In today’s competitive market, maximizing revenue in short-term rental businesses is more crucial than ever. Hospitality professionals must adapt and innovate to capitalize on every available booking opportunity. One of the strategies for boosting income involves identifying and filling gap nights—those tricky single nights that fall between longer bookings. By focusing on these overlooked opportunities, rental operators can significantly increase their occupancy rates and revenue.
Understanding Gap Nights
Gap nights in short-term rentals refer to the vacant days between bookings on a property’s calendar. These are also known as “orphan days”, “orphan nights” or “booking gaps”. Filling these gap nights is important for vacation rental professionals to maximize occupancy and revenue.
Some key points about gap nights:
- Gap nights occur when the minimum stay requirement exceeds 1 night, leaving vacant days between bookings. For example, if the minimum stay is 2 nights and there is a booking from Monday-Wednesday, the Thursday night would be a gap night.
- Owners can offer discounted rates on gap nights to incentivize guests to book and fill those vacant days. Even with a deep discount, this is “found money” since there are no additional fixed costs like cleaning fees.
- Owners can use dynamic pricing and adjust minimum stay requirements to help prevent and fill gap nights. Offering a discounted rate, early check-in, or late check-out are other tactics to fill gap nights.
- Gap nights can be a significant source of lost revenue if not managed properly. It is recommended to use vacation rental software like PriceLabs, providing tools to help identify and fill gap nights automatically.
Short-term rental professionals always aim to fill in order to maximize occupancy and revenue for their short-term rental properties.
The Financial Impact of Gap Nights
How Gap Nights Affect Overall Revenue
The unbooked nights between two reservations, can significantly impact the revenue potential of short-term rentals. Here’s how these breaks in occupancy impact your business and why you should be monitoring and addressing this.
Lost Revenue Opportunities
Each unbooked night represents a direct loss of potential income. For instance, if a property typically earns $200 per night and experiences five gap nights in a month, the business loses $1,000 in revenue that month.
Operational Costs
While the property remains vacant, fixed costs such as mortgage payments, utilities, and maintenance continue to accrue, effectively increasing the cost per booked night.
Pricing Strategy
Property managers or investors often reduce prices to fill gap nights, which can lower the average nightly rate and overall monthly revenue. However, this strategy might not always cover the operational costs, leading to diminished profitability.
Seasonal Fluctuations
During peak seasons, the impact of gap nights is more pronounced due to the higher demand and potential earnings per night. Conversely, during off-peak times, even though the loss per night might be lower, prolonged vacancies can accumulate substantial revenue losses over time.
Long-Term Impact
Frequent gap nights might indicate issues with pricing, property appeal, or marketing strategies, which could affect long-term occupancy rates and the property’s reputation in competitive rental markets.
Calculating the Opportunities of Gap Nights Revenue
Let’s review and example of gap nights opportunities to understand the financial implications
To calculate the opportunity of adding a gap night upsell in a hospitality business, we need to first determine the total number of nights available, the nights booked, and then estimate the number of potential gap nights that could be filled. Let’s walk through the calculations with the given data:
Data Overview:
- Number of listings: 10
- Average nightly rate: $200
- Occupancy rate: 75%
- Days in a year: 365 (for simplicity, we’ll assume non-leap year)
Step 1: Calculate Total Nights Available
Total nights available per year for all listings = Number of listings × Days in a yearTotal Nights Available=10×365=3,650 nightsTotal Nights Available=10×365=3,650nights
Step 2: Calculate Nights Booked Per Year
Nights booked per year = Total nights available × Occupancy rateNights Booked=3,650×0.75=2,737.5 nightsNights Booked=3,650×0.75=2,737.5nightsFor simplicity, let’s round this to 2,738 nights.
Step 3: Estimating Gap Nights
Gap nights are typically the single nights available between two bookings that are harder to fill. The exact calculation of gap nights would require detailed booking data to see exactly how bookings are distributed throughout the year. However, we can make a simplified assumption that 10% of the nights left (unbooked nights) could potentially be gap nights that could be targeted for upselling.
Unbooked nights per year = Total nights available – Nights bookedUnbooked Nights=3,650−2,738=912 nightsUnbooked Nights=3,650−2,738=912nights
Estimated gap nights = 10% of unbooked nightsEstimated Gap Nights=0.10×912=91.2 nightsEstimated Gap Nights=0.10×912=91.2nightsRounding this, we get approximately 91 gap nights.
Step 4: Potential Revenue from Gap Nights
Potential revenue from filling all gap nights = Number of gap nights × Nightly ratePotential Revenue=91×200=$18,200Potential Revenue=91×200=$18,200
Conclusion
By potentially filling these 91 gap nights, the vacation rental operator could potentially add an extra $18,200 to their annual revenue. Implementing a strategy to upsell these gap nights, perhaps by offering special deals or promotions, could help in capturing this additional revenue.
How to Avoid Gap Nights in Short-Term Rentals
Adjust Minimum Stay Requirements
- Set flexible minimum stay requirements that can adapt to demand and booking patterns. Require longer minimum stays (e.g. 3-4 nights) for peak periods, but allow shorter 1-2 night stays during slower periods.
- Use “adjacent day” booking rules to allow shorter stays that don’t create gap nights, such as a 1-night booking before or after an existing reservation.
- Offer discounted rates on “last-minute” bookings within a certain window (e.g. 7 days) to incentivize shorter stays and fill gap nights.
Use Dynamic Pricing
- Implement dynamic pricing strategies that automatically adjust nightly rates based on demand, seasonality, and booking windows. This can help prevent and fill gap nights.
- Offer discounted rates on gap nights to make them more appealing to guests and increase bookings.
Automate Gap Night Management
- Use vacation rental software like PriceLabs that can automatically identify gap nights and Enso Connect to send personalized offers to guests to fill them.
- Set up automated email templates and triggers to offer discounted rates or extended stays to guests already booked before/after a gap night.
Promote Gap Night Deals
- Proactively market discounted rates or extended stay offers for gap nights on your listing, website, and social media.
- Reach out directly to guests with upcoming bookings to offer deals on adding an extra night and filling the gap.
Example of driving gap night revenue – High Street Townhouse
By strategically filling gap nights, short-term rental managers and investors can boost occupancy rates. A prime example of this successful approach is High Street Townhouse in Manchester, which consistently achieves an impressive occupancy rate of 90%. This demonstrates the effectiveness of targeting and filling these single-night vacancies in enhancing overall occupancy.
Boost Your Revenue and Guest Satisfaction with Our Gap Night Automation
