What Break-even occupancy means
Each occupied night contributes the average daily rate minus variable per-night costs. That contribution must first cover mortgage and other fixed costs before the property produces positive monthly cash flow.
Contribution per occupied night equals average daily rate minus platform fees and other costs that rise with a booking night.
Separate fixed and variable costs consistently. Cleaning charged to guests may still have unrecovered labor, supplies, or turnover costs.
Break-even occupancy example
- Fixed monthly costs: $4,200
- Average daily rate: $225
- Variable cost per occupied night: $45
- Available nights: 30
Result: $4,200 / (30 x $180) = 77.8% break-even occupancy.
When investors use it
- Stress-testing a short-term rental
- Comparing monthly seasonality
- Evaluating a management or platform-fee change
- Testing whether a long-term-rental fallback is safer
Common mistakes
- Using gross nightly rate as contribution margin
- Assuming all calendar nights are legally and practically available
- Ignoring seasonal price changes
- Treating annual average occupancy as proof that every month covers fixed costs
Frequently asked questions
Should mortgage payment be included in break-even occupancy?
Include it when the goal is cash-flow break-even. Exclude financing only when measuring property-level operating break-even before debt.
How do cleaning fees affect the calculation?
Include only the net cleaning contribution or cost retained by the owner. A guest-paid fee is not automatically profit.
Why calculate break-even by month?
Seasonality can make an annual average look safe while low-season months require substantial reserves.
This guide is educational and does not provide investment, lending, tax, legal, or appraisal advice. Verify inputs and requirements for the specific property, lender, and jurisdiction.
Put the metric inside a complete deal.
PropLurk keeps acquisition inputs, financing, expenses, returns, and the decision record together.