March 13, 2023
Adam Hoeksema
The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 28,716 tax returns that were filed in the Airbnb industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their Airbnb business.
We hope that this data will be helpful for you as a “reality check” for your financial projections and Airbnb business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.
Here is what we will cover in this article:
Learn How to Use this Financial Data
If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data.
How many Airbnb businesses in the US are sole proprietorships
There are approximately 29,000 Airbnb businesses in the US organized as sole proprietorships. We specifically analyzed 28,716 companies based on the 2019 IRS tax return data.
Average annual revenue for Airbnb companies
The average annual revenue for all sole proprietorship Airbnb businesses in the U.S. was just $29,183.
While this number might seem low, you need to remember that many Airbnb hosts are just operating a single property as a side hustle business, and not a full time job.
This underscores the importance of actually creating your own Airbnb revenue projections based on your specific Airbnb business plan.
Average annual expenses for an Airbnb business
The average annual expenses for all sole proprietorship Airbnb businesses in the U.S. was $32,411.
It should jump out to you immediately that average annual expenses for an Airbnb business are greater than total revenue. The specific dollar amount of expenses isn’t all that important, but the ratio of expenses to revenue can be informative for what other short term rental businesses might experience.
Average net profit margin for a Airbnb business
The average net profit margin for an Airbnb business was -11%.
This might seem shocking, but you need to keep in mind a couple of things.
- Once you add back in depreciation which amounted to 12%, Airbnb businesses are actually breakeven or slightly profitable on average.
- You also need to consider the appreciation in value of the property. So if the property increased in value by 7% per year, your total return as an investor looks much different than the simple net profit margin calculation.
How much can I make by owning an Airbnb business?
On average you can expect to breakeven from a cash flow perspective, and then your upside potential is the appreciation of the property over time. We dig into a ton of detail on the steps to start and the earnings potential of a short term rental property in our blog post - How to Start an Airbnb Business.
Top 9 expenses for an Airbnb business
Based on the tax returns of 28,000+ sole proprietors operating in the Airbnb industry, the following were the 9 largest business expenses as a percentage of revenue.
Average depreciation expense for an Airbnb business
The average Airbnb sole prop spent 12% of revenue on depreciation.
As a reminder, depreciation is a non cash expense, so from a cash flow perspective you can add back depreciation to your net profit which brings the average Airbnb business to roughly a breakeven level.
Average rent expense for an Airbnb business
The average Airbnb business spent 11% of annual revenue on rent.
This is interesting, this highlights that a material percentage of Airbnb hosts must be renting their property instead of owning the property.
Average interest expense for an Airbnb business
The average sole proprietor Airbnb business spent roughly 10% of annual revenue on interest expenses.
For those hosts that don’t rent their property, they might own the property and have a mortgage loan. As mortgage rates continue to increase, you can see the massive impact that interest rates can have on Airbnb profitability in our video - Airbnb and Interest Rates.
Average consumables expense for an Airbnb business
The average sole proprietor Airbnb company spent roughly 9% of annual revenue on material costs. This would be for consumable items like snacks, drinks, paper products, cleaning products, etc.
Average utility cost for an Airbnb business
The average Airbnb host spent roughly 8% of annual revenue on utilities.
Average repair cost for an Airbnb business
The average Airbnb host spent roughly 6% of annual revenue on repairs to the property.
Important Details about the Data
I want to point out a few key items about the data:
- You can download this data for free from the IRS website.
- The data includes 28,716 Airbnb sole proprietorships in the U.S. in 2019.
- This data will include businesses that operate full time, and businesses that only operate on a part time basis.
- Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.
- This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.
- We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry. COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data.
If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us!
