Short-term rentals — properties booked by the night through platforms or direct bookings — follow a different set of numbers than traditional leases. Instead of one monthly rent, revenue depends on nightly rates, how many nights are booked, and how often guests turn over. Expenses look different too: cleaning, platform fees, furnishings, utilities and supplies are all on the owner.
This guide walks through the key metrics and a full annual example.
The three revenue metrics
Average daily rate (ADR) is the average price per booked night:
Occupancy rate is the share of available nights that are booked:
RevPAR (revenue per available night) combines the two:
RevPAR is useful because ADR and occupancy pull against each other. Raising nightly rates can lower occupancy; lowering them can fill more nights. RevPAR shows whether the combination produces more or less revenue per night on the calendar.
Revenue beyond the nightly rate
Many short-term rentals also collect a cleaning fee per stay. Because it’s charged per booking rather than per night, it depends on the average length of stay: shorter stays mean more bookings, more cleaning fees, and also more cleaning costs.
Occupancy taxes collected from guests are usually passed through to the taxing authority, so they’re typically excluded from both revenue and expenses in the owner’s analysis.
Expenses that are different from long-term rentals
- Platform or booking fees, often a percentage of each booking.
- Cleaning and laundry for every turnover.
- Management or co-hosting, frequently a percentage of revenue and usually higher than long-term management.
- Utilities, internet and streaming subscriptions, almost always owner-paid.
- Consumables — toiletries, coffee, paper goods — per stay.
- Furnishings and their replacement, which add to upfront cost and CapEx.
- Licensing or permit fees, where local rules require them.
A full annual example
A short-term rental at $265 ADR and 66% occupancy
Average stay is 3.5 nights, with a $95 cleaning fee per stay. The property is financed with a $320,000 loan at 7% for 30 years.
| Revenue | Annual |
|---|---|
| Nights booked (66% × 365) | 241 nights |
| Room revenue ($265 × nights) | $63,838 |
| Cleaning fees (69 stays × $95) | $6,539 |
| Gross revenue | $70,377 |
| Expenses | Annual |
|---|---|
| Platform fees (3%) | $2,111 |
| Cleaning cost ($110/stay) | $7,571 |
| Management (20%) | $14,075 |
| Supplies ($18/stay) | $1,239 |
| Utilities | $4,080 |
| Internet & subscriptions | $1,440 |
| Property taxes | $4,800 |
| Insurance | $2,400 |
| Maintenance (5%) | $3,519 |
| Furnishing & CapEx reserve (4%) | $2,815 |
| Total expenses | $44,051 |
| Net operating income | $26,326 |
| Mortgage P&I | −$25,548 |
| Annual cash flow | $779 |
Hypothetical numbers for illustration. Occupancy taxes are treated as pass-through.
RevPAR for this property is $174.90. Expenses consume about 63% of gross revenue — noticeably higher than a typical long-term rental, which is common for short-term rentals given cleaning, management and utilities.
Occupancy sensitivity
Short-term rental revenue swings with occupancy, while many costs (taxes, insurance, utilities, the mortgage) don’t. If occupancy in the example dropped from 66% to 56%, revenue would fall to about $59,714. Per-stay and percentage costs would shrink with it, but fixed costs wouldn’t, and annual cash flow would move from $779 to about −$5,137.
That’s a ten-point change in occupancy turning positive cash flow negative — a pattern that makes stress-testing occupancy especially important for this property type.
Seasonality
Annual occupancy hides month-to-month variation. A mountain or beach property might be close to fully booked in peak season and mostly empty in the off-season, with ADR rising and falling alongside. Monthly cash flow can be negative for several months even when the annual total is positive, which affects how much cash an owner needs on hand.
Where the inputs come from
- Comparable listings in the same area show nightly rates and, through calendar data, rough occupancy.
- Market data services estimate ADR, occupancy and RevPAR by area and property size.
- Local regulations may cap the number of nights, require permits or prohibit short-term rentals in some zones — which can matter more than any revenue estimate.
Comparing to a long-term rental
The same property can often be modeled both ways. A short-term rental may show higher gross revenue but also higher expenses, more variability and more owner involvement. A long-term lease produces lower but steadier income with fewer operating costs. Running both — with honest assumptions about occupancy and costs — shows the trade-off for a specific property.
Startup costs belong in the return math
A short-term rental usually needs more cash up front than a long-term rental: furniture, linens, kitchenware, decor, smart locks, photography and sometimes permits. Those costs don’t appear in annual NOI, but they do belong in total cash invested when calculating cash-on-cash return. Leaving out a furnishing budget can make the return on cash look considerably higher than it is.
The furnishing and CapEx reserve in the example covers the gradual replacement of those items — sheets, towels, mattresses and small appliances wear out much faster under constant guest turnover than in a traditional lease.
The takeaway
Short-term rental math starts with ADR, occupancy and RevPAR, adds per-stay cleaning fees, and subtracts a heavier set of expenses than a traditional rental: platform fees, cleaning, management, utilities and furnishings. Because many costs are fixed while revenue moves with occupancy, testing a lower-occupancy scenario is one of the most informative steps in the analysis.