Occupancy rate vs nightly rate: which matters more?

Category: Pricing & Revenue

By: Megan O'Connor

Posted: 2025-12-16T10:59:03.888Z

I'm having an internal debate with myself. My 2BR in Chicago was running at 80% occupancy at $120/night. I raised prices to $145/night and my occupancy dropped to 62%. Monthly revenue actually went DOWN slightly but my costs also dropped (fewer turnovers). So my profit stayed roughly the same. Which metric should I be optimizing for? High occupancy at moderate prices or moderate occupancy at high prices?

Reply by David Okafor:

The metric you should actually track is **RevPAN (Revenue Per Available Night)**. It combines both occupancy and nightly rate into one number. RevPAN = (Total Revenue) ÷ (Total Available Nights) Your example: - Before: 80% × $120 = $96 RevPAN - After: 62% × $145 = $89.90 RevPAN So you actually went DOWN in overall revenue efficiency despite the price increase. The higher price didn't compensate for the lost bookings. The sweet spot is usually 70-80% occupancy in most markets. Below 65% and you're pricing too high. Above 85% and you're probably pricing too low (you could charge more and still book). AirDNA (https://airdna.co) shows the RevPAN of top performers in your market. Compare yours to theirs.

Reply by Michael Thompson:

Chicago host here — I've found 75% occupancy to be my sweet spot for maximizing both revenue and quality of life (fewer turnovers to manage). When I use PriceLabs (https://pricelabs.co), I set my target occupancy to 75-80% and let the algorithm adjust prices to hit that range. If I'm above 80%, it raises prices. Below 70%, it lowers them. Works beautifully once you dial in the base price correctly. Also consider: occupancy affects your Airbnb search ranking. Consistently empty nights signal to the algorithm that something's wrong with your listing. So moderate occupancy with good reviews > low occupancy at premium prices for long-term visibility.

Reply by Tasha Williams:

One factor people miss: **guest quality tends to be better at higher prices.** When I raised my rates, I noticed: - Fewer noise complaints - Less property damage - Higher average review scores - Guests who genuinely appreciated the space It's not always about raw revenue. Sometimes the "right" price for your sanity and long-term review scores is slightly higher even if it means a few empty nights. Track your numbers in a spreadsheet or use DealCheck (https://dealcheck.io) to model different scenarios. The answer depends entirely on your specific cost structure and market.