Profitability on Airbnb: how to calculate it and maximize your income in Spain

The rise of vacation rentals has reshaped the Spanish real estate market. While a decade ago traditional rentals dominated residential investment, today Airbnb and similar platforms have opened up new, more flexible, and potentially more lucrative revenue streams. But is it really profitable? How is that profitability measured? What factors influence it? And, most importantly, how can it be improved?

In this article, we analyze in depth the profitability of Airbnb, answering key questions for owners and investors looking to maximize their income.

What does 'profitability' really mean on Airbnb?

Talking about profitability on Airbnb implies evaluating how much net profit a property generates for tourist rental in relation to the investment and associated operating costs. Unlike long-term rental, the Airbnb model requires active management, is subject to seasonality, incurs more expenses per stay, but also offers higher margins if done correctly.

In practical terms, profitability can be measured monthly (income minus expenses) or annually, using ratios like ROI (return on investment), which allows comparing different investment options.

Factors that influence profitability

Profitability doesn't just depend on having a beautiful property or being in a tourist city. It's the result of multiple variables interacting with each other. Here are the most important ones:

1. Location

It's the most decisive factor. A property in a city with a stable tourist flow (Madrid, Valencia, Málaga) offers more potential than one in areas with seasonal or restricted demand. But it's not just the city: the exact location within it (center, alternative neighborhood, university area or near hospitals) conditions the guest profile and booking frequency.

Key point: locations with good connectivity and diversity of visitors (tourism + business) tend to be more stable throughout the year.

2. Average nightly rate (ADR)

The average price you charge per night must be competitive, but also sustainable. A high rate with low occupancy can be less profitable than an optimized rate with regular occupancy. Many owners make the mistake of imitating competitors' prices without taking into account real differences in quality, equipment or location.

Tip: calculate your target ADR based on your fixed costs and minimum occupancy to be profitable.

3. Occupancy rate

It's the percentage of nights your accommodation is booked in a period. A healthy occupancy rate is around 70-80% in well-managed urban destinations. Occupancy is influenced by seasonality, price, reviews, and the visibility of your ad. It's not a goal in itself, but a variable that must be balanced with the price.

Example: an apartment with an ADR of 95 € and 75% occupancy in Madrid can generate 2,137 €/month before expenses.

4. Operating expenses

This includes recurring costs such as:

• Cleaning per stay
• Bed linen and laundry
• Supplies (water, electricity, gas, WiFi)
• Replenishment of consumables (paper, coffee, soap)
• Airbnb commissions
• Specialized insurance
• Maintenance

These expenses are usually higher than in traditional rental. Therefore, efficient management is key to protecting margins.

5. Additional services

It's not just about renting a space. Many hosts increase income through services like private transfer, breakfast, bike rental or early check-in. They also improve the experience, and therefore the ratings, which results in higher occupancy and better positioning.

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6. Type and configuration of the accommodation

Smaller properties (studios and 1-bedroom apartments) tend to be more profitable in cities, while in tourist or rural areas it's more efficient to offer houses for groups or families. Distribution, accessibility, sound insulation level and services (terrace, air conditioning, equipped kitchen) influence the attractiveness of the accommodation.

7. Local regulations

Each autonomous community and town hall regulates vacation rentals in its own way. Some require licenses, others impose restrictions by zone, and some cities even limit the number of allowed annual days. Not knowing the regulations can turn a profitable investment into an unexpected fine.

Recommendation: before buying or adapting a property, check if it's possible to obtain a license and what conditions you must meet.

So… what combination is the most profitable?

Experience shows that the most profitable combination on Airbnb usually occurs when these elements coincide:

• City with high stable demand (not just summer)
• Small or medium-sized property, well equipped and visually attractive
• Rate between €80 and €120 per night, with an occupancy rate above 70%
• Expenses well controlled through automation and efficient outsourcing
• Professional management (with software, dynamic pricing and customer care)
• Good online reputation, with ratings >4.7 and quick response

For example, a renovated 50 m² apartment in the center of Valencia, tastefully decorated, well managed and legalized, can generate between 18,000 € and 25,000 € net per year, depending on its optimization.

How to calculate the profitability of an Airbnb

There are two main ways to calculate profitability, depending on the degree of analysis you want.

Simple method: revenue minus expenses

It's useful to have a monthly or seasonal idea. You just need to add up your gross income and subtract all costs.

Example:

• Gross income: 2,400 €/month
• Operating expenses: 850 €/month
• Monthly net profit: €1,550

It does not yet include amortization of the initial investment, but it is useful for evaluating cash flow.

ROI Method (Return on Investment)

The annual ROI allows measuring whether an investment is worth it compared to other options (bonds, funds, traditional rental).

Formula:

ROI (%) = (Annual net profit / Total investment) x 100

Example:

• Purchase price: 150,000 €
• Renovation + furniture: 20,000 €
• Total investment: 170,000 €
• Annual net profit: 18,600 €

ROI = (18,600 / 170,000) x 100 = 10,94%

And a calculator? How to estimate your profitability before launching

To evaluate before buying or reconverting a property, a spreadsheet can help you simulate different scenarios:

Variables you should include:

• Purchase price
• Renovation and furniture costs
• Rates per night (low, medium and high season)
• Expected monthly occupancy
• Expenses per stay
• Monthly fixed costs
• Platform commissions
• Taxes

This will allow you to know your break-even point (minimum number of nights to avoid losing money) and evaluate the potential ROI before committing capital.

Strategies to increase the profitability of your Airbnb

Having the right property is just the beginning. Management makes the difference. Here are some strategies with direct impact:

1. Automate everything you can

Keyless check-in, automated messages, synchronized calendars. Using management software (like Guesty, Hostfully, Smoobu...) reduces errors and allows you to scale or delegate without losing control.

2. Use dynamic pricing

Tools like PriceLabs or Beyond analyze demand and adjust your prices to maximize revenue. It's the best way to avoid static prices that make you lose money in high season or not generate bookings in low season.

3. Optimize your ad and photos

Professional photos increase the click-through rate and bookings. Descriptions should be clear and benefits-oriented. Think like a traveler: what makes your accommodation different?

4. Create an experience, not just accommodation

An apartment can be functional, but a memorable experience generates excellent reviews. Personalize details, include local recommendations and create a welcoming atmosphere. Airbnb rewards this with better positioning.

Is it still profitable to have an Airbnb?

Yes, it can be very profitable, but it's not automatic or universal. It requires prior analysis, financial control, legal compliance and professional management. In cities like Madrid, Seville, Malaga or Valencia, ROI can double that of traditional rental if done well.

However, without a clear strategy, strict expense control, and market understanding, you can end up with a poorly optimized or even legally unviable investment.

The key: analyzing each variable honestly, investing in management, and making data-driven decisions, not assumptions.

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