Short-term rentals (STRs) are all the rage, but when it comes to measuring success, gross revenue only
tells half the story. The real hero of your financial tale? Net revenue. It’s the number that cuts through
the glitz and glamour of high nightly rates to reveal how much money you’re actually taking home.
In this guide, we’ll dive into what net revenue is, why it’s a big deal, and how you can optimize it to make
your STR dreams come true.
Net revenue, decoded
Think of net revenue as your rental’s “take-home pay.” It’s what’s left after you’ve paid for everything
needed to run your property. Yes, the shiny $8,000 monthly gross revenue looks great on paper, but
after cleaning, platform fees, utilities, and the occasional burst pipe? Your real profit might be closer to
$4,500-or less.
The formula is simple:
Net Revenue = Gross Revenue – Total Expenses
Expenses can vary wildly, but common ones include:
▪ House keeping: Every guest leaves crumbs (and worse) behind.
▪ Platform Commission: Airbnb doesn’t work for free; expect a conservative your 3%revenue – toa conservative go their way. 15% of
▪ Utilities: Hot tubs and heaters don’t run on good intentions.
▪ Repairs and maintenance: Guestwear adds up fast-think clogged drains, stained furniture, or a
mysteriously broken TV.
▪ Taxes and insurance: Because the taxman and reality always win.
Why does net revenue matter?
▪ It keeps you grounded; Gross revenue can be deceiving. A beachfront villa raking in $12,000 a
month might sound like a goldmine, but if it costs $10,000 to run, it’s hardly a dream investment.
Net revenue reveals whether your property is truly pulling its weight.
▪ It’s a decision-making compass; Net revenue helps you decide where to invest your time and
money. Should you splurge on that new hot tub? Will adding a pool pay off in the long run?
Without this number, you’re flying blind.
▪ It protects you in the off-season; Every STR has its slow months. Understanding your net
revenue helps you plan for quieter times, ensuring you’re not scrambling to pay bills when
bookings dry up.
Let’s talk numbers
Imagine you own a cozy mountain cabin. Here’s how the math might play out:
▪ Gross Revenue: $7,500/month
▪ Expenses:
o Cleaning: $1,200
o Platform fees (15%): $1,125
o Utilities: $400
o Maintenance: $300
o Taxes and insurance: $700
▪ Net Revenue: $7,500 – $3,725 = $3,775
Not bad. But what if cleaning costs spike during peak season? Or if repairs eat into your profits after a
snowy winter? These are the types of questions net revenue can help answer.
How to boost your net revenue without losing your mind
Think strategically about your short-term rental upgrades and operations to maximize profitability. While
amenities like hot tubs can attract guests, they often come with high maintenance costs; instead,
prioritize features with real ROI, such as better Wi-Fi or energy-efficient appliances that reduce utility
bills. Streamline cleaning and maintenance by switching to more cost-effective providers or bundling
services, potentially saving hundreds each month. Use dynamic pricing to your advantage, increasing
rates during peak seasons and offering discounts in slower periods to maintain occupancy. Finally,
reduce platform fees by encouraging direct bookings through your own website or social media,
minimizing reliance on Airbnb and Vrbo.
The Net Revenue mindset
It’s easy to get caught up in impressive top-line numbers, but success lies in understanding what you’re
left with after expenses.
Here’s a quick real-world comparison:
A luxury downtown condo earns $10,000/month but spends $7,000 on cleaning, management, and
utilities.
A suburban home earns $6,000/month with only $2,500 in expenses.
Guess which property is actually more profitable? That suburban charmer takes the crown with a net
revenue of $3,500 compared to the condo’s $3,000.
Focus on what really matters
Net revenue is the ultimate truth-teller in short-term rental investing. It’s not about how much you
make—it’s about how much you keep. Just keep a close eye on this metric, so you can make smarter
investments, cut unnecessary costs, and plan for long-term success.
