Important Metrics to Calculate ROI
In order to calculate your return on investment (ROI) for your vacation home, you must be familiar with some common metrics used in the industry. To simplify what these terms really mean, we’ve listed some terms along with their definitions for you to better understand these metrics. Maximize your vacation rental’s revenue by knowing your ROI year over year.
Gross Bookings
This is your total bookings for the year. Do not include any expenses or fees in this metric as we’ll use those later to calculate overall ROI. It’s a good practice to keep track of your gross bookings throughout the year to get a feel of where your vacation rental income stands.
Property Expenses
These are the expenses used to keep your vacation home rental ready. Property taxes, utility bills and upkeep/maintenance costs should all be included in this metric. An easy way to keep track of this is to keep regular receipts (monthly or quarterly) from your service providers, as well as well documented invoices for exceptional expenses like a roof repair.
Net Bookings
This metric, more or less, can be considered your “bottom line”. Easily calculated, this is your gross bookings minus your property expenses.
Additional Metrics to Consider
Bookings by Season
Calculating bookings by season takes a little analysis. As a vacation home owner, you probably already know the high and low seasons for your area. To get your bookings by season, simply add up your total bookings for the different seasons. For example – if in your area, high season is considered May through August, isolate the bookings you had only in those months and add them up.
Pricing Trends
You may have tried raising or lowering your booking rates at different times throughout the year. Did you notice any trends in the amount of bookings you had when you changed your rates? Knowing these trends will help you year over year to optimize your rates to increase your bookings.
Return Guests
Guest loyalty is often overlooked as a meaningful metric to determine your reach. It’s good to know whether the majority of your bookings come from a wide client base or a few loyal guests. This will help you to determine whether your marketing strategies need to be adjusted.
Operational Fees
These fees include booking or listing fees, marketing fees and property management fees. In the first year of listing your vacation home, this metric is important. Your total spend on operational fees is a metric with the biggest chance for improvement as there are many different options for managing your vacation home. Knowing this metric will also help you determine which listing sites give you the best bang for your buck!
While this list isn’t all-inclusive, knowing these metrics can help paint the picture of your vacation home’s financial health and your ROI. After identifying your benchmarks, use each metrics drive your optmization efforts. For help optimizing these metrics and learning your options for property management, Contact a Casiola agent today!
