13 Feb How to Start An Airbnb | Use Market Research to Know Airbnb Occupancy Rate, Revenue, and More
In this post, I’d like to give you guys a complete guide to using AirDNA, a tool that gives you data on Airbnb occupancy rate, among others, for Airbnb short-term rental market research. If you’re new here, PassiveAirbnb is focused on renting other people’s properties to generate passive income. In my case, I’m able to consistently generate $10,000 dollars a month renting other people’s properties.
I know that sounds like a dream, but it is my reality, along with many others who took the leap and signed up for my program.
Here’s a quick overview of the available market research tools on Airbnb analytics in the market that I have used to do STR market research:
- Airbnb – a free tool
- AirDNA – a paid tool
The goal of these Airbnb research tools is to help us find a profitable location.
Essentially, a profitable location is a geographical area that attracts plenty of potential Airbnb clients. Major cities and popular holiday destinations are usually considered profitable locations.
I have written about this in my last blog post, so I’m going to link you here. It’s free and anyone can use it. However, you can only get very surface-level information. If you want 100% confidence in a profitable area, then I’d encourage you to check out the paid tools below.
If you’re just starting out as a new host, perhaps this beginner hosting guide will be of help to you.
Why Do Market Research?
Before we go any further, I would first like to briefly talk about why market research is important. Consequently, this will also explain why these tools are crucial for the growth and success of your business.
So, what is market research and why should budding entrepreneurs like yourself learn about it? In a nutshell, this is what gives you the pulse on the ground, so to speak. Business decisions, now more than ever, must be made founded on accurate information. It’s good to be “data-driven.” It’s only through data that you can understand what went wrong or right in the past, know where the business is currently standing, and project where it is going in the future.
Now, depending on which industry you’re in, there are going to be plenty of tools and applications that can help give you the data you need. And hopefully, with the information in your hands, you can make smart business decisions and strategies that will take you a step closer to your goals.
When it comes to the Airbnb business, therefore, don’t be quick to assume that just because there is a famous Instagrammable spot in the area, it’s going to attract people in need of Airbnb lodging in droves. This is where market research comes in.
It gives you a deeper look into the context by generating data into average daily rate and revenue, how to find out about Airbnb occupancy rates, and how to calculate all of them.
AirDNA is a bit more sophisticated to use, but it provides all the data that you’d need in order to make an intelligent decision. It is a paid tool that allows investors to narrow down to a profitable location by zip codes. It has the most robust analytics and features.
AirDNA’s Data Methodology
AirDNA analytics and reports are based on Airbnb data gathered from information publicly available on the Airbnb website. Their database currently tracks the performance of 4,000,000 Airbnb listings around the globe each day, generating their custom raw data reports, and updating their interactive market intelligence tool Market Minder. If you’re curious, they gather data from a method called Web-scraping.
AirDNA is the clear leader in artificial intelligence and machine learning capabilities. In a nutshell, their AI and ML can distinguish booked vs. blocked days. What this means is that the data you’re paying for is more accurate.
You can head here to learn more about their methodology in details.
**Sign up now and receive 5 mini-lessons to get you started. This training is absolutely FREE. Click Here to learn more about how you can leverage other people’s properties to build a 6-figure business on Airbnb.
How AirDNA Works
Again, you will have to pay to use their services. I was able to talk to the team at AirDNA and got additional insights of how AirDNA actually works. My goal is to walk you through their product via pictures in 5 steps.
**I recommended this tool to all of my students and readers and they all loved it. I’m only recommending it because I’ve personally used it.
Step 1 – Home Screen
I am only showing you the top part of the home screen because the bottom half is a map that you can narrow in just like Google Maps. What is also missing is the # of active rentals, rental size, rental activity, rental growth, and professional hosts down at the bottom of the home screen.
*Professional hosts = the number of hosts that have more than 1 active listing. This is a good way to judge the competition quickly.
What is cool about the home screen is that you’ll be able to judge the Market Grade of a location very quickly. In the case of Nice, France, the market Grade is a B+. It is further divided into 4 components: rental demand, revenue growth, seasonality, and regulation.
Rental demand: high score = high travel demand
Revenue growth: high score = increasing revenue per property
Seasonality: high score = the change between high and low seasonality is low
Regulation: high score = low regulation
Pro-tip: record all of your researched cities in an excel sheet and copy down each of these scores, so that the excel sheet can be your reference point to go back to. Start with 10 cities or locations that you think might be a good STR investment opportunity.
Step 2- Pricing
It further breaks down the analytics into three buckets: future supply and available rates, average daily rate( ADR), and ADR range.
This graph shows you how many active rentals are available during a given month and how much they are charging per night.
The graph breaks it down into a calendar view. It’s another way to visualize the data that they’re giving you.
This graph shows you that the total of booked properties and the ADR that it was booked. Pretty useful information.
This graph breaks down ADR further into percentiles. I always take a modest approach to my investment properties assuming that I’ll be in the 50th percentile, I am able to charge 79 dollars per night for an entire home in the month of January.
Step 3 – Occupancy Rate
Occupancy rate is self-explanatory. Booking Lead Time means how many days in advanced before a booking takes place.
In this graph, you get the occupancy rate based on the percentile.
Booking Lead Time is broken down monthly. This is good to know because it allows you to predict when your next booking will come in. It also gives you a snapshot of the location’s seasonal viability, meaning, the exact months when bookings start coming in, and for how long the influx runs. Having this data is helpful for those who run a very tight business calendar, or if there are any preparations that must be made in the property for the arrival of the guests.
Step 4 – Seasonality & Revenue
What I like about AirDNA’s seasonality feature is that I can get it down to the date of the month.
Quickly, you can tell the best month, which is good actionable intelligence to price your unit 3x, 4x or even 10x your daily rent. If you hover over a date, it’ll tell you what the RevPar for that date is. Pretty neat!
Revenue graph is pretty standard.
You can see the average weekly views. Use that to compare to your listing and see how well you’re doing. The more views generally mean there’s a higher chance of getting booked.
The feature that I really like is Amenities. This gives you a good idea to see what your competitors have and how to beat them out. If I were an investor in Nice, France, I would make all of my properties “Business Ready.”
That is it, folks!
As you can see, AirDNA’s interface is pretty easy to use and understand. This tool not only presents data in an easy-to-digest format, but also helps you arrive at an accurate analysis. With more practice using the tool, and more exposure to statistical data, you’ll be well on your way to becoming a data-driven entrepreneur with a successful business model to match.
AirDNA has it all. So, if you are data-obsessed, I’d definitely go with AirDNA.
Sign up now and receive 5 mini-lessons to get you started. The best part is that this training is absolutely FREE. Click Here now to learn more about how you can leverage other people’s properties to build a 6-figure business on Airbnb.
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