Modeling Future Occupancy and Rates for STRs

[Kyle A.]

I typically work in the commercial multifamily space using the LTR approach, but currently broadening scope into smaller multis, potentially using the STR approach. Those of you that have experience modeling out pro formas for STR's, what's the best way to project occupancy and rate variability throughout the year? I'm looking in areas that experience all the seasons, so I need to take into account the drastic income fluctuations throughout the year.

I've checked out tools like AirDNA, but not sure how accurate that is, and also looking into contacting super hosts or someone who specializes in STR acquisitions. Please let me know if you fit into one of those categories or if you have any other feedback regarding this, I'd love to chat.

[Alex Scattareggia]

Quote from @Kyle A.:

I typically work in the commercial multifamily space using the LTR approach, but currently broadening scope into smaller multis, potentially using the STR approach.

You are coming from a market segment that is much more hard data specific and looking to apply the same approach.  It will be helpful if you can get your hands on reliable numbers, but that will be your annoyance in this space.

To answer your initial question, I would get as many data points as possible from all of the above listed sources for revenue.  Average them out and give yourself a 10% margin of error because of the unreliability in the inputs.  We have been throwing out March 2020- January 2022 when running analyses recently because it has the potential to skew the whole data set for obvious reasons.  

The part that you can have more certainty on is the expense side, where you can get real #´s on utilities, turnover etc. As others have alluded to above, there is a bit more art and a bit less science in the STR vs CMF market. You are dealing with the whims of individual travelers over a long period of time vs one renter pool once every few years. The value-add stuff is actually pretty easy if you can narrow down the things that really drive business which with your background I am sure you will be able to do.

Cheers and good luck.