Knowing how much a tourist property bills is relatively easy. Knowing how much its owner really earns is another matter.
A property that generates €30,000 a year does not necessarily produce €30,000 in profit, even if the expenses directly associated with bookings are small.
To understand the real profitability, one must start from all the income obtained by the property and deduct all the costs necessary to maintain, market, and operate it during the analyzed period.
The Short Answer
The real profit of a tourist property is obtained by subtracting all the actual expenses derived from its operation from its income.
Real Profit = Income - Operating Expenses
Then, to know its profitability, that profit must be related to the investment made or the value of the property, depending on what we want to analyze.
The problem is that many owners miscalculate one of the two parts of this equation.
Billing is Not Profit
Let’s imagine a tourist property that generates €32,000 in bookings over a year.
At first glance, this may seem like an excellent result. But during that same year, there have been commissions from Airbnb, Booking, or other platforms; cleaning and laundry expenses; electricity, water, gas, and Internet; insurance; maintenance and repairs; welcome products and consumables; management software and tools; professional services; advertising; management fees; and other expenses related to the activity.
If all those costs amount to €13,500, the real result of the operation is not €32,000.
€32,000 - €13,500 = €18,500
This is the figure that allows us to start understanding how much the property is really producing.
There Are Expenses That Are Often Forgotten
One of the most common mistakes is to account only for those expenses directly related to a booking, such as cleaning or platform commissions.
However, a property incurs costs even when it has no guests. Insurance continues. Internet continues. Certain supplies continue. There may be maintenance, a community fee, software, consulting, or other recurring services.
If we want to know the real economic result of the operation, these costs must also be taken into account.
What About the Mortgage?
Here it is important to differentiate two concepts.
One thing is to analyze how the economic operation of the property works and another is to analyze the money that is finally available for the owner.
To study the operation of the accommodation, it is very useful to separate the operating result from its financing. This allows for a comparison between two properties regardless of whether one has a mortgage and the other is fully paid off.
Then, the financial cost can be added to know the final economic flow for the owner.
These are two different questions:
- Is my property profitable as a business?
- How much money do I really have left after also paying for its financing?
Both answers are important, but they should not be confused.
Practical Example
Let’s suppose a property earns during twelve months:
- Income from bookings: €35,000
- Commissions from platforms and payment methods: €4,200
- Cleaning and laundry: €3,400
- Supplies: €2,700
- Maintenance and small repairs: €1,100
- Insurance, Internet, software, and other expenses: €1,600
The operating result would be:
€35,000 - €13,000 = €22,000
The property has generated, therefore, €22,000 before considering financing and taxes.
From there, other indicators can be calculated depending on what the owner wants to know: margin, return on investment, return on property value, cash flow, or tax result.
Occupancy Doesn’t Explain Everything
Having a very high occupancy rate does not necessarily mean earning more money.
A property can achieve a 90% occupancy rate due to prices that are too low and end up generating less profit than another with a 70% occupancy rate and better rates.
That’s why it is more useful to analyze income, occupancy, ADR, RevPAR, expenses, and margin together.
The correct question should not only be “How many days am I occupied?”, but “How much profit does each property generate and what can I do to improve it?”
When Managing Multiple Properties, the Problem Increases
For a professional manager, it is not enough to know the total result of all their properties. They need to know what happens in each accommodation.
They may have ten properties and discover that three concentrate a good part of the profit while others barely leave a margin.
They also need to correctly separate the owner’s money from their own income as a manager, controlling commissions, bookings, collections, expenses, and settlements.
Without that separation, it is difficult to know which properties are really working and which need changes.
What Should an Owner Monitor?
At a minimum, they should be able to answer these questions at any time:
- How much have I billed?
- How much have I spent?
- How much am I really earning?
- What percentage of my income goes to expenses?
- Which months are really profitable?
- Which bookings leave the greatest margin?
- Which expenses are increasing?
- Am I collecting everything I should?
- Is my property improving or worsening compared to last year?
And, above all: What can I do to improve the result?
Because knowing the numbers is only the first part. The really useful information is the one that allows for decision-making.
From Data to Decisions
Gatavia was born precisely around that idea: not to limit itself to showing bookings, income, and expenses, but to turn all that information into a complete economic view of the property.
The goal is for an owner to know how much they are earning, how much they are spending, what is happening with their accommodation, and where they can improve; and for a manager to do exactly the same with each of the properties they manage.
In other words: to apply to a tourist property the same logic that a financial director would use in a company.
More clarity. More time. More life.