Despite a considerable drop at the beginning of 2020, the short-term rental industry has managed to bounce back in 2021. In fact, in April 2021, occupancy for vacation rental properties in the US reached 61.6%, the highest rate in history.
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 rental management different from long-term rental management? And is it the right path for you to take?
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.
Short-term rental management refers to the supervision and administration of short-term rental properties. The manager or the company in charge of managing these rentals have to complete a long list of daily tasks that involve operations such as:
In short, the main goal of short-term rental management is to make sure the business runs smoothly, guests enjoy a five-star guest experience, and your ROI increases.
The main difference is the time period for which the properties can be rented out. Short-term rental management typically deals with properties that are rented out for only a few days.
Another main difference is the type of property that is rented out. Short-term rental properties are ideally located in a popular area, typically close to the city center.
Lastly, unlike long-term rental management, it’s more labor-intensive. Not only do tasks like marketing and guest communication require more time, but short-term rental guests also have higher demands.
They expect that the property should offer the essential amenities, such as linen, towels, etc. 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 a renovation typically does not perform well as a short-term rental.
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 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.
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 Ts and Cs 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.
While short-term rental management can deliver a higher ROI, it also means higher expenses and more effort. 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 it altogether. 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.
As mentioned, short-term rental management 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.
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 short-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, 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. 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-have 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.
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.
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.
Vacation rental software, such as iGMS, can make vacation rental property management more straightforward and help you to streamline numerous of your day-to-day operations. These include:
To simplify the process of your vacation rental management, you can also consider hiring a property manager. Professional property managers usually take care of many aspects of your hosting routine, including:
If you opt for hiring 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.
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.
If you’ve decided that you’re going to outsource property management services, 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 reason. 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 companies 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. 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.
You might just discover that there is a reason, like a lack of good reviews, why one company is so much more affordable than the others. Perhaps a company is more expensive but offers a lot more? This exercise will also help you to get a better idea of how a specific company can help you to boost your return on investment.
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 communication 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 communication. Things that you specifically need to look out for are how quickly do their employees respond to guest messages and maintenance requests.
About the Author
Olga Vasylieva is the Content and Social Media Team Lead at iGMS. Olga is on a mission to help hosts and property managers grow their businesses and deliver an excellent guest experience. She is a travel enthusiast and is inspired by life in all its aspects.
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