Holiday rental involves generating rental income by optimizing profitability. As a result, you have every reason to invest in a city with high demand. To make a wise choice, rely on many indicators before embarking on short-term rental. Among other things, the calculation of the occupancy rate.
What is the definition of occupancy in vacation rentals?
This is a relative value indicating an average occupancy of the property over the entire year. Depending on the season, the result will not be the same. Imagine that you have a property in Cannes, the occupancy rate will be maximum during the festival period. On the other hand, do not expect to reach the same figures outside of this very special ceremony.
Remember that the occupancy rate is the ratio between the number of occupied rooms compared to the number of rooms available during the short-term-rental. In tourist accommodation and in the hotel industry, this is a key performance indicator called the KPI.
To fully exploit this information, we advise you to select a precise range, because the seasonal effects are absolutely not negligible. Incidentally, occupancy rate is a critically important Airbnb stat and if you neglect it, you may not be optimizing your earnings.
How to calculate the occupancy rate?
The occupancy rate follows a specific formula that is relatively easy to understand. As explained in the previous paragraph, it is a percentage allowing to understand the difference between the rooms occupied and the number of rooms available according to a defined period. For more precise clarification on the occupancy rate and its calculation, you divide the total number of accommodations occupied during the period and the geographical location by the total number of accommodations available under the same conditions. Then you multiply the result obtained by 100 in order to obtain a percentage.
Let's take a concrete example to better understand the calculation of the occupancy rate. You have several properties in the Paris region for a total of 10 rooms available. The previous night, you managed to rent 7 of them. Going over the previous elements, you easily understand that the occupancy rate will then be 70%.
What is the impact of the occupancy rate on the rental yield?
To get the best profitability in seasonal rental , you will have to rely on the geographical location of your property, but also the management of it. Thecalculation of the rental yield must imperatively take into account the dynamism of the districts. The most striking example remains that of the French capital with significant disparities depending on the districts or nearby towns. If you are lucky enough to have a property in a tourist area, the occupancy rate will be higher.
If on the other hand you have made an investment in a seasonal city , be aware that the Airbnb occupancy rate varies between 30 and 40%. Some exceptions all the same as in Cannes with its famous festival which attracts countless tourists. If, on the other hand, you invest in large and highly touristic cities such as Toulouse, Lyon or Paris, the average occupancy rate will be between 50% and 60%.
However, this is not the only criterion to be taken into consideration in the context of a rental yield. You could very well have a relatively low occupancy rate, but make excellent income compared to seasonality. Once again, the most typical example remains the city of Cannes. But other French cities follow exactly the same pattern like Biarritz and Nice.
Which French cities have the best occupancy rate?
Before making your investment, we strongly advise you to include this information in your calculation. In 2021, first place goes to the city of Montpellier with an average occupancy rate of 60%. In 2nd place, you find Bordeaux and Bayonne with an average occupancy rate of 58%. In their wake, Lyon is at the foot of the podium with 57%, a result similar to Marseille. Just behind, Toulouse with an average occupancy rate of 56%.
However, these results are based solely on a 35 m² dwelling from a study carried out by the Airbnb platform. However, the occupancy rate is not always the best indicator of a good rental yield. The city of Cannes does not appear on the podium and yet the performances are there in terms of seasonal rental. Unsurprisingly, the presence of the Cannes Film Festival alone explains this result.
The correlation between pricing and occupancy rate
As you have just seen, the previous ranking remains globally dominated by the Provence-Alpes-Côte d'Azur region. In the first 15 cities with the best occupancy rate, 5 agglomerations of the region are present and they charge the price of the night at a higher rate. So, take into consideration all the elements specific to the geographical location before embarking on your real estate investment.
When you need extra help, know that the UpperKey Concierge will be of great help to you. Even if you have not yet acquired your property, you will receive valuable advice to optimize your future investment. As a result, you are in the best possible position to take full advantage of the many advantages of the Airbnb platform. If you want to know more, get all the information from an advisor at Upperkey Concierge.