Short-Term Rental (Airbnb) Operating Costs by Country

If you are thinking about investing overseas, you need to be aware of the day-to-day operating costs to ensure it is a sensible and passive investment.

Don’t be fooled by pre-sale yields of 10% or even 15%. This is in most cases deceptive, as no one can predict what yields one will have over a period of 5, 10, or even 20 years.

And to be fair, 10-15% NET yields are extremely rare, but not unheard of.

Here’s why:

Common Short-Term Rental Operating Costs

Here’s a realistic breakdown of typical operating costs as a percentage of gross bookings:

Usually, short-term rental operating costs vary from 30% to 70% of the gross revenue. This means you will end up with a profit margin of 30% to 70% of the revenue.

Note: Self-management can reduce these costs, but few investors manage properties abroad full-time.

1. Platform fees: 3% to 20% on revenue

Online booking platforms like Airbnb and Booking.com are essential for visibility and bookings—but they come at a price. 

While the percentages taken from the gross revenue vary from country to country, the average is usually somewhere between 3% and 20%. So if you are making $100,000 in gross bookings, expect to pay between $3,000 and $20,000 to the platform. 

Yes, you can offset these costs by creating your own website or booking platform, but for the vast majority of short-term rental owners, these platforms bring in 90% or more of their revenue.

2. Property Management and Cleaning: 10% to 30% on revenue

Depending on the country or city you invest in, you will likely allocate a significant portion of your revenue towards a professional rental manager, a management company, or employed staff.

Rental management companies are often better options in highly developed locations where the GDP per capita is higher than $20,000 – think the USA, Canada, and most of Europe. In such places, expect to pay around 20% to 25% for management, communication, and cleaning services.

In countries with a lower GDP per capita – consider Mexico or the Dominican Republic – hiring a full-time employee can sometimes be a viable option, depending on the revenue. This could cost around 10% to 15% as a flat rate for management and cleaning.

Regardless of your choice, be sure to hire a professional who will keep your property clean and well-maintained.

3. Utilities, HOA, Energy: 5% to 20% on revenue

Utilities, HOA (Homeowners Association) fees, internet, and energy bills can vary greatly from country to country.

Some European countries have exceptionally high energy prices, while in other countries these costs are only a fraction of your revenue.

The same goes for HOA fees. Some gated communities or apartment complexes in expensive areas charge ridiculously high HOA fees (think of the Cayman Islands, Turks and Caicos), while others charge only pennies—think of Latin America.

Be sure to do your due diligence on all these costs and factor them into your business plan.

Sometimes high utility costs can make or break your investment.

4. Supplies, Maintenance and Repairs: 10% to 12% on revenue

To ensure the long-term success and positive reputation of your short-term rental property, it is prudent to budget a dedicated portion of your monthly income for ongoing maintenance and upkeep. 

A reasonable allocation to consider falls within the range of 10% to 12% of your total monthly earnings. 

Neglecting these essential aspects can lead to negative reviews, decreased occupancy rates, and a decline in overall profitability. 

Therefore, viewing maintenance and upkeep as a vital investment, rather than just an expense, will contribute significantly to the longevity and profitability of your venture.

5. VAT / Accommodation Fee / City Tax: 0% to 18% on revenue

Many regulated tourist towns and cities now have mandatory VAT (Value Added Tax) or accommodation tax. This usually varies from 4% to 18%. It is worth noting that the enforcement of this may not be highly regulated yet.

Submitting VAT tax is quite simple, though, so it doesn't come with a large overhead cost. Sometimes rental managers can do this on your behalf, or you can hire an accountant for around $100 per month who will perform this task once a month.

Not all countries have such mandatory taxes.

Short-Term Rental Operating Cost Comparisons by Country

Below is an estimated breakdown of average operating costs in key Airbnb markets. These estimates are based on local wage levels, management company quotes, tax regulations, and actual performance data from comparable listings.

Comments

In Europe and North America, operating costs are highest here due to expensive labor, tighter tax environment and stricter STR regulation. Net margins are thinner - even when occupancy is solid.

Latin America and Southeast Asia offer better net income potential due to low labor costs, friendlier tax enforcement and cheaper maintenance.

However, be aware that every property and management company is different. Always double check the costs before making any serious commitments.

Last, but not least, do not forget to include property taxes in your calculations.

If you need help buying a short-term rental abroad and manage it passively, check out our curated listings here or contact us directly [email protected] / + 372 5555 1677.