Airbnb Occupancy Rate vs Revenue: Why High Occupancy Isn't Always Better

You've hit 95% occupancy for the third month in a row. Your calendar is packed. Bookings keep rolling in. You feel like you're winning.

But when you look at your bank account, something doesn't add up. Your competitor down the street runs at 72% occupancy—but they're making $3,000 more per month than you.

What's going on?

You've fallen into the occupancy trap. You're optimizing for the wrong metric. And it's costing you thousands of dollars every single month.

The Occupancy Trap: Why 100% Occupancy Loses Money

New STR operators obsess over occupancy rate. It's the easiest metric to understand: "My property is booked X% of the time." It feels good to see your calendar fill up. It feels like success.

But here's what most operators don't realize: Occupancy rate has almost no correlation with profitability.

The Math That Changes Everything

Let's compare two San Diego properties—same location, same amenities, same 3-bed layout:

Property B earns $27,405 MORE per year while being occupied 58 fewer nights. That's an extra $2,283 per month. For doing LESS work (fewer turnovers, less wear and tear, lower cleaning costs).

This is why elite operators optimize for revenue, not occupancy.

Why High Occupancy Usually Means You're Underpriced

If you're consistently hitting 90%+ occupancy, one of three things is happening:

1. You're in an ultra-high-demand market (rare—even peak season in top markets settles at 85-90%)
2. You have a significantly better property than your comp set (possible but unlikely if you're pricing to match them)
3. You're underpriced (this is the answer 95% of the time)

Think about it from a demand perspective. If your property books instantly at $240/night, what would happen if you raised prices to $280? Or $320? Or $380?

Most operators never find out because they're afraid of losing bookings. They see a full calendar and think, "Why mess with success?"

But that's not success. That's leaving money on the table.

Understanding RevPAR: The Metric That Actually Matters

The hotel industry figured this out decades ago. They don't optimize for occupancy. They optimize for RevPAR (Revenue Per Available Room).

What Is RevPAR?

RevPAR is a simple but powerful metric:

RevPAR tells you how much revenue you're generating per night—whether it's booked or not. It's the ultimate measure of pricing efficiency.

Why RevPAR Beats Occupancy

Let's revisit our two San Diego properties using RevPAR:

Property B's RevPAR is 33% higher. That's $74.70 MORE per night—every single night of the year—despite lower occupancy.

This is why top operators track RevPAR, not occupancy. RevPAR shows you the full picture: pricing power AND demand capture.

How to Calculate Your Property's RevPAR

Pull your last 90 days of data and calculate:

1. Total nights available: 90 days
2. Total revenue earned: Add up all booking revenue (exclude cleaning fees for clean comparison)
3. RevPAR = Total Revenue ÷ 90

Example: If you earned $24,300 over 90 days, your RevPAR = $270/night.

Now compare that to your market's RevPAR (available through AirDNA or PriceLabs comp set data). If you're below market average, you're underperforming. If you're 20%+ above market average, you're elite.

The Sweet Spot: Finding Your Optimal Occupancy Rate

So if 100% occupancy is bad and 50% occupancy is bad, what's the optimal target?

The answer: It depends on your property and market.

But here are the general benchmarks elite operators use:

Optimal Occupancy Targets by Property Type

Notice the pattern? The higher your pricing power, the LOWER your optimal occupancy.

Premium properties don't need 95% occupancy because they're earning 60-80% more per booked night. They maximize revenue by maintaining pricing power, not by filling every gap.

How to Find YOUR Optimal Occupancy Rate

Here's the systematic approach top operators use:

1. Establish your current baseline: Calculate your last 90 days' occupancy rate and RevPAR
2. Test price increases: Raise prices 10-15% for dates 30+ days out
3. Monitor booking velocity: Are bookings still flowing at the new rate?
4. Calculate new RevPAR: Even if occupancy drops 5-8%, did RevPAR increase?
5. Iterate: Keep raising prices until RevPAR starts declining

Your optimal occupancy is the point where raising prices further would decrease RevPAR (because the occupancy drop outweighs the rate increase).

How Dynamic Pricing Balances Occupancy and Rate

The challenge with static pricing is that optimal occupancy varies by season, day of week, lead time, and dozens of other factors. You can't just set one price and hit your target consistently.

This is where dynamic pricing becomes essential.

How Dynamic Pricing Optimizes for RevPAR

Sophisticated dynamic pricing systems (like Calibr8ted's Golden Engine) constantly adjust prices to maintain optimal RevPAR:

• Peak season: Push prices higher, accept lower occupancy (75-80%), maximize ADR
• Shoulder season: Balance price and occupancy (78-85%), capture event premiums
• Off-season: Moderate discounts, protect floor prices, target 70-80% occupancy
• Last-minute gaps: Strategic discounts to fill orphan nights without training market to expect low prices

The Revenue Curve: Why Pricing Flexibility Matters

Here's what happens when you optimize dynamically vs. using flat pricing:

The dynamic revenue-optimized approach earns $22,855 MORE per year (26% increase) while operating at LOWER occupancy than flat pricing.

This is the power of optimizing for RevPAR, not occupancy.

Real Examples from San Diego and Austin Markets

Let's look at actual case studies showing the occupancy vs. revenue tradeoff in action.

Case Study 1: La Jolla Premium Property

Property: 3-bed oceanfront home, sleeps 8, premium finishes

Before optimization (using PriceLabs):

• Occupancy: 89%
• ADR: $298
• RevPAR: $265.22
• Annual Revenue: $96,830

After switching to Golden Engine revenue optimization:

• Occupancy: 76%
• ADR: $422
• RevPAR: $320.72
• Annual Revenue: $117,063

Result: $20,233 additional annual revenue (+21%) with 13% LOWER occupancy. Fewer turnovers, less wear and tear, higher profit margins.

Case Study 2: East Austin Private Room

Property: Private room in shared house, budget segment

Before optimization:

• Occupancy: 94%
• ADR: $42
• RevPAR: $39.48
• Annual Revenue: $14,416

After revenue optimization:

• Occupancy: 87%
• ADR: $52
• RevPAR: $45.24
• Annual Revenue: $16,513

Result: $2,097 additional annual revenue (+15%) with 7% lower occupancy. Even in budget segments, revenue optimization beats occupancy maximization.

The Pattern Across All Property Types

What we see consistently across markets:

• Operators optimizing for occupancy: 88-96% occupancy, below-market RevPAR
• Operators optimizing for revenue: 72-82% occupancy, 20-35% above-market RevPAR
• Revenue gap: $15,000-$40,000 per property per year

The revenue-optimized operators are earning dramatically more while doing LESS work.

Why Calibr8ted Optimizes for Revenue, Not Occupancy

Most pricing tools (PriceLabs, Wheelhouse, Beyond Pricing) have a fatal flaw: they're designed to maximize occupancy at competitive market rates.

This is because:

1. Occupancy is easy to measure and report
2. High occupancy "feels" successful to customers
3. Tools that push aggressive pricing create angry users ("Why is my calendar empty?")

But elite operators don't care about how their calendar LOOKS. They care about how their bank account looks.

How Golden Engine Optimizes for RevPAR

Calibr8ted's Golden Engine uses a fundamentally different approach:

• Revenue-first optimization: Every pricing decision maximizes RevPAR, not occupancy
• Property-specific targets: Your optimal occupancy is calculated from YOUR booking data, not market averages
• Lead time strategy: Last-minute discounts fill gaps without training market to expect low prices
• Competitive positioning: Prices relative to your ACTUAL competitors (the 3-4 properties you compete with), not the full market
• Real-time velocity tracking: If bookings flow faster than optimal, prices rise automatically

The result? Properties using Golden Engine typically operate at 72-82% occupancy while earning 20-35% more revenue than properties using occupancy-focused tools.

Actionable Tips for Finding Your Optimal Occupancy Rate

Ready to stop chasing occupancy and start maximizing revenue? Here's how to start:

1. Calculate Your Current RevPAR

Pull your last 90 days of data:

• Total revenue: $_______
• Total available nights: 90
• RevPAR = Total Revenue ÷ 90 = $_______/night

This is your baseline. Every pricing decision should be measured against whether it increases or decreases this number.

2. Test Price Increases on Future Dates

For dates 30+ days out, raise your prices 15-20%. Monitor:

• Does booking velocity drop significantly?
• Do you still get inquiries and bookings?
• Does your RevPAR increase even if occupancy drops slightly?

If RevPAR increases, you were underpriced. Keep testing higher.

3. Identify Your "Instant Book" Threshold

When you get a booking within 2 hours of listing a date, that date was underpriced. Track these instances. If you're getting instant books on 30%+ of your available dates, you're significantly underpriced across the board.

4. Compare Against Comp Set RevPAR

Use AirDNA or PriceLabs to find your market's average RevPAR. Your targets:

• Below market RevPAR: You're underperforming—raise prices
• At market RevPAR: You're average—test premium positioning
• 10-20% above market RevPAR: You're strong—you can push further
• 25%+ above market RevPAR: You're elite—maintain positioning

5. Use Revenue Optimization Tools

Manual pricing optimization is time-consuming and imprecise. Tools like Calibr8ted's pricing calculator analyze your property's data and recommend optimal pricing to maximize RevPAR automatically.

Conclusion: Revenue > Occupancy, Always

If you take away one thing from this guide, let it be this:

A full calendar means nothing if you're earning $240/night when you could be earning $380/night. A 78% occupancy rate is far more profitable than 94% occupancy if your ADR is 60% higher.

The path to maximizing STR revenue isn't filling every night. It's pricing each night to maximize the revenue per available night—whether booked or not.

Stop chasing occupancy. Start chasing RevPAR. Your bank account will thank you.