The short-term rental industry is experiencing a strong resurgence. According to the latest forecasts from AirDNA, the US short-term rental market is expected to grow, with demand increasing by 10.7% due to economic growth and more people traveling domestically.
The data intelligence company forecasts that even though high mortgage rates are slowing down how fast new properties are being added, the supply is still going up, and things should balance out. Further to this, Occupancy rates are expected to stay steady at around 54.7%, similar to last year. Prices per night and revenue per room are likely to see small increases of about 2.1% and 1.9%, respectively.
This growth indicates a promising outlook for the short-term rental market, highlighting its sustained popularity and potential for profitability.
Now, more and more people are keen to get into the business to reap the benefits of short-term renting. But how is short-term management different from long-term rental management? And is it the right path for you to take as property owners?
Continue reading to find out whether getting into a vacation rental property management business is a smart move for you and learn how to streamline the process of managing your vacation rental properties with iGMS.
This term refers to the supervision and administration of short-term rental properties by property management software or general property management services. The property managers or the company in charge of managing these rentals has to complete a long list of daily tasks that involve operations such as:
In short, the main goal of short-term property management is to make sure the business runs smoothly, guests enjoy a five-star guest experience, and the ROI (Return on Investment) on your short-term rentals increases.
Long-term and short-term rental property management has a few distinct differences, and it’s important to think about which suits you better before taking it on. The main differences are:
Short-term rental property management typically deals with properties that are rented out for only a few days.
Long-term rentals are rented out for months or years at a time.
Short-term rental properties are ideally located in a popular area, typically close to the city center.
Meanwhile, long-term rentals can be more spread out and oftentimes tend to avoid tourist-dense areas.
Short-term rental properties are generally more labor-intensive for the property owner or rental business partner.
Not only do tasks like marketing and guest communication require more time, but short-term rental guests also have higher demands. This is why property management services are most popular for these types of properties.
Plus, a property management company becomes more critical when aiming to achieve a passive income.
For example, they expect that the property should offer essential amenities, such as linen, towels, etc. as well as luxury add-ons like WiFi. The rental property will also need to be cleaned after every short stay.
The expectations of the overall condition of the property itself are also higher. Short-term rental guests expect that the property will be modern.
A property that is due for renovation typically does not perform well as a short-term rental.
Sometimes, you can see differences in the types of guests that rent vacation rental properties on a shorter-term basis versus on a longer one.
In recent years, the market has seen an increase in digital nomads, who can work from anywhere in the world. This allows them the freedom to travel and work at the same time, and thus, this market segment is more likely to book long-term rentals.
The classic business traveler remains a significant part of the vacation rental market, with 60% of business trips evolving into bleisure trips, where employees extend their business travel to include leisure activities. A survey by TravelPerk found that 83% of business travelers have taken a bleisure trip in the past year, often with companies covering the travel costs.
When comparing vacation rental property management to traditional rental management, you will see that both approaches come with their own set of pros and cons. Here are a few of the most appealing advantages that short-term rental property management can offer you:
If a property boasts a great location and offers all the amenities that travelers expect, vacation rental management can deliver better returns on investment.
However, to unlock this higher ROI, you need to ensure a high occupancy rate which requires skillful management by the property owner or vacation rental management company.
With vacation rental management, property owners have the opportunity to block out certain dates on the calendar. These dates can then be used for personal use, either by staying there yourself or allowing friends and family to unwind at your vacation rental.
Also, as the property is occupied for shorter periods of time, property owners will have more opportunities to inspect it.
This will make it easier to identify and sort out any issues relating to your accommodation in a timely manner. Not only can this offer you more peace of mind, but it can also help to prevent a minor issue from turning into a major renovation.
Your house rules and the rules of the vacation rental platform, such as Airbnb or Vrbo, will offer you the protection that you need. So, instead of turning to a lease agreement and the courts, you can simply reach out to the platform through which the guest booked if you have a problem with them.
If you feel that you need more protection, you can always create a vacation rental agreement.
This is a signed contract between the host and guest that explains the terms and conditions of the booking. It is a good way to protect all parties from possible misunderstandings and is much easier to draw up than a formal lease agreement.
By venturing into managing short-term rentals, property owners can diversify their sources of income. Instead of relying solely on long-term rental income, they can tap into the lucrative vacation rental market and potentially earn higher returns on their investment.
This income can then be increased by external services like dynamic pricing, using marketing strategies to increase occupancy rates, offering discounts, and so on.
There are various ways to further boost the income earned from short-term rentals, including the use of software management systems like iGMS for automating the check-in and check-out process, prioritizing reviews, and diversifying your marketing strategy.
While short-term rental property management can deliver a higher ROI, it also means higher expenses and more effort from property owners. Before you jump in head first, here are a couple of the main disadvantages that you will need to be prepared for.
As the turnover rate is much higher with short-term rental renting, there will be more work to make sure the property is ready for the next guest.
And, to ensure that there’s a next guest, you’ll also have the added responsibility of marketing your property.
From writing property descriptions to reviews, there are many more tasks compared to traditional renting that need to be completed if you want to be successful and thrive in the industry.
The income generated by vacation rental properties is typically seasonal. There are different factors, such as events and attractions, that can impact the number of bookings from one month to the next.
Some cities impose very strict short-term rental rules and regulations, while others might ban them altogether – as is the case with Barcelona’s upcoming regulation.
So, before you sign any contracts, you should first do due diligence and read up on the local laws.
In case you won’t be able to go the short-term rental route in a specific city, you can always consider exploring the long-term rental option instead, which gives the benefit of a fixed income.
As mentioned, rental management in the short-term needs to take care of more guest demands. You will need to provide more amenities and items which will need to be replenished or replaced when damaged.
Plus, unlike traditional rental management, you’ll also need to clean your rental after each booking. Liability insurance will be a cost no matter your management type, but it’s important to factor these costs into your rental process as well.
With more guests comes more potential for damage. Maintenance costs might seem insignificant now, but in the long run, they will add up to more than you might expect.
The top property management companies have contacts and features to help you with your maintenance requirements.
If you have reached the decision to take the plunge and go the short-term renting route, it’s time to compare different management styles. There are several approaches to shorter-term rental management that you can take, and each has its own set of factors to take into account before you can move forward.
If you prefer to have more control over your properties as a property owner, one option is to do it yourself. This way, you also won’t have to pay hefty property management fees.
That being said, it can be time-consuming as you’ll have to juggle numerous responsibilities as property owners. To have a smooth start when choosing to go with the DIY approach, be sure to take the following steps:
The specific short-term rental rules and regulations of the city where you will be operating might also dictate that you need a business license. You might need to get a general business license and a short-term rental license. A property lawyer will be able to offer you more information and help you with the application.
What do you want to achieve within your business? How many properties do you want to own? Where do you see your business in five years? By setting business goals and taking the time to write a business plan, you’ll have peace of mind that all the key aspects have been covered.
If you will be following the DIY approach, you will also be tasked with preparing your property and finding your first guests. Not only will your vacation rental need all the essentials, but you will also need to offer extras to delight travelers. From the kitchen to the living room to the bathroom and the bedroom, there are many must-haves and nice-to-have amenities that can make all the difference. Not to miss anything important while setting up your rental, follow this detailed checklist.
Which type of guests do you want to target? Is your property more suited for business travelers or families? Identify your ideal guests, choose a vacation rental website best suited for your business, and use social media to get extra exposure. You can, for example, offer special packages on social media platforms such as Instagram and Facebook.
To find your first guests, you will need to promote and market your listing. So, it is a good idea to create a marketing strategy so that you can increase your visibility beyond the audience of the vacation rental platforms. This is one of the things that successful property owners allocate time to when managing their short-term rentals.
Vacation rental property management software, such as iGMS, can make vacation rental property management more straightforward and help you to streamline numerous of your day-to-day operations.
To simplify the process of your vacation rental management, you can also consider hiring a property manager. Property managers differ from a vacation rental management company because they classically work independently of a company. Professional property managers usually take care of many aspects of hosting your short-term rentals, including:
If you opt to hire a property manager, make sure to factor in additional expenses. Depending on your property’s location and its type, an outsourced manager will charge somewhere between 20-40% of your rental income for vacation rental management.
Unlike traditional property management companies, short-term rental property management companies can also help you with aspects relating to hospitality and short-term rental laws. As they have their own team in place, they have more capacity than an individual property manager to take care of all the facets of your short-term rental business and can help more with marketing and advertising, which can boost the property’s exposure.
That being said, it can be quite expensive to enlist the services of these types of companies. In fact, you can pay as much as 30-50% of your total revenue for short-term property management.
If you’ve decided that you’re going to outsource the property management services of your short-term rentals, first list the tasks with which you need help. Then, before you sign any contracts, you’ll also want to do your homework by considering the following factors:
Word-of-mouth advertising remains powerful and for very good reasons. So, take the time to read the reviews that previous clients have written to get a more accurate view of the services and overall quality that the short-term rental company or manager typically provides. You can, for example, refer to Yelp, Facebook, and Google Business.
Alternatively, you can ask the managers or vacation rental management company that you’ve shortlisted for references from previous or current clients. The advantage of following up with references is that you’ll also be able to ask specific questions.
Needless to say, your goal is to find a service provider that can offer you the best value for money. Typical property management fees can range between 4% and 12% of the monthly rent. This varies depending on the size and type of your property (a freestanding home or an apartment) as well as the location of your property. Some companies may charge a fixed or flat fee depending, and this can range between $100 to $300 for a single property.
To help you evaluate the cost-effectiveness, it is a good idea to create a spreadsheet so that you can compare companies side by side. Include the following range of services to understand and assess the value and level of service each company will give you:
Service | Why it’s important | Estimated Fee |
Setup Fees | This is a one-time fee to onboard your property | $250 – $300 |
Tenant Placement Fees | This is either a flat fee for securing tenants, or charged as a percentage of the rent | Flat fee: $300-$500
Or 10 to 12% of the first month’s rent. |
Maintenance and Repair Fees | Some property management companies require a reserve fund to cover unexpected costs | Reserve fund: $1,000 to $3,000 – with a possible 10 to 12% mark-up on repair costs. |
Eviction Fees | To help manage the process of removing an unwanted tenant. | $300 to $500 plus legal costs. |
Absolute transparency is key! A good short-term property management company will share financial and performance reports on a regular basis. It should be easy for you to see how their own property management fees are calculated and how your business has grown. For each property, you should get a breakdown of your payouts, occupancy rates, and transaction history, at the very least.
Just because a property management company has glowing reviews and years of experience, it does not necessarily mean that it is knowledgeable about your specific market.
The best property management company for your business is one that understands the forces at play in your local market. For example, their team should be able to offer local recommendations to your guests, keep up to speed with the latest regulations, laws, and taxes, and create an effective dynamic pricing strategy.
Prompt communication is crucial for the guest experience. In fact, ineffective guest communications and customer support are the fastest ways that you ruin your reputation among travelers.
So, ask the property management company if they have a strategy for guest communications. Things that you specifically need to look out for are how quickly do their employeesrespond to guest messages and property maintenance requests.
If you decide to manage and market your vacation rental business yourself, you’re going to need some help getting your rental property seen. The best way to do that is to list your property on leading online travel agencies (OTA) and vacation rental sites. Below is a list of the top sites you could use to list your property.
The great news is that you can also use vacation rental software like iGMS to integrate multiple leading vacation rental sites and even your own direct bookings website into one convenient platform. This way you don’t have to choose just one of the methods below and can use the power of automation to manage multiple listings with ease.
Airbnb is a market leader in the vacation rental industry with over 6 million active listings across 220 countries and regions around the world.
Vacation rental property managers prefer to list on bigger sites like Airbnb because it attracts high volumes of web traffic. This means that short-term rental hosts and Airbnb property management companies creating listings on the site have the potential to be seen by a bigger audience and can attract more visitors and bookings.
Vrbo is another leading site for a vacation rental property manager or owner to promote short-term rentals. While Airbnb offers a wide variety of property types, Vrbo sticks to one niche: whole-house rentals.
Because it sticks to one property type and, thus, only attracts travelers looking to rent an entire property, short-term rental owners and vacation rental property managers that fit into this property type find it useful to market their listing on Vrbo.
Booking.com is an all-in-one online travel agency experience where travelers can book vacation stays, flights, car rentals, attractions, restaurants, and more, all on one platform. It is the ideal place to market a vacation rental business as part of an overall travel experience.
TripAdvisor is similar to Booking.com in that it is also classified as an OTA. Listing on TripAdvisor as well is a great way to boost rental income and many property management companies integrate with TripAdvisor.
Google Vacation Rentals is a relatively new kid on the vacation rental block. The platform is Google Search Engine’s take on helping travelers find vacation rentals to book. The advantage of adding your property listing to Google Vacation Rentals is that Google already has the traffic and audience. This means that listing on the platform will allow Google to promote your listing when travelers are searching for properties like yours.
Owning your own slice of the internet is often overlooked when it comes to promoting rental property. However, a direct booking website can be an invaluable asset for your vacation rental business.
Not only will your website be able to promote your own unique brand and offer more information about your rental property, but it will also help you bypass service fees that you will inevitably be charged when using third-party OTAs. Many property managers and hosts build up their websites to the point where they no longer need to market on other vacation rental sites at all.
Try out iGMS Website Builder and have your own direct booking website ready to receive bookings in mere minutes!
Managing multiple short-term rentals doesn’t have to be overwhelming. Here are five straightforward ways to help keep things running smoothly:
Using software like iGMS to make your life easier. These platforms help you manage bookings, handle maintenance, communicate with guests, and process payments all in one place, saving you time and reducing the chance of mistakes.
Automation can be a lifesaver. Set up smart locks for self-check-ins, use automated messaging for guest communications, and schedule cleaning and maintenance tasks. This way, you cut down on repetitive tasks and keep things running smoothly for your guests.
If you have several properties, consider hiring a property manager or a management company. They can take care of the daily operations, guest interactions, and maintenance, allowing you to focus on the bigger picture of growing your business.
Creating standard procedures for cleaning, maintenance, and guest interactions ensures that all your properties are managed consistently. This helps you stay organized and ensures that guests have a great experience at any of your rentals.
Regular maintenance and inspections are crucial. Schedule these tasks to keep your properties in top shape, preventing small issues from turning into bigger, costlier problems.
These steps will make managing multiple short-term rentals much easier and ensure that your properties are well-maintained and guests are happy.
Strategies to increase your occupancy rate include using dynamic pricing tools to adjust rates based on demand, and offer promotions or discounts during off-peak seasons. You can also add high-quality photos and detailed descriptions for your listing to draw more guests.
List your property on multiple vacation rental platforms such as Airbnb, Vrbo, and Booking.com. Use social media marketing to reach a broader audience. You can also create a direct booking website to avoid platform fees.
ALways respond promptly and professionally, offering solutions or compensation to guest complaints where appropriate. You can also use negative feedback to make improvements to your property and service.
Research local regulations and zoning laws for short-term rentals in your area and obtain necessary licenses and permits. Ensure you have appropriate vacation rental insurance coverage for your property.
Use property management software like iGMS to manage bookings, guest communication, and maintenance tasks. Implement smart home devices like keyless entry systems and smart thermostats, and schedule automated messages for check-in/check-out instructions. Explore automation options on iGMS.
If you are ready to start your free trial, register today, to streamline the process of managing your vacation rental properties with iGMS.