Whether you’re managing a cozy city apartment or a sunny beach house, scaling your short-term rental (STR) business can catapult your profits. But where to begin? Dive into our comprehensive guide and discover actionable strategies for turning your business from a spare room to a portfolio of short-term rental properties and ensure guest satisfaction.
If you already own an STR business, you probably already know the answer to this. That said, before we dig into scaling a vacation rental business, it’s worth fully understanding what it is.
An STR business is when you or your company rent out STR properties or rooms on a short-term basis. This might be for just a few days or could be up to a few months.
The vacation rental market is booming as many vacationers prefer to have a space with amenities like a kitchen or washer, or simply prefer the feel of being in a home, over hotels and hostels. Plus, communication platforms for business are better than ever. Now that online platforms like Airbnb have achieved mainstream success, renting rooms and homes on a short-term basis is easy for both renters and property owners.
The size of STR businesses can vary. Sometimes, it’s an individual renting out a room in their own home. This could be just on the weekends for vacationers or could be Monday to Friday lets for business travelers. At the other end of the scale, larger real estate companies may own multiple properties across a city or the entire country that they let on a short-term basis.
While simply making more money from your STR business is an obvious reason to scale, there are other benefits to be reaped. These include:
If you’re relying on a single listing for your income, there’s a risk that if anything goes wrong (for example, the property becomes unusable due to damage or flooding), you’ve lost your entire revenue stream. But if you have multiple listings, you reduce your dependency on the one property and ensure you have revenue coming in from multiple sources.
Scaling any business often means that you can be more efficient in your spending. In the STR context, that might mean having a single, optimized cleaning team across all properties or making more use of your property management software to reduce the cost per-unit.
The U.S. tax code provides several deductions for property owners, for example, including deductions for property depreciation, interest expenses, and property-related expenses. By scaling, you can make the most of these deductions and run an even more profitable STR business.
The STR world is growing, but some cities are clamping down and adding additional rules and regulations for STR hosts. Rather than viewing this as a reason to get out of the industry, see it as a reason to expand. By expanding your business to more locations, you lower the risk of being knocked back by regulatory issues.
Scaling your STR business contributes to the local economy first by creating jobs. A middling to large STR company has property managers, and cleaners, and may even collaborate with local businesses, working together to provide amazing experiences for guests.
Scaling any business is a complicated process that will likely require early investment before the profits start coming in. That’s why it’s essential to do some research into your business and the target market as a whole.
If you’re new to the vacation rental world, do some essential reading on the industry and its format. Just as a telecommunications business needs to know the difference between hosted and cloud, you should know the difference between ADR (Average Daily Rate) and RevPAN (Revenue Per Available Night) and make sure you have a short-term rental license.
Once you have your knowledge of the basics down, here are some things your initial research should absolutely cover:
Gone are the days of booking accommodation for our vacations via a travel agent or over the phone. The online travel industry is set to grow even more in coming years. And travelers aren’t the only ones who benefit from online booking platforms and other types of travel tech. Vacation rental hosts can benefit too.
If you’re scaling your STR business, you’ll need the following kinds of tech:
In addition to these essential tools, consider integrating small business apps into your operations. These apps can help streamline and manage various aspects of your business, from accounting to staff scheduling to guest communication and marketing analytics, making your scaling efforts more efficient and effective.
When expanding your business, you might be tempted to invest in lots of properties. Successful short-term rentals, however, require quality over quantity, to prevent bad reviews which can damage the entire business.
Rather than focusing on the number of rental properties you own, consider the following points to address to ensure you have consistent quality across all your offerings:
There are two main strategies for scaling your short-term rental operator business: location diversity and property diversity.
The vacation rentals market is a competitive one. You can’t rely on having vacation rental properties in a popular destination; you’ll need to develop a marketing strategy too.
Some things to consider when marketing your vacation rental business include:
Sensible management of finances and investments is essential to business growth for any host. Here’s what to keep in mind when scaling:
Scaling a business often means bringing in extra help. This can include property managers or a local real estate agent for specific regions or types of property, who can manage day-to-day tasks like guest messaging and liaising with cleaners.
Effective contract and property management strategy with a vacation rental property manager is crucial to ensure smooth operations and compliance with agreed-upon terms.
If you need tech support, especially if you’re planning on scaling on a large scale or running your own website, make sure you have IT support who can answer both broad and niche questions, ranging from “what is VoIP caller technology?” to “how do I work my property management software?”
While a vacation rental property management company tends to be a regular part of your business, sometimes you’ll need one-off support on tasks like graphic design or photography. Consider hiring freelancers who can provide expertise on a short-term basis.
Additionally, explore financing options to support your profitable growth ambitions. Venture capital funding, for instance, can be a viable route to secure the capital needed to expand your STR business. Exploring such opportunities can fuel your profitable expansion plans and help you achieve your scaling measurable goals effectively. Remember, the right financial strategy is often a crucial component of successful scaling efforts.
Running a short-term rental business is complex and can even be isolating. While guides like this provide comprehensive advice, sometimes the best people to help are your fellow STR managers and business owners. It’s worth joining or even creating a network to share advice and support.
Local meetups, online forums, conferences, and even membership groups like the Vacation Rental Management Association (VRMA) can all help you meet others in your industry and provide resources along the way.
You may be finishing this guide and thinking: how am I going to save time and handle all the extra work that scaling my short-term rentals will create? Yes, there’s extra work involved, but scaling your business can be professionally and personally rewarding.
Plus, scaling your STR business is much easier when everyday tasks from guest messages to managing your cleaning team are automated. When you automate tasks with software like iGMS, you can cut your workload in half and save money on hiring more rental property managers.
About the Author
Alwayne Powell is an experienced performance marketing leader with an extensive background in the digital space, working client and agency side to provide paid search, SEO and CRO solutions in the B2B and B2C sectors. They are the current Senior Digital Marketing Manager at leading communication platform provider 8×8. You can find them on LinkedIn.
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