Is a Shortlet Profitable in Nigeria? Do the Maths

A shortlet can be profitable in Nigeria, but only if you sell enough nights at the right price to cover all your costs. Nobody can promise that for your flat. What you can do is the maths. Three numbers tell you how many nights you must sell each month just to break even.

This guide shows you how to work it out, with a worksheet you can copy. It uses no market figures. Numbers you see online for “typical” shortlet profit are usually guesses, and your own flat is what counts.

What “profitable” means for a shortlet

Profit is the money that comes in, minus the money that goes out. For a shortlet, count it over a month, not a night. A full December does not help much if February is empty.

Ask three questions, in this order:

1. Does it cover its costs each month? If not, it is costing you money.
2. Does it beat a yearly let of the same flat? If not, a yearly tenant earns you more for less work.
3. Does it pay back what you spent to set it up? Furniture, power backup and fittings all need earning back.

The three numbers you need

1. Your fixed monthly costs. These are costs you pay whether anyone stays or not:

• rent, if you lease the flat rather than own it;
• service charge and estate dues;
• your internet plan and any TV subscription;
• wages for a caretaker or security, if you pay them monthly;
• loan repayments on furniture or power backup;
• a monthly amount set aside to replace linen, towels and furniture.

2. What one booked night leaves you. Start with your night price. Then take away the fees on that night and the costs a stay creates:

• any commission or agent’s cut on the booking;
• power for that night: fuel, electricity units or battery wear;
• water, toiletries, drinking water and cleaning products;
• laundry, and your cleaner’s pay for each changeover, shared across the nights of the stay.

3. The nights you can really sell each month. Be honest here. December and public holidays fill up; some months are quiet. Look at similar shortlets near you, such as shortlets in Lagos or Abuja, to see what you are up against.

On Cabans, the commission is 5% of the stay amount. The guest pays Paystack’s payment processing fee on top, so it does not come out of your payout. Your payout is the stay amount, less any refunds, less the 5%. You are paid within 7 days after the guest’s stay, and faster when the guest approves the payment after their trip.

Put your numbers into this worksheet:

Break-even nights, worked through

Here is an example with easy numbers. To keep the sums simple, we count everything in nights: one unit is the price of one of your own nights. These are made-up numbers to show the method, not real prices.

1. Fixed costs. Say your fixed costs for a month add up to the price of 9 nights.
2. What one night leaves you. Say fees and running costs take one fifth of each night’s price. So each booked night leaves you four fifths of a night, or 0.8.
3. Break-even. Divide the costs by what one night leaves you: 9 ÷ 0.8 = 11.25. So you need 12 booked nights to cover the month.
4. A good month. Sell 18 nights: 18 × 0.8 = 14.4, minus the 9 of costs, leaves 5.4 nights’ worth of profit.
5. A slow month. Sell 8 nights: 8 × 0.8 = 6.4, minus 9, is a loss of 2.6 nights’ worth.

In a 30-night month, 12 booked nights is 2 nights in every 5. Ask yourself honestly whether your flat can do that in most months, not just in December. Now put your own naira figures into the worksheet. The sums work the same way.

Paying back your set-up costs.Furniture, power backup and fittings are spent once, before your first guest. To see how long they take to earn back, divide them by a normal month’s profit. In the same example, say setting up cost the price of 60 nights. A month of 18 booked nights leaves 5.4 nights’ worth of profit, and 60 ÷ 5.4 = about 11. So it takes around 11 good months to earn back what you spent, before the flat is truly in profit.

Do the sum for a slow month, a normal month and a busy month. If only the busy month makes a profit, the plan is too fragile.

What pushes profit up

• Fewer empty nights. Every empty night still costs you the fixed costs.
• Longer stays. A week-long guest means one changeover, not three or four. That saves cleaning, laundry and empty gaps between guests.
• Pricing by date. Charge more for busy nights, such as December and holiday weekends, and less for quiet ones.
• A cleaning fee. A fee charged once per stay can pay your cleaner, so it does not eat into the night price.
• Lower power costs. An inverter or solar can cost less to run than a generator on diesel, once paid for.
• Good photos and fast replies. Guests book the listing they trust, and the host who answers first.
• Repeat guests. Business visitors and families who come back every year fill quiet months.

On Cabans, you can give busy nights a special day price, price a whole season with a price window, and offer a longer-stay discount or free nights. Guests get whichever saves them more, never both. See discounts and free nights.

What pulls it down

• Quiet months. Plan for the slow months, not just the busy ones.
• Power. Fuel prices can rise quickly, and a guest will run the air conditioning.
• Wear and damage. Linen, towels, mattresses and sofas wear out faster than in a normal home.
• Rent rises. If you lease the flat, a higher rent at renewal changes every sum above.
• Estate or landlord rules. Some estates and landlords do not allow short stays. Check before you spend.
• Cancellations. A guest who cancels in time gets their money back, and the nights may not resell.
• Tax. Rental income is taxable. See rental income tax in Nigeria. This guide is not tax advice.
• Your own time. If you do the work yourself, it still has a value. A manager would charge for it.

Thinking of handing the work to someone else? Read shortlet management company or manage it yourself? and add their fee to line C.

Shortlet or yearly let for your unit?

If you own the flat, a yearly let is the real competition. A yearly tenant pays you in advance and usually covers their own power and water. So compare the two like this:

1. Work out what a yearly tenant would pay you each month: the yearly rent divided by 12.
2. Add your shortlet’s fixed monthly costs.
3. Divide by what one booked night leaves you (line E).

The answer is how many nights you must sell each month just to match the yearly let. Using the example above, say a yearly tenant would pay you 6 nights’ worth a month. Then (6 + 9) ÷ 0.8 = 18.75, so you need 19 booked nights a month to match it.

If you are not confident of selling that many nights in most months, the yearly let may be the better choice. It is also less work. Our guide short let vs long-term rental compares the two in more depth, and how to calculate rental yield helps you measure the return on the property itself.

Numbers add up for your flat? List your short let and start selling nights. You can see what similar homes offer on the shortlet page first.

Guests can now book and pay online. See how to take shortlet bookings online, then learn the tools step by step in the free Host Academy.

Frequently asked questions

Related guides

Shortlet business plan template · Shortlet bookkeeping · Start a shortlet business · Short let vs long-term rental · Calculating rental yield · Can I turn my flat into a shortlet?