Why are repeat guests more profitable than first-time guests?

Repeat guests are 3-6x more profitable because: (1) Zero OTA commission fees on direct bookings (saving 15-20%), (2) Zero marketing acquisition costs (saved $50-150 per booking), (3) Higher booking rates (60% vs 2-3% for cold ads), (4) Longer stays (average 4.2 nights vs 3.1 nights), and (5) Lower operational costs (familiar guests require less support).

What is the typical OTA commission rate for vacation rentals?

OTA commission rates typically range from 15-20%: Airbnb charges 14-16% host fee (or 3% host + 14% guest with split fee model), Booking.com charges 15-18% commission, VRBO charges 8% commission + 3% payment processing (or subscription model). Direct bookings eliminate these fees entirely, putting 15-20% more revenue directly in your pocket.

How much does it cost to acquire a new vacation rental guest?

Customer acquisition cost (CAC) for vacation rentals ranges from $50-$150+ per booking: Google Ads: $3-8 per click, 2-3% conversion rate = $100-400 CAC; Facebook/Instagram Ads: $1-3 per click, 1-2% conversion rate = $150-300 CAC; OTA listings: "free" but with 15-20% commission on every booking. Email marketing to past guests has near-zero CAC ($0.10-0.50 per email) with 60%+ open rates and 8-12% booking conversion.

What percentage of vacation rental revenue should come from repeat guests?

Healthy vacation rental businesses generate 30-50% of annual revenue from repeat and referred guests within 3-5 years. First year: 5-10% repeat revenue (building the foundation). Year 2: 15-25% repeat revenue (first wave returns). Year 3+: 30-50% repeat revenue (compounding returns). Properties without a repeat guest strategy plateau at 5-15% repeat revenue, leaving significant profit on the table.

How do I calculate guest lifetime value for vacation rentals?

Guest Lifetime Value (LTV) formula: LTV = (Average Booking Value × Number of Stays × Profit Margin) + Referral Value. Example: $1,200 avg booking × 2.5 stays × 65% profit margin = $1,950. Add referral value: 30% refer 1 friend = +$585. Total LTV = $2,535 per guest. Compare this to First Booking Profit: $1,200 × 1 stay × 50% margin (after OTA fees) = $600. The LTV is 4.2x higher than first booking profit.

📈 The Long Game Series • Part 1 of 5

Why Your Guest's Second Stay Is 3x More Profitable Than Their First

The hidden economics of repeat guests: lower acquisition costs, zero OTA fees, and 60% higher booking rates. Here's the math that changes everything.

👤

Jason LaGreca

Founder, STR Host

12 min read

The $2,535 Question

You spend months perfecting your listing. You invest in professional photos. You optimize your pricing. You finally get a booking for $1,200.

After Airbnb's 15% commission ($180), operating costs ($420), and your time, you pocket about $600 in profit.

But here's what most hosts miss: That same guest is actually worth $2,535 over their lifetime — if you know how to capture them.

Let me show you the math that changed how I run my vacation rentals.

The Problem: You're Leaving 70% of Revenue on the Table

Most vacation rental hosts are stuck on what I call the "OTA Treadmill":

1
Pay to Acquire: Give Airbnb/Booking.com 15-20% commission to find guests
2
Provide Great Experience: Deliver 5-star hospitality (which you're great at!)
3
Lose the Guest: Guest leaves. You have no way to contact them directly.
4
Repeat: Pay OTAs another 15-20% to reach the same guest again

The Hidden Cost

If that guest books with you 3 times over 3 years, you'll pay OTA commissions on all 3 bookings. That's $540-720 in fees for the same person — someone who already loved your property.

The Math: Why Repeat Guests Are 3-6x More Profitable

Let's break down the real economics using a typical 3-night booking at $1,200:

🆕 First Booking (via OTA)

Booking Value$1,200

OTA Commission (15%)-$180

Operating Costs (35%)-$420

Subtotal$600

Acquisition Cost*-$0**

Net Profit$600

*OTAs don't charge upfront CAC, but you pay 15% forever
**Effective CAC is the ongoing 15% commission

🔁 Second Booking (Direct)

Booking Value$1,200

OTA Commission$0 ✓

Operating Costs (35%)-$420

Subtotal$780

Email Marketing Cost-$0.50

Net Profit$779.50

Zero OTA fees + negligible marketing cost
Email cost: ~6 emails @ $0.08 each = $0.48

$779.50 vs $600

That's 30% more profit on the second booking

And this is just the beginning...

🚀 But That's Not All

Repeat guests don't just save you money — they actually spend more:

Longer Stays

First Stay:3.1 nights

Repeat Stay:4.2 nights

+35%

Higher Spend

First Stay:$387/night

Repeat Stay:$412/night

+6.5%

Booking Rate

First Stay:2-3%

Repeat Stay:60%+

+20x

Support Time

First Stay:2.5 hours

Repeat Stay:0.5 hours

-80%

When you factor in longer stays and higher nightly rates, the second booking averages $1,730 vs $1,200 (+44%)

The Lifetime Value: Where 3x Becomes 6x

Most guests don't just come back once — they return multiple times. Here's where the real magic happens:

Guest Lifetime Value (3-Year Horizon)

Year 1: First Booking

Acquisition

Booking Value:$1,200

Net Profit (50% after OTA fees):$600

Year 2: Second Booking

Direct

Booking Value (longer stay):$1,730

Net Profit (65% no OTA fees):$1,124.50

Year 3: Third Booking

Direct

Booking Value:$1,730

Net Profit (65%):$1,124.50

Referral Bonus

Word of Mouth

30% of guests refer 1 friend:0.3 × $1,200

Referral Value:$360

TOTAL GUEST LIFETIME VALUE

$3,209

vs. $600 first booking profit

5.3x More Profitable

Industry Benchmarks

•Average repeat booking rate: Guests return 2.5 times over 3 years (hospitality industry data)
•Email marketing ROI: $53 return for every $1 spent in hospitality (EmailToolTester, 2025)
•Referral rate: 30% of satisfied guests refer at least 1 friend
•Direct booking profit margin: 15-20% higher than OTA bookings

From Repeat Guests

When I started hosting in 2022, I was 100% dependent on Airbnb. Every booking cost me 15% in fees. After implementing a repeat guest strategy using email marketing:

Year 1 (2022)

Repeat booking rate

$58,400 total revenue

Year 3 (2024)

38%

Repeat booking rate

$89,200 total revenue

Additional Profit from Repeat Guests

$6,247

in Year 3 alone (vs. paying OTA fees on all bookings)

That's why I built GuestLoop — to help other hosts capture this same value without the technical complexity.

Common Questions About Repeat Guest Profitability

What if my property is in a destination market (not many repeat guests)?

Even in destination markets, 15-25% of guests return within 3 years. Plus, referrals work even better — your guests will recommend you to friends/family planning trips to the same area. Focus on word-of-mouth marketing.

Isn't 65% profit margin too high for direct bookings?

Not at all. When you eliminate OTA fees (15-20%), reduce marketing costs (near zero for repeat guests), and decrease support time (familiar guests need less hand-holding), 65-70% margins are typical for direct repeat bookings. Some hosts achieve 75%+.

How long until I see meaningful repeat booking revenue?

Expect 12-18 months for the flywheel to spin up. Year 1: build your email list (target 80+ guests). Year 2: see 15-25% repeat revenue. Year 3+: reach 30-50% repeat revenue. The compounding really kicks in during years 2-3.

What if guests want to book through Airbnb even after staying with me?

That's totally fine! The goal isn't to force direct bookings — it's to own the relationship. If they book through Airbnb again, you still saved on the marketing cost. Over time, offer a 10% direct booking discount to incentivize the shift. Even if only 30% book direct, that's significant savings.

Do I need a separate booking website for direct bookings?

No! You can start by simply including your Airbnb/VRBO link in emails to past guests. They'll see your calendar and book. Later, you can add direct booking tools, but don't let perfect be the enemy of good. Start with email marketing first.

The Bottom Line

Your guest's first booking is an investment. You pay the OTA commission. You spend time on support. You put in the work to deliver a great experience.

Their second (and third, and fourth) booking is where you reap the returns: zero acquisition costs, zero OTA fees, higher spend, less time.

A guest who books once is worth $600.
A guest who books three times is worth $3,209.

The only difference? Having their email address and a system to stay in touch.

Ready to Turn First-Time Guests Into Repeat Revenue?

GuestLoop helps you capture guest emails, stay top-of-mind, and turn one-time visitors into a recurring revenue stream.

Start Free 14-Day Trial See How It Works

No credit card required • 90%+ email capture rate • 5-minute setup

Why Your Guest's Second Stay Is 3x More Profitable Than Their First

The $2,535 Question

The Problem: You're Leaving 70% of Revenue on the Table

The Hidden Cost

The Math: Why Repeat Guests Are 3-6x More Profitable

🆕 First Booking (via OTA)

🔁 Second Booking (Direct)

🚀 But That's Not All

The Lifetime Value: Where 3x Becomes 6x

Guest Lifetime Value (3-Year Horizon)

Year 1: First Booking

Year 2: Second Booking

Year 3: Third Booking

Referral Bonus

Industry Benchmarks

The Compounding Effect: Year 1 vs. Year 3

Year 1

Year 2

Year 3

How to Actually Capture This Value

Capture Guest Contact Info

Deliver Exceptional Experience

Stay Top of Mind

Make Direct Booking Easy

Real Example: My Property in the Blue Mountains

Common Questions About Repeat Guest Profitability

What if my property is in a destination market (not many repeat guests)?

Isn't 65% profit margin too high for direct bookings?

How long until I see meaningful repeat booking revenue?

What if guests want to book through Airbnb even after staying with me?

Do I need a separate booking website for direct bookings?

The Bottom Line

Ready to Turn First-Time Guests Into Repeat Revenue?

Continue Reading: The Long Game Series

How to Get Repeat Bookings for Vacation Rentals →

Vacation Rental Email Marketing Guide →

How to Build a Vacation Rental Email List →

Vacation Rental Guest Database Guide →