60 day Case Study: $11.22 return for every $1 spent on property amenities

Problem:

 

The single-unit Airbnb wasn't generating it's potential revenue. We worked with the owner to determine how their investment in guest-experience transformed the bottom line.

 

Before investing heavily in guest-experience:

Before investing in guest experience, this one bedroom Airbnb was charging an average room rate of $50 per night. The average length of stay was 4 nights for 2 guests and spend was $10 per stay for amenities. Monthly occupancy was around 70%, roughly 21 days per month.

This means, that gross revenue was $50*21 or $1050. Gross revenue (after amenities) was $190 per stay ($50 * 4 nights - $10) or $47.50 per night. 

Results:

21 days / 4 night stays = 5.25 stays * $190 = $997.50 gross revenue per month after amenities.

Consequences / Growth Inhibitors:

Pricing couldn’t increase, as guest's would complain what they would get for the price, capping their growth at $50 for certainty of 5 star reviews

Anything above that would directly risk lower occupancy and reduced review quality.

 

After investing in guest-experience:

The Airbnb owner decided to enhance the amenities on property to make it feel more luxurious. They utilized a Pampered Guest box full of amenities to provide a warmer welcome experience and property information. In addition, they supplied a few upgrades such as kitchen utensils ($175), faster WiFi, AppleTV/Netflix and published those amenities on Airbnb. The increased wifi was $45 extra per month and AppleTV total of $130 and $7 AppleTV fee + $9 netflix fee.

The new total spend averaged out to $40 per stay and increase of $61 monthly fees. One-time spend was $305 for the first month.

They began charging $85 for short-term and $70 for mid-term stays. The property became booked for the majority of the year and currently at a 93% occupancy rate.

Results

93% in 30 days is 28 days occupied. Average price per night was $78. Average length of stay increased to 1.5 Months / 45 days which means their Airbnb became a mid-term rental from amenity upgrades.

28 days * $78 = $2184  

First month: $2184 - $305 (one-time fees) - $61 monthly dues - $40 amenity fees = $1778 in gross revenue after amenity costs.

Second month: $1778 + $305 = $2083 gross revenue after amenity costs.

What this means:

The first month investment in amenities (305+61+40=$406) resulted in a return of $2184-$1050= $1134. That means $406 generated $1134 or, for every $1 spent, $2.79 was made.

On the next month, the monthly fees were $101 for amenities and generated $1134 in different. This means that for for every $1, $11.22 was made.

And the reviews? All 5 star, raving specifically about the quality of amenities and things needed.

New key metrics: Check-in 100%, Value: 100%, Accuracy: 100%, Overall quality: 100%

• We had a very comfortable and peaceful stay. The apartment is very spacious and thoughtfully furnished. It had all the amenities needed to make us feel right at home.
• Great location and such nice and comfortable accommodations.
• Great place! Nice and big. The location was perfect for us. All the things we needed in the kitchen and bath. And laundry facilities. Perfect. Would stay again.
• Great price for a great place to stay. Nothing but good things to say about this place. Clean, welcoming, and has everything you need

 

Take-aways:

Investment in amenities and guest-experience SIGNIFICANTLY impacts gross revenues and review ratings, earning more and achieving better ratings. In this use-case, a 279% increase in month one after CAPEX and 1122% in month two onwards...

Important Notes:

There are clearly diminishing returns in investment of amenities to gross revenue. The more invested doesn't guarantee exponentially greater returns, but we encourage each host to find their own "sweet spot" of maximum return by experimenting and testing their investment in guest-experience and amenities.