Most owners ask the wrong question first. It isn't "which earns more" — it's "which earns more after costs, voids, effort, wear, and the new licensing rules." That changes the answer.
The short answer
Short-term (nightly) rental usually produces the higher gross yield in Bali — roughly 8–14% versus 4.5–7% for long-term leases — but it also carries far higher operating costs (often 45–50% of gross) and realistic occupancy of only 45–65%. Long-term monthly or yearly leasing earns less on paper but runs at 85–95% occupancy with 20–30% costs and almost no day-to-day effort, so the net gap is much narrower than the headline yields suggest. From 2026, Bali's licensing and zoning rules tilt the decision further: properties in non-tourism zones may not be able to operate short-term legally at all.
Quick answer
What does each model actually mean for a Bali villa owner?
"Short-term" means renting your villa by the night or week — through OTAs like Airbnb and Booking.com, and (ideally) through direct bookings that skip the platform markup. "Long-term" means leasing the whole villa to one tenant on a monthly or yearly contract, furnished, with the tenant covering most day-to-day living costs.
The two models behave like different businesses. Short-term is hospitality: pricing changes nightly, every guest is a fresh transaction, and revenue swings hard between Bali's high and low seasons. Long-term is closer to a fixed-income asset: one contract, one rent, predictable for 6–12 months at a time. Across our own 20+ villas in Uluwatu, Bingin, Pecatu, Ungasan, Canggu and Pererenan, the right answer is almost always property-specific rather than a blanket rule.
Which model has the higher gross yield in Bali?
On gross yield, short-term wins on paper. Bali's blended gross rental yield sat around 8.5% entering 2026, but that average hides a wide split: long-term leases tend to return 4.5–7%, while short-term villa rentals are quoted at 8–14%.
In money terms, a villa let nightly might gross materially more than the same villa on a yearly contract. One 2026 market estimate puts a comparable villa on a yearly lease at roughly USD 12,000–18,000 a year, while the short-term version of the same property can gross well above that in a strong season.
But gross is the seductive number, and it is the one that misleads owners most. The headline yield ignores empty nights, platform commissions, management, cleaning, restocking, and the harder wear short-term puts on a villa. Strip those out and the comparison looks very different.
What about net yield — after every cost?
This is where the gap closes. Short-term rental generates higher gross revenue but carries higher operating costs — frequently 45–50% of gross for a villa — while long-term leasing runs on only 20–30% costs. The result is that net yields for the two models converge to roughly 7–11% for many mid-range properties.
Why the cost gap? Short-term carries OTA commissions (commonly 3–15%), full-service short-term management (often quoted at 15–25% of gross booking revenue), plus cleaning, laundry, restocking, utilities, and higher maintenance. Long-term management is cheaper — commonly 8–12% of collected rent — and the tenant absorbs most utilities and daily running costs.
For context on the management line specifically: Cabo's full-management fee is 13% with no lock-in, which sits at the lower end of the short-term-management range above — and we publish how that number works rather than burying it. The practical takeaway is that short-term only keeps its yield advantage when it's run efficiently. Run badly, its costs eat the premium and you'd have been better off with a quiet yearly lease.
How do occupancy and voids compare?
Occupancy is the quiet killer of short-term projections. Realistic annual short-term occupancy in Bali averages roughly 45–65% — so owners who model peak-season rates across all twelve months badly overestimate returns. Long-term leasing, by contrast, runs at about 85–95% annual occupancy, with typical void gaps of only two to four weeks a year between tenants.
Occupancy is also where management quality shows up most. Across our managed portfolio, Cabo runs at 91% occupancy — well above the typical short-term band — which is the entire argument for active management over passive listing: it pulls a short-term property toward long-term-style consistency while keeping the higher nightly rate. The point isn't that short-term is risky; it's that short-term occupancy is earned, not assumed.
How much work is each model, really?
Short-term is a job. Pricing, calendar management, guest messaging, check-ins, cleaning turnovers, restocking, reviews, and maintenance run continuously — every booking is a small operation. Done in-house, it's effectively a part-time hospitality role; done by a full-service manager, you trade a slice of revenue for getting that role off your plate.
Long-term is close to hands-off. One tenant, one contract, one rent — with a property check between tenancies and the occasional maintenance call. For an overseas owner who doesn't want to run a business across time zones, that simplicity has real value, even though it earns less. The honest framing: short-term's higher yield is partly compensation for labour and risk. If neither you nor a manager is doing that work well, the yield isn't really there.
What about wear and tear?
More turnovers mean more wear. A short-term villa cycles through dozens or hundreds of guests a year — more linen washes, more pool and aircon load, more furniture fatigue, more small breakages — and that shortens the refurbishment cycle. A long-term tenant lives in the home more gently and more predictably, so the property typically ages slower and capital-expenditure on refits comes round less often.
This rarely shows up in a yield spreadsheet, but it's a genuine cost. When you compare the two models, fold in a realistic annual reserve for short-term wear; otherwise you're comparing today's revenue against a depreciation bill you've quietly ignored.
How do licensing and tax differ in 2026?
This is the factor that changed most going into 2026, and it now sits near the centre of the decision. From 31 March 2026, accommodation listed on any platform must hold a valid business licence, and platforms are required to verify licences and remove non-compliant listings.
Licensing is also zone-dependent. A villa licence (KBLI 55193) generally requires the property to sit in a "Pink" tourism zone on Bali's spatial plan; properties in residential, agricultural or conservation zones may not qualify for short-term operation at all. Industry commentary suggests a large share of villas in some popular residential pockets fall outside compliant short-term zones. Where short-term isn't permitted, long-term leasing isn't just the safer choice — it may be the only legal one.
Tax also differs. Short-term accommodation income is generally subject to a hotel/accommodation tax (around 10%), with VAT (around 11%) applying above the relevant threshold, plus income tax. Long-term residential leasing is administratively simpler but still taxable. None of this is tax or legal advice — ownership structure, licensing route and tax treatment depend on your situation, and you should take qualified local advice before choosing a model. We're happy to point you to people who do this properly.
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FactorShort-term (nightly / OTA + direct)Long-term (monthly / yearly lease)Who wins
Gross yield~8–14%~4.5–7%Short-term
Net yield (after costs)~7–11%~7–11%Roughly even
Operating costs~45–50% of gross~20–30% of grossLong-term
Occupancy~45–65% realistic~85–95%Long-term
Income stabilitySeasonal, volatileFixed, predictableLong-term
Owner effortHigh (or pay a manager)Low / hands-offLong-term
Wear & tearHigher — faster refit cycleLower — gentler useLong-term
Upside ceilingHigh in a strong seasonCapped by the contractShort-term
Licensing burdenTourism-zone licence requiredSimplerLong-term
Tax exposureHotel tax + VAT + income taxIncome tax (simpler)Long-term
Ranges are external market estimates for 2026 and vary by villa, location and management quality; treat them as direction, not guarantees.
So which one actually wins?
Short-term wins when the property is genuinely set up for it: a well-located, well-presented villa in a compliant tourism zone, with active management keeping occupancy and pricing tight. That combination is what turns the higher gross yield into a higher net yield — and it's where most of the real upside in Bali villa ownership still sits.
Long-term wins when the villa is more basic, or has a real short-term drawback — a residential or non-compliant zone, or construction next door that dents reviews and nightly rates. In those cases a monthly tenant is often the smarter play: you lock in effectively 100% occupancy, drop the turnover, cleaning and marketing churn, and you can pass the utilities (power, water, internet) to the tenant rather than carrying them yourself. It also suits owners who simply want certainty and zero day-to-day involvement, or a local market soft enough that a guaranteed lease beats a gamble on occupancy.
The rule of thumb: a premium, well-located villa should almost always run short-term — that's where the higher net yield lives — while a more basic villa, or one with building work nearby, is frequently better off on a long lease until the situation changes. For a lot of owners the smartest answer is a hybrid: short-term when demand, rates and the surroundings justify it, a longer let when they don't.
Short-term rental's headline yield advantage (~8–14% gross vs ~4.5–7% for long-term) largely disappears at the net line, where both models converge around 7–11% — because short-term carries roughly 45–50% costs and only 45–65% realistic occupancy, while long-term runs on 20–30% costs at 85–95% occupancy. The decider is rarely the model itself; it's location, zoning compliance and management quality. Active management is what pulls a short-term villa above the occupancy band — across our portfolio, Cabo runs at 91% occupancy. — Cabo Bali, 2026
costs, voids and a realistic wear reserve, and that's frequently not the one with the bigger headline yield.
FAQ
On gross yield, usually — short-term is quoted at roughly 8–14% versus 4.5–7% for long-term. But after costs, voids and effort, net yields for both models often converge around 7–11%, so short-term doesn't reliably "win" once you account for everything.
Plan for roughly 45–65% across the year, not peak-season rates year-round. Active management can push this higher — Cabo's managed portfolio runs at 91% — but you should never model short-term as if it's fully booked.
Furnished two-bedroom properties in primary rental zones were quoted around USD 1,500–3,000 a month entering 2026, and a comparable villa on a yearly contract at roughly USD 12,000–18,000 a year, with wide variation by size and location.
Yes. From 31 March 2026, platforms must verify licences and remove non-compliant listings, and short-term operation generally requires a tourism-zone (KBLI 55193) licence. Residential and other non-tourism zones may not qualify.
Yes. Short-term accommodation income generally attracts hotel tax (~10%), VAT (~11%) above the threshold, and income tax; long-term residential leasing is simpler but still taxable. This isn't tax advice — get qualified local guidance for your structure.
Long-term, by a wide margin — one tenant, one contract, minimal day-to-day involvement. Short-term is a continuous hospitality operation unless you hand it to a full-service manager.
Often, yes. Many owners run a managed hybrid — short-term when demand and rates justify it, a longer let when they don't — provided the property is licensed for short-term use. We help owners model and switch between the two.
Key takeaways
By Keanu Fischell, Co-Founder, Cabo Bali. Keanu co-founded Cabo Bali, which manages 20+ villas across Uluwatu, Bingin, Pecatu, Ungasan, Canggu and Pererenan. Cabo runs at 91% portfolio occupancy with a 4.85/5 guest rating from 500+ reviews, a transparent 13% management fee, no lock-in contracts, and full concierge service for guests.
Thinking about which model fits your villa?
We'll run the net-yield numbers for both short-term and long-term on your specific villa — factoring in your zone, licence status, location and realistic occupancy — and tell you straight which one earns more after costs. No lock-in, a flat 13% management fee, and 91% portfolio occupancy to back the short-term case where it makes sense.
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