People love to travel, and when they do, finding a place to stay can be quite challenging. Hotels are nice, but when the tourist needs a home away from home, vacation rentals always top their preferences. If you had always wanted a business that allows you to meet new people while raking in money, the vacation rental business is right for you.
A vacation rental business is basically a private house that is rented for short-term use. Vacation rentals can take the form of a condominium, a cabin, a single-family house, or a guest house. The fact that it offers you extra income and allows you to work flexible hours makes it one of the businesses you can engage in if you’ve always wanted to be your own boss. Vacation rental is often known as short term rental business.
Starting with one investment property to owning multiple properties in various tourist locations is not unheard of. Moreover, you can choose to be a full-time host or simply run it on a part-time basis. Generally, you will be making money while enjoying what you do.
Current and future prospects of the vacation rental industry
In the tourism sector, vacation rental service is soaring high. In 2019, just before the Covid19 pandemic, the global vacation rental business market hit a $57.67 billion mark, and it is projected to hit $64.1 billion by 2023. Thus, there has been unprecedented growth in the vacation rental industry since its inception in the 1950s, and the level of growth is not stopping anytime soon.
Though the Covid19 pandemic has brought a massive downturn in the vacation rental market in 2021, it won’t be for long. In fact, the post-Covid19 era will see a surge in traveling as people have gotten very bored of staying at home due to the government policies that shutdown many countries to contain the virus.
It is on record that Europe has the highest share of vacation rental properties standing at 60%, while the United States follows suit with about 20% of vacation rental businesses. The share that other countries including UK, Canada, Australia and Turkey take equals about 20%. Revenue from the vacation rental market has been forecasted to grow by 2.5% in the upcoming years, so if you are keen to start a vacation rental business, this is the right time to do so. Additionally, if you’d like to know how to make money with vacation rental, continue reading this article to learn about the steps to take to start a profitable venture.
The advantages of vacation rental business
Vacation rental business owners make an average of $925 a month or more. The good news is that millennials are very likely to travel a lot more than older generations, and they prefer vacation rentals overbooking hotel rooms. Interestingly there are a couple of advantages to short-term vacation rentals. These include:
- Renting to multiple people in a year
Most travelers do not rent to stay for more than 31 days. Some even rent for a lesser amount of days. This practically allows you to rent your property to a different set of travelers every month.
- Less money spent on maintenance
This is a major edge that vacation rental businesses have over long-term rentals. The wear and tear that happens to your vacation rental property over time is lesser. Therefore, you will spend less on repairs.
- Recurring revenue
During peak seasons, you can have guests willing to rent your vacation rental property back to back. The cool thing is that due to the high demand, you can be rent out your property at high rates.
The disadvantages of the vacation rental business
There are disadvantages to this line of business too. Once you find out how to run a vacation rental business successfully, you will experience fewer of these disadvantages. Nevertheless, the cons include:
You really have to be on top of your game to stay relevant in the vacation rental business. The competition is very tough, so you need to market your business creatively.
- Zero patronage
Let’s face it; there is no guarantee that travelers will rent your property every month. These are the challenging months for investors. During trough periods, you will earn very little income or none at all.
- Guests that are a nightmare
When you start your vacation rental business, you are bound to encounter guests who will be a pain in the neck. Some of them can be so bad, and you might have to go on short breaks to put your house in order,
Furnishing a vacation rental house
Before we show you the steps to start a vacation rental business, there are several items you need to stock up on if you want your guests to feel at home. Some important items include
- General household items
You may not realize it at the initial stage, but it will pay to equip your vacation rental business property with Cable TV, wireless internet, trash cans, hangers, bath mats, and towels. Consumables include toilet paper, hand and bath soap, shampoo, coffee, tea, detergent for kitchen and laundry. Don’t also forget to purchase an ironing board and hairdryer.
Steps to take to start a vacation rental business
Now that you know a little about a vacation rental business. Let us take you through vital steps to starting a vacation rental business.
1. Research market and check out your competition
You need to know a lot about the business you are about to go into before you start. This will minimize the risk of failure. For example, find out what location is the best for a vacation rental business in the city you want to start your business. Ensure you also research the rules and regulations covering real estate rental services in your city. If you do your research well, you will know which locations are best suited for such a service.
Research the costs of starting. These might include insurance costs, property taxes, utility costs, marketing fees, and the likes. You also need to research your competitors. What are they currently doing? What can you do better? These are important questions to ask.
2. Create a business plan
This is a very vital step. Have a plan on how you want to run the business for the next 5, 10, or 15 years. First, write down the goals you want to achieve. What accomplishments are you striving for, and how soon? Next, determine how well you want to serve your guests and the type of experience you wish to offer with your property. Finally, decide how you want to operate and how much investment you are willing to put into the business. Do not leave out plans on marketing, and try as much as possible to make your plans time-specific. Once this is done, you can move to the next step.
3. Search for the perfect property
Finding the right vacation rental property that will be of interest to your target guests is essential. The right location, the right type of building, and the right rates that will suit their budget are things you should consider. Planning for this may take a long time, but you will eventually make the right choice if you are dedicated. So, getting it right from the start can boost your income astronomically.
4. Furnish the property to vacation rental standards
There is a lot to do in this step. First, you need to furnish your vacation rental property to impress the guests. Earlier in this article, we mentioned the need for high-quality furniture that will last a long time. Do not be tempted to go for cheap and inferior quality furnishings in a bid to save money. It will backfire, and the last thing you want is a negative review by an unimpressed client.
Make sure you capture the area’s unique characteristics with your choice of interior décor and furniture so that your guests will feel the culture of the locality through your business. Also, remember to add everything your guests will need for a comfortable stay. Finally, stock up the house with basic amenities and watch out for what your competitors are doing and do better.
5. Make up your mind on the pricing
This is a very critical step and has a lot to do with the revenue flow of your vacation rental business both in the short and long term. Bear in mind that the location of your business should influence your rate. More so, it is essential to factor in the cost of the property, the cost of marketing, turnover rate, and maintenance when setting a rate for your property.
There is also one very important thing about this step that you should not forget. Vacation rental businesses are seasonal, and you may have to adjust your pricing strategy based on the season. More so. If there is a particular event or festival that attracts visitors to your location, expect rates to rise.
6. Market and list your vacation rental business
This step cannot be overemphasized. A good marketing strategy will bring more guests to your doorstep. Do everything within your power to promote your business as well as you possibly can. Social media can be very helpful to reach a wider audience and drive traffic. You can also promote it on tourism websites and forums. If you have the available resources, create a website and present the features and uniqueness of your property. Doing so will give your brand a professional outlook.
You can also list the property or sets or properties on platforms like Airbnb, Homeaway, VRBO, and many others. Do this well, and the bookings will flow through in no time.
7. Set up procedures and get software for running the business
Doing all the work by yourself can be very tedious. This is especially stressful if you plan to run the business as a part-time side hustle. However, you can effectively manage the workflow by engaging updated and latest vacation rental management software and tools. These software can be automated to promote and push your business on various listing websites. Furthermore, automation can help you manage bookings and automatically respond to inquiries and promptly respond to questions. Lodgify, iRoomi, Cloudbeds, and Rental United are very good apps.
These apps will take a lot of workload off your shoulder. It will also give you enough time to strategize and market more. Additionally, the guests that spend their holidays on your property will walk away with a positive impression of your administration skills.
Lastly, simple procedures like routinely stocking up consumables like coffee, soap, or sponges and checking out the property for damaged items after a guest has departed is advisable.
There is no denial that vacation rental businesses are very profitable, and we expect the industry to bounce back and accelerate in growth in the coming post-Covid19 years. Once you have done your homework and have a worthy property, you are already underway to adding another stream of income to your portfolio. If you already have a choice property at a choice location, get it exquisitely furnished so that your guests will feel at home while being far away from home.
Do not forget to promote the business online, so tourists will see what you have to offer. In conclusion, make sure you put plans in place to give your guests the best experience from the moment they walk through your door up till the point they depart. Doing so will earn you repeat customers and a positive rating on travel and booking websites that will boost your business profile significantly.