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The average ADR trap: why your Airbnb deal looks better on paper

Planning with one average for the whole year can hide the months your Airbnb loses money, and make it look like you'll earn back your investment sooner than you will. Here's a simple example.

When people forecast an Airbnb, most use one average nightly rate (often called ADR, average daily rate) and one average occupancy for the whole year. It's quick. But because short-term rentals are seasonal, that average hides the months you could lose money.

Here's one example property, forecast both ways. Net profit means what's left each month after all running costs.

Forecast with a yearly average£1,714 every monthNet profit looks the same all year, so you'd expect to earn back your £12,000 set-up costs in about 7 months.
Forecast month by month3 months at a lossDecember, January and February each lose £1,005. Earning back your £12,000 set-up costs actually takes 10 months.

Net profit each month: the yearly average vs month by month

Example property, launched in October. Net profit is what is left after all monthly running costs.

Monthly profit, month by month vs the yearly averageExample property launched in October. December to February each lose £1,005; June to August each make £4,260. The flat average shows £1,714 every month.-£1k£0£1k£2k£3k£4kOct (Medium season): £1,800 net profitOctNov (Medium season): £1,800 net profitNovDec (Low season): -£1,005 net profitDec-£1,005Jan (Low season): -£1,005 net profitJan-£1,005Feb (Low season): -£1,005 net profitFeb-£1,005Mar (Medium season): £1,800 net profitMarApr (Medium season): £1,800 net profitAprMay (Medium season): £1,800 net profitMayJun (High season): £4,260 net profitJunJul (High season): £4,260 net profitJul£4,260Aug (High season): £4,260 net profitAugSep (Medium season): £1,800 net profitSepYearly average: £1,714/month
High seasonMedium seasonLow seasonWhat the yearly average shows
View as a table
MonthNet profit
Oct£1,800
Nov£1,800
Dec-£1,005
Jan-£1,005
Feb-£1,005
Mar£1,800
Apr£1,800
May£1,800
Jun£4,260
Jul£4,260
Aug£4,260
Sep£1,800
Illustrative example: nightly rates of £410 to £520, occupancy of 65% to 85%, £9,000 monthly running costs and £12,000 set-up costs (initial investment).

Same property, same year, different story

Both forecasts add up to the same profit over the year. The difference is when the money arrives. Launch in October and the average never warns you that your first winter runs at a loss, or that earning back your set-up costs takes three months longer than you planned.

That's the gap that catches out new hosts: not a bad deal, but a deal they couldn't see clearly.

Forecast the dips before you sign

The Prop AnalytiX Analysis Extension captures an accurate reflection of ADR and occupancy for every month from PriceLabs or Property Market Intel in one click. The Calculator then shows your profit and ROI term month by month, with every cost included.

Step-by-step guides: using PriceLabs · using Property Market Intel

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Capture every month's ADR and occupancy in one click, and forecast your real ROI term.

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