Understanding Occupancy Costs: A Must-Know Airbnb Strategy for Hosts

Understanding Occupancy Costs in Airbnb: How to Stay Profitable as a Short-Term Rental Host

Running an Airbnb can be one of the most exciting ways to generate income, but it’s not all about bookings and five-star reviews.

If you're not tracking your expenses, you could be bleeding profit without realizing it. Understanding occupancy costs is essential if you want to stay profitable and scale your short-term rental business the smart way.

At BNB Guardians, we’ve coached Airbnb hosts through this exact issue.

Knowing your true costs is the difference between thriving and barely breaking even. In this guide, we’ll walk you through what occupancy costs are, why they matter, and how to manage them to maximize your Airbnb income.

What Are Occupancy Costs in Short-Term Rentals?

Occupancy costs are all the ongoing expenses tied to keeping your Airbnb property operational. These costs can eat into your margins if you don’t have a solid Airbnb strategy in place.

Here’s what’s typically included:

• Mortgage or RentYour monthly loan payments or lease, especially if you're using rental arbitrage.

• Property TaxesBased on your local government’s valuation.

• InsuranceThis includes homeowners insurance and short-term rental-specific coverage (like liability insurance).

• UtilitiesThink electricity, water, gas, internet, trash pickup—everything your guests use.

• Maintenance & Turnover CleaningsRoutine upkeep, repairs, pest control, and between-stay cleaning services.

• Airbnb Management FeesIf you hire help or use tools like Guesty to streamline operations, you’ll incur software or service costs.

• Licensing & Local TaxesSome areas require short-term rental permits, annual fees, or occupancy taxes.

Understanding all of these costs is key to setting profitable nightly rates and staying in control of your bottom line.

How to Calculate Your Airbnb Occupancy Cost

Here’s a simple three-step process we walk our Airbnb coaching clients through:

Step 1: List Every Expense

Start with the big stuff: mortgage or rent, insurance, taxes—then move on to monthly expenses like cleaning, supplies, and management tools.

Step 2: Add It All Up

Let’s say your expenses look like this:

• $1,500 mortgage

• $200 utilities

• $300 maintenance & cleaning

• $200 Guesty and management tools

Your total monthly occupancy cost would be: $2,200

Step 3: Calculate the Occupancy Cost Ratio

This ratio tells you what percentage of your Airbnb income is going toward operating expenses.

Formula: Occupancy Cost Ratio = (Total Occupancy Costs ÷ Total Revenue) × 100

Example: If your Airbnb made $4,000 last month: ($2,200 ÷ $4,000) × 100 = 55%

A lower ratio means more profitability. A higher ratio could signal it’s time to optimize pricing or trim costs.

How to Reduce Your Airbnb Occupancy Costs

Want to increase your margins without compromising the guest experience? Try these strategies:

Go Energy-Efficient

Upgrade to LED bulbs, smart thermostats, and Energy Star appliances. This saves money month after month.

Focus on Preventative Maintenance

Fix small issues early to avoid expensive surprises (we teach this as part of our Airbnb optimization method).

Negotiate with Vendors

Shop around for competitive pricing on supplies, cleanings, and even property management help.

Diversify Your Bookings

List on multiple platforms and build a direct booking site. Reducing platform commissions is one of the fastest ways to boost revenue.

Use Guesty to Streamline and Save

At BNB Guardians, we use Guesty for all our managed listings. It helps our clients:

• Automate guest messaging and reviews

• Sync calendars across Airbnb, Vrbo, and Booking.com

• Manage turnovers with cleaning schedules

• Adjust pricing dynamically based on market trends

All of this reduces your operational workload and helps you stay profitable even when you’re not glued to your phone.

Final Thoughts: Track Costs, Stay Profitable, and Grow Smart

If you want to run a sustainable short-term rental business, don’t guess your numbers. Track your occupancy cost percentage, keep it healthy, and use automation to do more with less.

At BNB Guardians, we show new and seasoned hosts alike how to run profitable Airbnbs without burnout. We’ll help you build smarter systems, trim waste, and increase profit without sacrificing guest experience.

Need Help with Airbnb?

Join our Airbnb Super Host Academy community or book a coaching call. We’ll walk you through everything from pricing and guest communication to occupancy cost analysis and long-term strategy.