Today’s topic: Is 100% Occupancy good or bad?
It depends. What does it depend on? Your personal goals.
I am going to share with you what I do and what I think, but it may not necessarily be good for you or correct. It is just an approach that I have that I want to share with you.
The reason i am filming this video (and writing this article) is because inside of our Facebook group with over 7000 members, there are quite a few people who post about 100% occupancy being THE GOAL.
While that might work for some, I don’t think that is the actual goal. I believe that the actual goal for AirBnB and short term rentals tends to be related to your why. That “why’ in many cases has to do with profitability and 100% occupancy may actually be away from your why and may actually be unprofitable.
What I shoot for is maximum profitability with the right guests. I want to reduce headache, problems, parties, and things like that. At the same time I want to attract the right people, the right fit (Families, business people, etc) that have more disposable income and want a better product. That’s what I do. That does not mean that 30 days a month, twelve months a year, those people are actually traveling, but if that is what I am attracting then I have to have less than 100% occupancy.
To put it very simply, if you were going to go Tuna Fishing, you have to go tuna fishing in the right sea, at the right period with the right conditions, and you still can’t go drop a line and just expect to catch tuna. You might catch a minnow, but is that what you’re after?
In my experience and speaking with Ian McHenry, the founder of Beyond Pricing,the optimal mix for me in most of my properties is between 70% and 80% occupancy.
If I do that, I have enough days free on my calendar for:
This ensures me that my system isn’t going to stress and/or break down, and I am also charging enough that I am actually optimizing and maximizing my profit. Now there are periods where I am at 100% occupancy, and that is the peak-peak periods (Holidays, Summers, Christmas, etc). That is where I shoot for 100%. So I am not saying that you can’t have 100% occupancy for periods of time, but shooting for 100% 365 days a year. At that point, you are the equivalent of a low priced budget motel that just needs to turn them over. This strategy is not consistent with my “why” at all.
Here is an important point:
When I saw I am shooting for 70&-75% occupancy, that doesn’t mean that I am turning down 25%-30% of bookings. That means that I am pricing myself such that the market finds its own natural equilibrium and I am priced too high for a lot of the people that are not a good fit for me and they book somewhere else. By design, this means I am charging the rate that will clear the market about 75% of the time.
Why I Do It.
- Less wear and tear on the unit – My unit has to last 30 or 40 or 50 years. Having people coming and going constantly in and out the door, constantly churning leads to much higher need for reinvestment due to maintenance and repairs. It also means that during that reinvestment period, my unit is offline.
- It allows me to get the right people in there. Generally speaking in my properties, I want families, and people with higher disposable income. I will give them more high-end furniture and things like that. If I reduce my price, I might get the wrong people in there.
Want a way to get 100% occupancy?
Put your nightly rate at $1. I guarantee you sell out 365 days a year, but you won’t like it. Your place will be trashed and that is not a good idea.
This is a business. Find the clearing price, where you are optimizing your profit, not killing your property, and your not killing yourself, or your cleaning team, or anyone else. I think you’ll find it very sustainable and quite rewarding.
One other thing to keep in mind, I am not taking a pay cut by being at 70% or 80% occupied, in fact I am making the same amount of money (if not more) with less wear and tear, and overall lower expenses. If I have someone in the house 365 days a year, there is A/C, heating, water, electricity and all the other utilities that are being used 365 days a year. If I am at 250 days a year, there is 105 days a year where utility expenses are going down, wear and tear is reduced, rugs and floors last longer, and so on.
Same revenue + Lower Expenses = Higher Profit
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