: Seasonality, local events, and destination appeal are crucial.

Competition: The availability of similar accommodations impacts your pricing strategy.

Local Economy and Events: Economic growth and events can temporarily boost demand.

Property Amenities: Unique features, such as a pool, can justify a higher average daily rate (ADR) for your property.

Economic and Demographic Trends: Job, wage, and population growth indicate a strong market.

Market Supply: The balance of long-term rental properties and for-sale homes affects market saturation.

Community Attributes: School quality and neighborhood safety are key for attracting residents.

Property Features: Long-term appeal is boosted by practical amenities like storage and efficient appliances.

Whether you decide to start a short-term rental business or go with a traditional long-term rental, these factors will determine the feasibility and profitability of your investment property. For more information on how to navigate the STR investment market, read our Airbnb Investment Guide.

How to Calculate the Potential Income of Your Rental Property

Determining potential rental income is a key step in real estate investment strategy, whether you’re considering short-term or long-term rentals. It's not just about estimating profits, but understanding the market conditions and pricing strategies. Successful property investment lies in having a clear understanding of these factors.

STRs, such as those listed on Airbnb, offer unique revenue opportunities. Setting a competitive yet profitable rental price involves a blend of factors, including location desirability, seasonal demand, and the current landscape of travel accommodations. A balanced approach, combining your property analysis with market data, can lead to a more accurate income projection.

Platforms like AirDNA provide in-depth market performance dashboards that give a window into the STR market's vitality. Let’s look at Charleston, South Carolina's market performance dashboard as an example. Its vibrant STR market boasts an impressive average annual revenue of $94,800. 

Analytics like these give investors a glimpse into potential earnings. Remember, though, that this is part of a larger picture. For more detailed guidance, read our article on what to charge for rent for your STR. 

For those considering long-term renting, Zillow has a rent index that provides valuable metrics. They track and report typical rent levels in metropolitan areas, cities, and ZIP Codes, offering a snapshot of the long-term rental market. 

As of December 2023, for instance, Zillow noted an average monthly rent of $2,008 for Charleston, equating to an annual income of $24,096. This figure serves as a benchmark, helping investors to gauge the steady income potential for long-term rentals in contrast to the more dynamic STR market.

Note that regional averages cannot provide an investor with specific information about the potential income of a particular property. However, with AirDNA's Airbnb Calculator, you can input a property address and the tool will factor in similar properties in the area to give you a more accurate picture of its potential income. The customizable calculator can also help estimate the potential costs of operating the property as a short-term rental.

Understand the investment potential of any address in the world. 

Factors Affecting Total ROI of Airbnb vs Renting 

Understanding potential rental income is just the beginning of real estate investing. To get a complete picture of your investment as a property owner, it's important to consider other factors that shape the true ROI. These factors include market trends, operational costs, and more. 

We have created a chart that compares the various factors affecting both your total rental income and broader ROI when it comes to deciding between Airbnb vs renting. 

Why Net ROI is the Name of the Game of Airbnb vs Renting

Net Return on Investment (Net ROI) measures the profitability of an investment after accounting for all costs, offering a clear picture of the actual financial returns. It's calculated by subtracting the total costs from the total revenue generated by the property, then dividing this by the investment cost and multiplying by 100 to get a percentage.

In real estate investment, choosing between Airbnb vs renting hinges on understanding which option yields a higher Net ROI. This metric is crucial as it factors in not just the potential revenue, but also the operational costs associated with each rental strategy. The result is a comprehensive view of profitability.

AirDNA’s vacation rental pricing tool uses data-driven recommendations to propose the best daily rates.

Net ROI of US Markets Airbnb vs Renting 

We have created an interactive dashboard that estimates the net return on investment for long-term and short-term rentals in 40 different markets. Our estimates are based on AirDNA data on average annual short-term rental revenue combined with data from Zillow on typical long-term rental rates and home purchase prices.

In order to determine the Net ROI, we made certain assumptions. These assumptions include:

Operating expenses are 50% of the revenue for STRs 

Operating expenses are 35% of the revenue for long-term rentals

Average vacancy rates or lease-up times decrease annual long-term rental income by 5%.

The difference in operating expenses accounts for the higher costs of managing, furnishing, and maintaining an Airbnb property. 

Get a birds-eye-view of how different urban areas across the U.S. compare in terms of short-term rental revenue versus long-term rental rates. Filter by real estate type (apartments versus houses) and see how revenue projections stack up against real estate prices.

Our analysis confirms that Charleston, SC stands out as a winner. Net ROI of short-term rentals is substantially higher than the ROI of long-term rentals there:

Net ROI for STR of 9.1% vs 3.5% for long-term rental (LTR).

The STR net ROI exceeds the long-term value by 5.6%, which we call the STR net ROI premium (also listed in the dashboard).

Charleston has the largest premium of any major metropolitan area as of this data from the end of 2023.

We have developed an additional dashboard that enables users to delve into the submarket towns of any metropolitan area, provided that data is available. In addition to the net ROI for LTR and STR, this dashboard presents information on the total number of listings and year-over-year changes in rent amounts for different markets and submarkets. 

Using both dashboards makes it easier to determine whether Airbnb vs renting will provide a higher rate of return on your investment property.

Hone in on a specific city to see how short-term versus long-term rental revenue projections have changed over time and how they vary across different areas of the city.

Net ROI Market Highlights of Short-Term Rentals vs Long-Term Rentals

As we can see in the data in those dashboards, the profitability of Airbnb versus traditional renting varies significantly across regions:

Southeastern Markets Shine: Charleston, New Orleans, and Jacksonville lead with the highest STR net ROI premiums, making STRs a more attractive investment.

Western Markets Lag Behind: In the Bay Area, the attractiveness of STRs diminishes. San Jose shows no STR premium, with both rental strategies yielding a net ROI of just 1.5%. San Francisco's premium is slightly better at 0.7%.

Exceptions to Regional Trends: Atlanta presents a unique case with a low STR premium of 0.8%, attributed to the relative strength of LTRs there. Conversely, Providence, R.I., stands out in the Northeast with a strong STR premium of 4.2%, driven by solid travel demand and STR pricing.

It's important to remember that the ROI estimates provided are just a snapshot in time of these properties' net operating income potential based on their current prices. However, the full picture of their return on investment will depend on various factors that we will discuss next. 

Other Key Considerations of Vacation Rentals Vs Traditional Rentals

Property owners face a complex decision when choosing between investing in an Airbnb property or a traditional rental property, as they need to consider various factors beyond revenue potential. The impact of local regulations, taxation, and property management plays a pivotal role in shaping the viability and profitability of each rental strategy.

Short-term rental regulations set the groundwork for what's possible with property rentals. Cities like New York have implemented stringent zoning laws that curtail the ability to offer STRs unless specific conditions are met, such as the host's presence during the stay. These regulations can influence the decision to pursue Airbnb as an option, with the need for permits or strict guidelines potentially complicating the rental process.

The tax implications for Airbnb rentals can diverge from traditional rentals. Airbnb property earnings might come with hotel or tourist taxes and income taxes, creating a unique tax scenario for vacation home operators. Conversely, long-term rental properties typically fall under more familiar tax rules. Landlords can deduct expenses like mortgage interest, property tax, and maintenance costs directly related to the upkeep of the rental property.

Insurance for vacation rentals must cover the higher risks associated with transient occupancy, such as property damage or liability issues. These risks aren't usually covered in standard homeowners' policies. This specialized insurance tends to be more costly, reflecting the increased risk. Landlords of long-term rentals, however, generally invest in landlord insurance policies that provide liability and property damage coverage suitable for longer-term tenancies. Long-term rental insurance offers a different cost and coverage structure that aligns with the lower turnover rates.

The day-to-day management of an Airbnb rental property can be much more hands-on than a traditional rental. The high turnover of guests demands regular cleaning, maintenance, and active communication for check-ins and support. This operational demand can be both a time and financial burden on the property owner. In a traditional rental property, the property can often be managed more passively once a reliable tenant is secured. However, it is possible to operate your vacation rental remotely or hire a property manager to make your Airbnb investment more passive. 

How to Maximize Your Total Airbnb Earnings

If you’re leaning towards the Airbnb route, you’ll want to make sure you know how to make the most of it. We’d recommend you read our 22 Tips to Maximize the Return on Your Vacation Rental in 2024. It includes expert strategies and actionable tips covering everything from optimizing your listing to adjusting for peak seasonality, ensuring you harness the full potential of your property as you run your vacation rental business. 

Remember that making the Airbnb vs. renting decision doesn't have to involve endless number-crunching. AirDNA is here to lighten the load.

With AirDNA, you can access an extensive suite of analytics tools that dissect market trends, occupancy rates, pricing strategies, and much more. All of our products are designed to empower your decision-making process. Our platform offers detailed insights into local and global markets, competitor analysis, and revenue projections that can sharply define whether Airbnb hosting aligns with your financial goals. If it does, you’ll know you made your decision the right way—based on data.

Debating between the hustle of short-term rentals and the stability of long-term tenants? Our data showcases the the lucrative appeal of STRs—here’s why.

Airbnb Occupancy Rate: Insights and Tips

Key Takeaways
The Airbnb occupancy rate is a vital metric for success and is calculated by dividing the number of booked nights by the available nights. The occupancy rate reflects how often your property is rented out compared to its availability.
Understanding and monitoring your occupancy rate is key to maximizing earnings, as it indicates property performance and influences pricing and marketing strategies.
How you interpret your occupancy rate is essential; high and low occupancy rates don’t always mean what you think.

Successful Airbnb hosts are obsessed with bookings, and for good reason—it’s the name of the vacation rental game.

When hosts talk about Airbnb bookings, they're really talking about occupancy rate: the percentage of available nights that guests book. Monitoring your occupancy rate is important because it shows how well your Airbnb stacks up against the competition. The occupancy rate can also indicate whether you need to switch up your strategy or pricing to boost your rental income.

Whether you’re new to short-term vacation rentals or an industry expert, it’s important to understand the methodology and best practices behind your occupancy rate. 

Learn about short-term rental data

What is Airbnb Occupancy Rate?

In its simplest form, the occupancy rate is the percentage of time a vacation rental property is booked compared to the time it is available for bookings. 

To make understanding occupancy rate easier, let's use a straightforward example.

Imagine you own a cabin that's available for guests all year. That means it could potentially be booked for 365 nights. Throughout the year, guests book your cabin for 90 of those nights. We can use that number to calculate the occupancy rate and see how often your property was rented out compared to its availability. 

By dividing the booked nights (90) by the total available nights (365) and multiplying by 100 to get a percentage, we find an occupancy rate of approximately 25%. This means your cabin was rented out for about a quarter of the year.

Reasons Why Your Occupancy Rate Matters
Maximize Revenue Potential: Physical products can be sold at any time if they’re not immediately purchased. However, a vacant vacation rental represents a unique challenge. If a property goes unbooked for a night, it's impossible to "sell" that night again. Each unbooked night directly translates into a tangible loss of potential income. That’s why the occupancy rate is crucial for owners looking to maximize their earnings. 
Reveal Property Performance Insights: Consider two similar properties in the same location. Property A consistently achieves an 80% occupancy rate, while Property B struggles to reach 50%. This stark difference signals that Property A might be better aligned with guest preferences or have better marketing. Analyzing occupancy rates helps identify performance gaps and areas for improvement, whether that's improving your listing or adjusting pricing strategies to meet market demand.
Determine Market Demand and Inform Pricing Strategies: High Airbnb occupancy rates indicate strong market demand, while low occupancy rates can reflect lower demand. This information informs your pricing strategy. Let’s consider an apartment near a convention center that has high occupancy during events but low occupancy rates otherwise. This trend suggests that you may want to consider adjusting your rates in relation to the convention center’s event calendar. Dynamic pricing takes into consideration trends like this and uses them to optimize revenue during peak and off-peak times.
Guide Investment and Enhancement Decisions: Evaluate occupancy rates before and after making upgrades, like installing high-speed internet or renovating the kitchen, to assess the return on investment (ROI). This analysis is crucial for prioritizing property improvements that make your listing more appealing and, subsequently, improve the occupancy rate.

Learn about Dynamic Pricing

How to Calculate the Airbnb Occupancy Rate

Understanding the occupancy rate of your Airbnb property is pivotal for optimizing your rental strategy. Yet, it all comes down to a single equation.

Airbnb Occupancy Rate Calculation

Reserved Days / Available Days x 100 = Occupancy Rate

With that in mind, here's a simple guide on how to find Airbnb occupancy rates:

Step-by-Step Calculation
Determine the Total Number of Reserved Days: Start by counting how many days guests booked your property over a specific period of time, usually 12 months. 
Identify the Total Number of Available Days: Calculate the total days your property was available for booking over the same time period, excluding any days you blocked off for personal use.
Calculate the Occupancy Rate: Divide the total number of reserved days by the total number of available days, then multiply the result by 100 to convert it into a percentage. These steps represent AirDNA’s version of an Airbnb occupancy rate calculator.

Example Calculation:

Imagine you own a house on the water in North Carolina and you're evaluating its performance on Airbnb over the last 12 months. The property was available for 340 days and booked for 240 days within this timeframe.

Reserved Days: 240

Available Days: 340

Occupancy Rate Calculation: 240/340 x 100 = 70.58%

Calculate potential earnings

Understand the investment potential of any address in the world. 

See your STR revenue potential
Interpreting Your Occupancy Rate

While a 70% occupancy rate may seem ideal, signaling guest satisfaction and consistent revenue, it's essential to delve deeper. High occupancy could indicate underpricing, meaning you might be missing out on potential income. It's crucial to balance occupancy with your average daily rates (ADRs) to maximize revenue. 

Think about it: A property with a 50% or 60% occupancy rate could earn more revenue than one that’s booked 70% of the time. It’s all relative to pricing. A property booked more often at $100 per night may not outearn a property that’s booked less often at $300 per night.

It’s important to ask yourself: Do I want higher occupancy or higher average daily rates (ADRs)? An accurate data tool can help you sort out which strategy is best for your bottom line. (Why guess when you can know exactly what you should be charging guests?)

What is a Good Airbnb Occupancy Rate?

Average Airbnb occupancy rates vary from market to market and year to year. You can see how the national average occupancy rate has fluctuated:

Trailing twelve months (TTM), March 2023 to February 2024: 55.1%
2023: 55.4%
2022: 58.6%
2021: 60.3%

The occupancy rate in 2022 reflects a recovery trend in the industry after the pandemic brought the average occupancy rate into the low fifties in 2020.

Determining a "good" rate is less about finding a universal number and more about understanding local market conditions, historical performance, and your personal goals for the property. Knowing your market's average helps inform decisions on pricing, marketing, and operations.

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Average Airbnb Occupancy Rates by City: Top 10 Highest Occupancy Rates

If you’re new to the short-term rental market, understanding the average airbnb occupancy rates by city can help you choose a location that’s likely to generate a healthy revenue.

These markets had the highest trailing twelve-month short-term occupancy rates (March 2023 to February 2024):

Kauai, Hawaii: 74.4%
Oahu, Hawaii: 73.4%
Maui, Hawaii: 72.4%
Maine DownEast/Acadia Coastal: 67.7%
Big Island, Hawaii: 67.1%
New York City: 65.5%
Denver: 65.3%
Anaheim, California: 65.2%
Boulder, Colorado: 64.3%
 Outer Banks, North Carolina: 64.3%

Many of the markets with the highest occupancy rates are located in Hawaii. However, seeing as the vacation rental market in Hawaii is subject to fairly heavy restrictions, let’s consider the markets with the highest occupancy rates in the contiguous U.S.

Maine DownEast/Acadia Coastal: 67.7%
New York City: 65.5%
Denver: 65.3%
Anaheim, California: 65.2%
Boulder, Colorado: 64.3%
Outer Banks, North Carolina: 64.3%
San Diego: 64.2%
Sarasota, Florida: 64.1%
Lincoln City/Newport, Oregon: 64%
Gatlinburg/Pigeon Forge, Tennessee: 63.9%

Average Occupancy Rates by City: Top 10 Lowest Occupancy Rates

The average Airbnb occupancy rates by city in the following areas leave hosts wanting more. These markets currently have the lowest trailing twelve-month occupancy rates:

Oxford, MS: 34.9%
Big Bear, CA: 39.6%
Southbend, Indiana: 40.4%
Texas East Area: 41.4%
College Station, Texas: 41.8%
Mississippi area: 42.1%
Augusta, Georgia/South Carolina: 42.8%
Pocono Mountains, Pennsylvania: 43.2%
California South area: 43.7%
 Louisiana area: 43.9%

If you’re looking to invest in vacation properties, avoid these markets because you likely won't get a good ROI. Property managers and hosts in these markets may need to lower their rates to encourage guests to book with them rather than other Airbnbs.

Hottest Airbnb Markets
Free Airbnb Calculator
Why Airbnb Occupancy Rates Differ from Hotels 

Hotels offer a consistent product and pricing strategy, but STRs vary widely in terms of property type, location, amenities, and host engagement. It’s crucial to assess STR occupancy differently than traditional hotel occupancy in order to accurately reflect performance in the vacation rental market.

AirDNA only considers active listings in its occupancy rate calculations, whether it’s for a specific market or when someone uses our Airbnb calculator. We define active as having at least one calendar day classified as reserved or available during the reporting period. If we included every available night from every available listing in our occupancy calculation, it would return a falsely low occupancy rate. This is due to variations in vacation rental host behaviors and motivations. We’re talking about host attentiveness in managing listing calendars and their responsiveness to reservation requests.

Here are three host cases that would falsely skew occupancy downward if we included them in the occupancy rate calculation: 

Event-Based Hosts: Hosts who list properties temporarily to take advantage of specific events, causing temporary market fluctuations that don’t reflect regular hosting activity.

"Make Me Move" Hosts: Hosts who set their prices significantly above the market rate, using Airbnb as an opportunistic platform rather than a committed hosting venue.

Dormant Listings: Properties that appear available but haven't seen a booking for months, often due to a shift in host priorities or property usage.

AirDNA ensures that its occupancy rate calculations reflect genuine market activity and trends by focusing on active listings. We stand by the accuracy of our data and use this methodology to help stakeholders understand the true dynamics of the STR market. Our insights are distinct from those that can be gleaned from hotel occupancy data.

How to Get High Occupancy on Airbnb

Occupancy rate may not be a complete picture of your property’s performance, but it’s still important. After all, you’re only making money if guests are staying at your property. If your occupancy rate is falling short of expectations, take these data-driven steps to learn how to increase occupancy rate on Airbnb. 

Increase Your Airbnb Occupancy Rate

Occupancy Rate is Just the Beginning  

According to ou annual best places to invest report, most of the destinations at the top of the list have occupancy rates of 60-70%. If you're interested to learn more about a market's occupancy rate, visit the AirDNA app.

While Airbnb occupancy rates are important, you need to track a range of metrics to assess how your Airbnb is performing overall. Our insights can help you optimize your properties for the best possible occupancy rate, average daily rate (ADR), revenue per available rental (RevPAR), and overall profitability.

Frequently Asked Questions:
What is a good occupancy rate for an Airbnb?

There is no universal “good" occupancy rate. Determining whether your occupancy rate is optimized requires understanding local market conditions, historical performance, and your personal goals for the property. Keep in mind that lower occupancy rates don’t necessarily indicate lost revenue. If you are charging a higher average daily rate, you might not need as many bookings to make as much money as a competitor with higher occupancy but a lower nightly rate.

Where can you see Airbnb occupancy rates?

You can see the occupancy rate for your listing as well as that of competitors in the area on your AirDNA dashboard. 

Find out what “Airbnb occupancy rate” refers to, how to calculate it, and tips for improving your occupancy rate and increasing your STR income.

Airbnb vs Renting: Make the Right Choice for Your Investment Strategy

Explore Net ROIs by Market

Get a birds-eye-view of how different urban areas across the U.S. compare in terms of short-term rental revenue versus long-term rental rates. Filter by real estate type (apartments versus houses) and see how revenue projections stack up against real estate prices.

Explore Net ROI by Submarket

Hone in on a specific city to see how short-term versus long-term rental revenue projections have changed over time and how they vary across different areas of the city.

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