If you want to know if your vacation rental is really profitable, you need more than intuition. Here you have a clear and replicable method to calculate the profitability of a vacation rental with formulas, few data and a realistic example of Barcelona. We also offer you a calculator to estimate it in minutes.
What does “profitability” mean in vacation rentals?
We talk about how much you keep (in percentage or in euros) after exploiting your accommodation as a vacation rental. It is important to distinguish between:
- Gross Income (GI): the revenue generated per night, before deducting costs.
- Net Profit (NP): income remaining after commissions, cleaning, supplies, local taxes, etc.
- Gross Profitability (%): GI / Total investment in the asset.
- Net Profitability (%): NP / Total investment in assets.
- Cash-on-Cash (%): NP / equity invested (useful if there is a mortgage).
At BCN Flat Management, We usually use these three perspectives (gross, net and cash-on-cash) to decide whether an apartment is worthwhile and which factors to attack first (average rate, occupancy, costs).
The data you need (and how to get it)
To avoid assumptions, define these minimum requirements.
In our case, we collect this data from the PMS, OTAs and monthly accounting:
- ADR (average nightly rate) and expected occupancy (or last 12 months).
- Average length of stay (nights per booking) to estimate the number of cleanings.
- Commissions (OTA, payment gateway, management/administration).
- Fixed costs (utilities, community, insurance, IBI, license, maintenance).
- Variable costs per reserve (cleaning, laundry, amenities).
- Total investment (purchase price + taxes/expenses + furniture + renovations).
In Barcelona, at BCN Flat Management, we usually validate ADR and occupancy with actual neighborhood and seasonal data; a 5-10 % error in any of these metrics can erase profitability.
Key formulas for calculating profit and profitability
Apply these formulas in your spreadsheet or with a calculator:
| Magnitude | Formula | Notes |
|---|---|---|
| Gross Revenues (GR) | ADR × Nights sold | Nights sold = Occupancy × 365 |
| Cost of commissions | % OTA × IB + % Management × IB |
Realistic example in Barcelona (with numbers)
Let's assume an apartment in the Eixample district with:
- ADR = €160
- Occupancy = 70 % → Nights sold ≈ 365 × 0,70 = 256
- Average stay = 4 nights → Reservations = 256 / 4 = 64
- OTA Commission = 15 % of Gross Revenue
- Comprehensive management = 15 % of Gross Revenues
- Annual fixed costs: Utilities 1,800 €, Community 900 €, IBI 600 €, Insurance 250 €, Maintenance 500 €, License 300 €.
- Costs per reservation: Cleaning 45 €, Laundry + Amenities 25 €.
- Total investment (Purchase + Expenses + Furniture): 358,000 €.
Step-by-step calculations:
- Gross Income (GI) = 160 × 256 = 40.960 €
- Commissions = 15 % × 40.960 + 15 % × 40.960 = 6.144 + 6.144 = 12.288 €
- Variable costs = (45 + 25) × 64 = 70 × 64 = 4.480 €
- Fixed costs = 1.800 + 900 + 600 + 250 + 500 + 300 = 4.350 €
- Net Profit (NP) = 40.960 - 12.288 - 4.480 - 4.350 = 19.842 €
Gross profitability = 40,960 / 358,000 = 11.44 %
Net return = 19,842 / 358,000 = 5.54 %
At BCN Flat Management, we usually compare this NP with a conservative scenario (-10 % ADR and -5 percentage points of occupancy) to ensure that the asset remains viable in the off-season.
Key levers of profitability
Not everything weighs the same. In our experience, these are the levers we attack first:
- ADR and occupancyincreasing ADR by €10 for the same occupancy can add thousands of euros per year. Dynamic pricing and tight minimum stays are key.
- Frequency of cleaningIf you increase the average stay, you reduce cleanings per booking and improve the margin without touching the rate.
- Channels and commissions: consolidating direct bookings reduces the average cost per booking.
- Operationsautonomous check-in, preventive maintenance and efficient cleaning routes.
In our case, we tend to prioritize price and minimum stay optimization first; when ADR is well positioned, cancellations go down and profitable occupancy goes up (but not at any price).
Decision thresholds: when is it worth it?
In Barcelona, we see interesting projects from a net return ≥5-6 % on investment and with room for operational improvement. If the net return is consistently below 4 %, we usually rethink the use (medium/long term) or renegotiate conditions.
At BCN Flat Management we help owners to interpret these numbers honestly: if the apartment is not profitable, we say so; if there is enough to distribute, we propose a growth and reinvestment plan.
Calculate your profitability in 3 minutes.
In order not to struggle with spreadsheets, use our profitability calculator.
Do you need integrated management and a scorecard?
If you prefer to delegate the operation and receive a clear monthly report (occupancy, ADR, RevPAR, booking costs and margin), BCN Flat Management offers comprehensive management in Barcelona with a focus on net profitability, not only on nights sold. At BCN Flat Management, We usually set measurable objectives and review them on a quarterly basis.
Quick checklist before investing
These points allow you to validate in a few hours if the project makes sense. At BCN Flat Management, We usually use it in the pre-feasibility phase:
-
- Municipal license and clear regulations for the property.
- ADR and micro-market occupancy (not city averages).
- Average stay and seasonality (peaks and valleys).
- Actual cost per reservation (cleaning, laundry, amenities, incidents).
- Direct booking plan (web, meta-search engines, CRM, campaigns).
- Stress scenarios: -10 % ADR and -10 occupancy points.
With the numbers on the table, it is easier to decide. If you want, we can review your data and propose concrete adjustments in prices, minimum stay and operations.