Revenue potential is the figure a short-term rental property could have earned if it had been available to be booked every day of the last 12 months.
Revenue potential is a metric we use in our Rentalizer tool. When creating a Rentalizer estimate, our algorithm identifies comparable properties and uses their historical performance to start building estimated revenue, average daily rate (ADR), and occupancy figures. Most of these comparable properties will have had differing numbers of days available, so in order to analyze these properties equally, we need to look at them as if they all were available every day of the last year.
This is where revenue potential comes in. We apply the ADR and occupancy rate the property achieved to 365 days, and we also factor in market seasonality, historical performance for that property, as well as the historical performance of the comparable properties. In the example above, you can see that the listing was available 248 days of the possible 365, generating
$27,500 in revenue. By applying these conditions to a full 365 days, we’re able to calculate a revenue potential of $40,000.
When creating a Rentalizer estimate, we use the revenue potentials from the comparable properties to generate the figures for the next 12 months for the address that has been entered. Learn more about how Rentalizer works here.