How to Start Your Own Vacation Rental Business: Step-by-Step Guide
There are several reasons for starting your own vacation rental business. For example, you might have vacant space in your house as your children have moved out. Or, you probably have inherited a house that is now your second home.
You might have calculated that renting out your house as a vacation rental is more profitable than renting it for more extended stays. You might have done some research on the hospitality industry and realised that the travel demand is increasing. So, why not invest your money into starting a vacation rental business!
Also, you may have noticed that the property owners in your area are keen to allow property managers to operate their properties. This is because they prefer not to manage the properties themselves.
No matter what the reason is, you need to know how to start your property management company. You need to assess how much effort this career requires and whether you’re made for this career or not!
Table of Contents
Vacation Rental Business | What Does It Include?
What Do You Need to Start Your Own Vacation Rental Business?
- A Business Plan
- At Least One Property
- A Money-Back Guarantee
- A Licensed Business Name
- A Contract with the House Owner
- A Team
- A Marketing Strategy
- A Guest Database
- A Vacation Rental Software
- Integration with Various Apps
- A Direct Booking Website & Channel Manager
- A Pricing Tool
- Knowledge of Taxes
- Accounting Tools
- An Aim to Provide the Best Guest Experience
- Harvesting the Fruit of Amazing Guest Experience
Many Steps? The Same as Other Businesses!
Vacation Rental Business | What Does It Include?
The day you welcome your first guests, you will be delighted by seeing the result of all your efforts. But, before that day, you have to go through a long checklist.
Airbnb promotions about becoming a host are whitewashing all the essential operations of a host or vacation rental manager.
Vacation rental management includes:
1. Listing your vacation rental(s) on different booking channels, as well as on your website.
2. Monitoring the well-being of the properties during and after stays.
3. Sending periodic reports to the owner(s) and splitting the income based on the agreed formula in the contract.
4. Setting standard and competitive rates and adjusting them based on the demand for specific dates.
5. Automating check-in and check-out methods and processes.
6. Thinking of taking online payments from the guests through secure, preferably 3-D Secure Links.
7. Providing satisfactory guest experience.
8. Getting and publishing reviews.
9. Keeping track of the revenue and accounting.
10. Paying your business-related taxes.
And going through the list and many more over and over again!
But before you can start attending to the list and ticking the boxes, you need to warm up by reading a guide to starting your vacation rental business.
What Do You Need to Start Your Own Vacation Rental Business?
A Business Plan
A business plan is your roadmap towards fulfilling your short-term and long-term goals. Drafting a business plan helps in clarifying the requirements of a vacation rental business. By narrowing down all the possibilities, you can stay focused on delivering the necessary services to your guests. This includes determining who your target audience is, how long they require your services, and to what extent you’ll provide them.
At Least One Property
You need a home to host!
Be mindful of local vacation rental policies when buying or managing a property. This will help you avoid any potential legal issues and ensure that you’re in compliance with local regulations.
If you dream about starting from New York, for example, be advised that the policies restrict having vacation rentals there! Following your business plan, you should discover the most suitable location for your prospective vacation rental business.
Reaching out to homeowners: Find the landlords who have listed their properties to hire a property manager. Meet them and, based on calculations, convince the profitability of the investment.
A Money-Back Guarantee
You should find a way to estimate the money return of your vacation rental investment. A property deal analyser helps determine your vacation rental investment potential by analysing various data points, such as nightly and occupancy rates. It also considers expenses, including property management fees, taxes, and maintenance costs, to calculate the net profit. This tool provides a comprehensive analysis of the investment return, enabling property managers to make wiser decisions about pricing and managing their short-term rentals.
Depending on your location, a certain amount of occupancy rate must justify your vacation rental business. Make sure you can meet those figures before starting your business.
A Licensed Business Name
To start your vacation rental business, you need to adhere to the regulations of this sector in your location. You can read more about vacation rental management regulations in our Rules and Regulations blog post.
A Contract with the House Owner
To ensure that everyone is on the same page, it’s essential to create a written document. It should include your vacation rental management scope, the fees, the timetable of different possible conditions, the responsibility for probable damages to the property, etc.
A Team
Although you will handle many of the tasks on your own in the beginning, delegating some tasks is inevitable.
You need to get help from local cleaners, skilled repairers, and a financial manager who tracks the income and expenses. Occasionally, you will need to get help from a lawyer or IT staff.
A Marketing Strategy
The rise of digital technology has made online marketing an essential component of any successful hospitality business. With prospective guests worldwide, it’s critical to use digital marketing to reach new audiences and generate interest in your brand.
To bring more traffic to your direct booking website, there are several marketing strategies that you should focus on. These include content marketing, SEO, email marketing, social media presence, and publishing customer reviews.
A Guest Database
Anyone in your target market who may be your future guest is called a “lead.” You need to store the contact information of your potential guests to launch email campaigns. You should also stimulate repeat bookings and convince people to stay at your property by offering discounts and promotions.
A Vacation Rental Software
You need to save time to improve your business strategy instead of dealing with operations related to upcoming reservations.
Using a property management system (PMS) is so essential that you must have already started looking for the right solution if you are about to start your vacation rental.
A vacation rental software automates a handful of operations for you. It is expected to:
1. Automate the booking confirmation process.
2. Facilitate responding to enquiries.
3. Manage cleaning and maintenance.
4. Take care of payments and online transactions securely.
5. Create a direct booking website for you.
6. Help implement your sales and marketing strategy.
Zeevou has created a free Search Assistant tool that helps you identify the ideal tools for your short-term rental business. It enables you to compare hospitality companies and select the ones that best fit your needs.
Integration with Various Apps
Although PMSes should offer a certain level of features, they can expand their functionality by integrating with various apps and software for guest vetting, communications, accounting, dynamic pricing, reviews, e-signatures, payments, etc.
A Direct Booking Website & Channel Manager
To fill your occupancy calendar, you should rent out your vacation rental(s) either through your direct booking website or by listing them on different channels using a channel manager.
Some Property Management Systems offer a direct booking website, equipped with a booking engine. A direct booking website should allow you to track your traffic, push your live rates & availability, publish content, be SEO-friendly, etc. Some PMS providers charge you per direct booking through your website. But, note that their pricing package might not include the cost of making you a direct booking website.
A channel manager increases your exposure. A higher occupancy rate is expected when you use a channel manager. However, overbooking and outdated information are the most common concerns when it comes to distributing your rates & availability on OTAs. When you look for a channel manager to pay for, ask if the provider offers two-way API connections.
A Pricing Tool
You should set rates according to demand trends to make the maximum profit out of your vacation rental business. You should also set competitive rates. Charging a higher price for a property with the same amenities as a neighbouring property can lead to losing guests. It’s essential to be mindful of your pricing and ensure that it’s competitive with similar properties in the area. The events and festivals in your area raise the prices, and incidents like COVID-19-related lockdowns lower them!
Thanks to technology, dynamic pricing tools can automate pricing with a data-driven approach. Most PMS providers develop built-in pricing tools or integrate with some dynamic pricing tools.
Knowledge of Taxes
Any place in the world has its tax rules. Upon starting your vacation rental business, file for taxes and seek legal guidance to determine your tax status.
Accounting Tools
Thinking of the vacation rental business seriously means that you will manage various short-term rentals and offer different management packages. This would require you to do various calculations on income and profit split with your investors.
Using accounting tools enables custom profit calculations based on specific party shares.
An Aim to Provide the Best Guest Experience
Vacation rental businesses revolve around review scores and the satisfaction you deliver by offering various services to your guests.
There are different ways to improve your guest experience. To make a five-star guest experience possible and attainable, you need to focus on:
- Communications
- A smooth booking process
- Cleanliness
- Amenities
- Upsells and extra services
- Maintenance of your place
- Attention to details
Harvesting the Fruit of Amazing Guest Experience
Quality service results in getting positive reviews from your guests and also the owners you manage their properties. You can ask your guests to leave reviews, which reflect how you offer services, thus boosting your reputation.
Many Steps? The Same as Other Businesses!
If you have begun researching about starting your vacation rental business, think about all the above steps. Starting and running a vacation rental business is challenging, but not more so than other types of businesses.
You need to establish pillars of your business with a mindful approach and get help from people you trust.
Originally published at https://zeevou.com on March 20, 2023.