Break-Even Occupancy

Break-even occupancy answers the question that decides whether you sleep at night: what fraction of the calendar do I have to fill just to avoid losing money? You add up the annual fixed costs and the mortgage, then divide by the profit an average booked night contributes after variable costs and by 365 nights. The result is the occupancy rate where cash flow is exactly zero.

Its value is in the gap. If your break-even occupancy is 45 percent and your market runs at 55 percent, you have a 10-point cushion before the property bleeds cash. If break-even is 60 percent and the market runs at 50 percent, the deal only works in a good year and you should walk away or change the terms. Lowering the purchase price, putting more money down, or trimming operating costs all push break-even occupancy down and widen your margin of safety. Our cash flow vs cash-on-cash playbook shows the full calculation.