Management Essay: Fermi Problem

University
Fermi Problem
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Professor’s Name
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Fermi Problem
Airbnb occupancy rate is one of the critical determining factors for a successful rental property business. Therefore, real estate owners must understand the occupancy rate formula to operate their businesses without setbacks. According to Volgger, Pforr, Stawinoga, Taplin, and Mathews (2018, p.16), the Airbnb occupancy rate is the overall percentage of days that guests occupy on an annual basis. All investors wish to have their real estate business occupied throughout the year to avoid any loss of income. Therefore, the Airbnb occupancy rate formula is critical in calculating the number of days that real estate property should be occupied every year. In the case study, a client wants to utilize company acquisition to diversify his portfolio.
The client owns thirty residential properties across the neighborhoods of Bundoora, Kingsbury, and West Heidelberg, which are located adjacent to the La Trobe University and campus of Bundoora. In the case study, the properties have several units comprising of two bedrooms, four-bedroom townhouses, and other houses that serve the market in providing student accommodation. Therefore, revenue projection is likely to extend for a year and determine if or not the residential properties should be under Airbnb (Volgger et al. 2018, p. 318). Just as aforementioned, customers can have a chance of booking for oversight lodging through the use of Airbnb marketplace. One of the unique aspects of real estate investment is that it exceeds the performance of the stock in significant ways since they are less volatile.
Market Research
According to a marketplace report, the average price of accommodation in Melbourne is $855438. The inner-east city attracts a higher price at an average of $1,340,000. Notably, the average rent is $525 weekly, with the rent of the two-bedroom houses being $628 every week. Independent youths and maturing established independence are the main factors that influence the lifestyle of the suburb. Melbourne is located near universities, and most of the occupants enjoy the convenience of city life for either work or lectures. Over the years, the pricing of houses has increased tremendously. For the case study, the proximity of the town to universities and a clear view of the city is likely to increase the overall demand for the accommodation. Considerably, the independent youths seek for accommodation for five days in every week. For that reason, the properties’ efficiency will be as follows:
5/7 * 100 = 71.43%
For that reason, the efficiency of the agent with the responsibility of managing the property is 90%.
One of the ways of ensuring that Airbnb operates smoothly and to cover for products and service costs is to formulate fee charges during booking. As such, individual home host imposes a shared host fee and guest. Although the hosting fee is 3%, it can increase for Airbnb based on the strict cancellation policy. On the flip side, the total charges for guest service is less than 14.2% from the available subtotal booking, which entails cleaning charges and guest fees while excluding Airbnb fees and excluding taxes if applicable. However, t...