Measuring ROI: A Simple Guide for Vacation Rental Owners

The Evolve TeamLeave a Comment

As a vacation rental owner, you know that measuring ROI – or how much you’re getting out of your vacation property after you spend on necessary expenses – on your property goes beyond just calculating what your annual bookings bring through your bank account. However, even newer and more seasoned property owners alike might be surprised at some of the details that can contribute to (or detract from) your annual ROI. Let’s have a look at some metrics you can establish to make sure that you’re seeing your vacation rental’s revenue from every possible angle in all circumstances.

Gross Bookings: Make sure you know the amount of your annual bookings, pre-expenses, each year. It’s the best baseline metric you can establish!

Total Property Expenses: You’ll need this for tax time. Hold all of your property’s service providers accountable for getting you monthly receipts or annual statements of account. Grab everything from utility and property tax bills to booking fees paid. Most likely the second most important figure you need to have a grasp on for making marketing better decisions.

Net Bookings: It’s Gross Bookings minus Expenses – the bottom line for every vacation rental owner.

Seasonal Bookings: How do you fare in high and low seasons in your market each year in comparison to the last? This is a great metric for setting financial goals, as you can experiment with everything from new photos to pricing strategies to increase these numbers each year.

Pricing Trends (aka Average Daily Rate): Did you experiment with different pricing strategies throughout the year? Make sure you’re tracking bookings and the price they’re being made at so you can see what pricing trends offer you the best opportunity to increase your occupancy rates and gross bookings year-round.

Repeat Bookings: Do you have a way to measure repeat bookings? Loyalty is an often overlooked metric and can help you determine whether your bookings and occupancy rates are coming from just a few loyal sources or a more widespread client base. A powerful tool for shaping future marketing efforts and revenue goals.

Booking & Listing Fees: How much are you paying and to whom each year for, marketing, booking and/or listing your vacation rental? Especially after the first year you’ve had your property in the vacation rental market, this metric alone is the one where you stand a significant chance for improvement. If you’re using a local property manager, you’ll want to determine what portion of your commission payment is going to marketing and booking.  If you’re renting on your own, it’s important  to determine which sites offer the best return on your listing fees.  These metrics will help you determine where your money is best spent going forward.

The great thing about metrics is knowing that there are multiple financial angles from which to view your vacation rental property.  While this list certainly isn’t exhaustive, it can help get you in the right financial mindset to determine what’s the most importance measure of ROI for your property and the things you can look at improving each year you’re in the market. If you have additional metrics you’ve found useful as a homeowner, don’t hesitate to share them below! Great ideas don’t just belong to us – we’ve built our business based on ideas from homeowners like you and we’re committed to improving it the same way – and of course, with full credit.