This article is the second of a three-part blog series where we unpack the latest trends and insights from Uplisting’s 2023 Industry Trends Report. If you haven’t had a chance to read our first post in the series, we encourage you to check it out for some valuable context.

In this post we’ll dive deeper into an intriguing question: "How much money can you actually make with short-term rentals?" To explore this, we'll rely on the insights shared by Vince Breslin, Cofounder and CEO of Uplisting, and Zach Busekrus, Cofounder of Sponstayneous, coupled with responses from Uplisting’s recent survey.

We will guide you through a detailed breakdown of the earnings potential in the STR industry, shedding light on key factors such as revenue, profit margins, and the number of properties managed. Whether you're an experienced property manager or a newbie, this post will offer valuable perspectives and unveil what it really means to make money in the world of short-term rentals.

Exploring the STR Industry Trends Report: Key Questions

In the industry report, we asked seven key questions. They are: 

  1. What is your annual booking revenue? This question is critical in determining the gross income participants are generating from their STR business.
  2. What is your net profit percentage from revenue? By asking this, we aim to uncover the profitability after all expenses, providing a clear picture of the financial health and success of their STR operations.
  3. What is your average occupancy rate? The response to this question reveals how frequently properties are booked, influencing both revenue and profit figures.
  4. How many properties are you managing? This gives an idea of the scale of operations for each respondent, influencing potential earnings and challenges.
  5. How many properties are you planning to operate? This question assesses participants' growth ambitions and future potential.
  6. How many employees are in your organization? The number of employees indicates the operational capacity of the business, impacting profitability and growth potential.
  7. How long have you been in the STR industry? This provides context around experience level and industry knowledge, factors that could impact all of the above elements.

It’s worth noting that the respondents in this survey are typically property managers. These are industry professionals managing multiple properties, often for different owners. 

Decoding the Magic Number: 26 

A fascinating revelation from our 2023 Industry Trends Report is the emergence of the number 26. Based on the responses we received, it appears that short-term rentals become a primary income source for property managers once they hit around 26 properties. This number reflects a critical tipping point in the property management business where the revenue from rentals outweighs other income sources.

While reaching 26 properties represents a significant shift in both operations and revenue, it's not as daunting as it might seem. Yes, the path toward this milestone brings increased responsibilities and complexity in regulatory compliance. However, it also opens doors to potentially higher and more stable revenues.

And remember, our data primarily mirrors the experiences of property managers, not individual owners. Thus, this 'magic number' could be different for those who personally own and manage their properties.

Understanding Profit Margins and Revenue in the STR Industry

Our Uplisting Industry Trends Report provides a detailed picture of revenue generation in the STR industry. Let's decipher the average revenues and profit margins tied to the number of properties managed.

For solo ventures, a single property generates an average of $45,000 in revenue, albeit the spectrum is wide, ranging from $7,000 to $200,000. 

As property managers grow their portfolios, so does their revenue. Companies managing two to five properties average $134,000 in revenue; those with five to 25 properties see revenues of $310,000. Interestingly, when property managers reach our magic number, (26 properties) their revenue leaps to a hefty one million dollars. The top of the ladder belongs to those managing 51 or more properties, garnering $2.7 million in revenue.

However, as revenue climbs, profit margins take an interesting turn—they tend to decrease. This is largely because as businesses expand, their expenses increase—there are more properties to maintain, more guests to serve, and more staff to hire. For instance, the largest companies that responded to our survey indicated a profit margin of around 20%-30%.

Balancing Growth and Profitability

While the revenue growth tied to portfolio expansion might be enticing, the diminishing returns in profit margins also mean you should pause and consider your next moves before making any big decisions. Growth for the sake of growth isn’t always a good thing. 

In fact, managing a portfolio of 10-20 properties could potentially offer a profitable and manageable business model, particularly for owners who prefer a hands-on approach to property management.

Striking the right balance hinges largely on individual or company goals. Aspiring to scale quickly might not be the right decision if your resources or management capacities aren't prepared to handle the increased workload and complexity.

The decision to grow should be weighed carefully, considering both your current circumstances and long-term aspirations.

The Role of Dynamic Pricing and Software

In the first blog post from this 3-part series, we talked about overcoming any fear with dynamic pricing tools. We can’t emphasize that enough. 

Dynamic pricing plays a significant role in STR strategy, leading to higher occupancy rates and profit margins.

Software tools like Price Labs and Beyond Pricing make dynamic pricing easy, offering automated capabilities that let you adjust pricing according to market fluctuations and demand. At Uplisting, we find that our customers primarily rely on Price Labs, but the choice is generally a matter of personal preference. 

Additionally, there’s an important distinction to note between dynamic pricing and revenue management. The former adjusts prices based on market demand, while the latter involves broader strategies like reviewing your numbers to make larger decisions for your business. Rented is a popular tool when it comes to revenue management. 

Final Thoughts 

In reflecting on the survey findings, nothing stands out as truly surprising to us. The results reaffirm our understanding that the short-term rental market is indeed profitable. And unlike news headlines would lead you to believe, the short-term rental market isn’t experiencing any doomsday events. The business of STRs continues to progress steadily, offering both long-term and short-term opportunities. 

Of course, the landscape is not without its challenges. Regardless of the number of properties managed, companies consistently grapple with securing bookings and expanding their portfolios. The 26-property range marks a pivotal point and requires reliable staffing and a new readiness to navigate local and city regulations. At this stage, a shift in focus toward the 'big picture' becomes imperative, ushering in an exciting yet challenging phase of growth and evolution.

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