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What is Gross Revenue?
Gross revenue represents the total amount of money earned from guest stays and associated fees over a specific period. It is a 'top-line' figure on a financial statement, meaning it reflects the full, unadjusted income from rental activities.
This includes the nightly rate, cleaning fees, pet fees, and any other charges paid by the guest.
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How it works
To calculate gross revenue, a property owner or manager sums up all payments received from guests for their bookings within a defined period. For example, if a property has ten bookings in a month, the gross revenue is the total of all ten booking values.
This calculation includes all mandatory charges collected from the guest but does not subtract any costs incurred by the host. These costs, such as OTA commissions, payment processing fees, and operating expenses like utilities or maintenance, are deducted later to determine net revenue and net income.
Why it matters
Gross revenue is a primary indicator of a property's market demand and earning potential. It allows hosts to gauge the effectiveness of their pricing and marketing strategies by tracking top-line growth.
While it doesn't represent profit, it is the foundational metric from which profitability is calculated and is essential for comparing performance over time. Tracking this key performance indicator is simplified by property management software; platforms like Lodgify provide analytics dashboards that automatically calculate gross revenue and other vital metrics.
Examples
- A host calculates their gross revenue for August by adding up the total value of all bookings, including nightly rates and cleaning fees. The total comes to $9,200 before subtracting the 15% commission paid to Booking.com for some of the stays.
- For a single booking, a guest pays $200 per night for 4 nights ($800), plus a $100 cleaning fee and a $75 pet fee. The gross revenue for this individual stay is $975.
- A property manager compares two similar cabins. Cabin A has a gross revenue of $75,000 for the year, while Cabin B has $68,000, indicating that Cabin A has been more successful at securing bookings or commanding higher rates.
- When preparing annual financial reports, an owner lists a gross revenue of $50,000. From this figure, they will then subtract operating expenses, taxes, and commissions to determine their net income.
Frequently asked questions
What is the difference between gross revenue and net revenue?+
Are cleaning fees and other extra charges included in gross revenue?+
Should I include refundable security deposits in my gross revenue calculation?+
Why is it important to track gross revenue if it doesn't show my profit?+
Related terms
Net Revenue
Net revenue is the total income a vacation rental generates from bookings after subtracting direct, variable costs associated with securing that revenue, such…
Average Daily Rate (ADR)
Average Daily Rate (ADR) is a key performance metric that measures the average rental revenue earned for an occupied property per day.
Revenue Management
Revenue management is the strategic process of using data analytics to predict consumer behavior and optimize pricing and inventory availability to maximize…
Occupancy Rate
Occupancy Rate is the percentage of booked nights out of the total available nights for a property over a specific period.