Cap rate, cash-on-cash, and RevPAR: which number to trust when
Four metrics get quoted constantly in short-term rental discussions. They answer different questions, and mixing them up is how people talk past each other.
Spend an hour in any short-term rental forum and you will see four numbers used as if they were interchangeable. They are not, and the confusion is expensive.
ADR: average daily rate
What you charge per booked night, averaged over the year. It tells you about pricing power and nothing about how full you are.
Useful for: comparing your rate to the market. A property with a strong ADR and weak occupancy is often priced above what its quality supports.
Misleading when: quoted alone. A $500 ADR at 25% occupancy loses to a $200 ADR at 70%.
Occupancy
The share of available nights that are booked. Pairs with ADR and means little without it.
One caution: definitions vary. Some sources count only nights the property was listed as available, which flatters an owner who blocks the calendar in the low season. When comparing, make sure you are comparing the same measure.
RevPAR: revenue per available rental
ADR multiplied by occupancy. This is the number that combines the two above into one honest figure, and it is the right metric for comparing two properties or tracking your own performance over time.
RevPAR is forecast up 2.9% nationally in 2026 on stronger nightly rates, which is a cleaner statement about market health than either component alone.
Cap rate
Net operating income divided by purchase price. It ignores financing entirely, which is exactly what makes it useful: it lets you compare two properties as assets without your particular loan distorting the picture.
Most markets sit somewhere in the 6 to 8% range, with strong short-term rental markets running higher. Treat an unusually high cap rate as a question rather than a conclusion. Something is usually explaining it.
Cash-on-cash return
Annual pre-tax cash flow divided by the cash you actually put in. This is the number that answers what your money is doing, and it is the one most people actually care about even when they are quoting cap rate.
Because it includes financing, it moves with your down payment and your rate. The same property can show a 6% cap rate and a 14% cash-on-cash return, or a negative one, depending purely on the loan.
The number nobody quotes
Net operating income after honest expenses. Cleaning, management, utilities, short-term rental insurance rather than homeowner insurance, lodging tax, platform fees, maintenance, software, and replacement of things guests break.
Most disappointing short-term rental investments are not disappointing because the revenue missed. They are disappointing because the expense line was built from optimism. If you get one number right, make it this one.
