7 Things I Learned From Managing Vacation Rentals For 1 Year
Over the past year I have been in the business of managing vacation rentals. I provide value by freeing up a property owner’s time and by increasing their occupancy rate. I do this by handling all the customer interactions, as well as pricing and marketing their property. There’s more to it than that, but that’s a very top-level overview.
It’s kind of interesting that I ended up going down this road because I don’t necessarily have a professional background in real estate. On the flip side, I am very tech savvy though. When I first started doing this about a year ago, there was a bit of a learning curve from the property management aspect of it. I could handle the technology, the platforms and the online marketing, but I had to learn the specific nuances of the vacation rental industry.
Well, here I am a whole year later and I can say that I’ve learned a lot. I’m making more money doing it than I was before, and I understand my Key Performance Indicators (KPIs) much better. Whether you are just getting started in this business or you are looking for ways to improve your existing performance, I’m hoping that this article will help you.
Without further ado, here are the 7 things that I’ve learned in the past year about managing a vacation rental property.
I. Know Your Platforms
AirBnB and Booking.com are arguably two of the most well-known platforms in the vacation rental business, but there are so many others. Admittedly, 95% of the business I conduct is via the two aforementioned ones, but depending on where your property is located, you might do well on others. For example Agoda.com is really popular in Southeast Asia, while Ctrip.com is popular among Chinese tourists, who make up a booming percentage of the worldwide tourist market.
Some other platforms to consider include HomeAway, Housli, FlipKey, and HouseTrip.
If you choose to list your property on multiple platforms — which you should — then you’ll need to keep two very important things in mind:
(a) Calendar Sync: Most of the platforms enable you to import and export your calendar from the other platforms. You need to do this across all of the sites where your property is listed or otherwise you could end up in a nasty situation where two people book your property for overlapping dates (i.e. — double booking). Then you’ll have to cancel on one of the guests and that is obviously not good. Besides damaging your reputation, canceling on a guest will hurt your search results position on the platform’s algorithm. So make sure you sync those calendars.
(b) Platform Commission: Each site has its own commission structure and the way they take that commission is also different. For example, AirBnB takes their commission up front when they collect payment from a guest on your behalf. Booking.com on the other hand leaves the payment collection to you, and thens send you a monthly invoice for their cut of the money collected. As for the commission structure, it’s important to know because you will need to adjust your pricing depending on the platform if you want to assure that you meet your revenue goals. Just to give you an idea of how widely they vary:
- AirBnB takes 3%
- Booking takes 15 — 20%
- Agoda generally takes 20%
- Ctrip takes between 10–25%
This means you need to do some math when you set your pricing for each site, otherwise you could end up with significantly less money from platform to platform.
II. Know Your Competition
It’s important to figure out who the main competitors are in your market. These are properties that are in the same geographic area, offer similar amenities to yours, and accommodate the same number of guests (or very close to it). The main two reasons this is crucial to know are because (a) you want to track their occupancy rate against yours and (b) you want to watch their pricing fluctuations.
If their occupancy rate is lower than yours, then awesome! You are doing something right. If it’s about the same, that’s not bad either. If it’s higher, then you need to figure out what they are doing that you are not.
- Do they have a special promotion for that month?
- Do they offer an ongoing promotion such as free airport pickup or free breakfast?
- Are they using advertising channels that you aren’t?
- Did they recently add a new amenity that’s making them more attractive to guests? If so, what is it?
- Do they have higher quality pictures on their listing page? (More on this in the next section)
These are just some of the questions you should ask and get answers to so that you can make adjustments, but perhaps the most important one is their pricing. Remember, if they are your competitors then we are already assuming that their property is on par with yours. You want to make sure that you aren’t pricing yourself out of the market. While guests will pay a little extra for perceived value, there is a limit to that when another comparable property exists for significantly less.
III. Pictures Matter
You only get one chance to make a first impression.
I’m sure you’ve probably heard this expression before. Well, in the world of vacation rentals, your pictures are your first impression. Simply put, the vast majority of potential guests browsing are being drawn to your listing by the pictures first. If you don’t have a good quality camera, find a friend that does. I can’t overstate this enough. Posting grainy cell phone pictures can make a big difference in whether or not a potential guest chooses you or the place down the street. This is especially true in a crowded market.
Make the investment and get either professional pictures taken or at the very least use a high resolution camera that will take quality shots. Also, keep in mind to have good lighting. You don’t need to be a professional photographer, but taking a little time to get this right will reap big rewards down the line.
One last thing to note here is that your cover photo matters a lot too. Whatever you think is the most attractive aspect of your listing, put that as your main photo. If you have an amazing swimming pool or a beautiful balcony view then use them to grab the attention of those browsing for a place. You should also consider implementing an ‘exit survey’ with your guests to give you more information in this regard. I’ll get more into that shortly.
IV. Know Your Guests
This sounds simple enough, but what does it mean really?
From my experience thus far, the two main components of this to consider are (a) where are my guests coming from (origin)? and (b) what can I learn from their visit that will help me attract future guests (feedback)?
Guest Origin
For the first part, this is crucial to know because it makes setting up ad campaigns easier and it makes your ads more effective.
Let’s use China as an example.
Let’s say that a large majority of your guests came from mainland China in the previous year. Knowing that the Chinese government blocks access to many websites, including Google, Facebook and Instagram, it would be a waste of money to try to target them using these services. Some savvy Chinese people use VPNs (virtual private networks) to get around their government’s censorship, but not for the purpose of searching for vacation rentals.
So what’s one possible work around?
You can connect with a Chinese person who is familiar with setting up WeChat influencer campaigns. You can then target the Chinese market through their most popular social app.
The major takeaway is that if you understand where your guests are coming from, then you can better set up your marketing campaigns to target them.
One thing to be wary of is if you are getting a heavily disproportionate amount of guests from one region of the world. We all know the old saying of don’t put all of your eggs in one basket. If you are relying too heavily on one part of the world for revenue, then what happens to your business if for some reason trends change?
Using my China example again, a boat accident in Phuket, Thailand in July of last year resulted in the deaths of about 50 Chinese tourists. This had an almost immediate domino effect on the number of tourists coming to Thailand from China. The numbers continued to plummet in the following months and truth be told, they still haven’t recovered to pre-accident levels.
For anyone operating in Thailand, this likely resulted in a dip in revenue, and they had to figure out a way to make up for it by targeting other markets. The goal of course being to diversify where guests are coming from in order to mitigate this risk exposure. If done properly and something does happen to one segment of the market, it won’t cause a huge down-spike in revenue.
Collecting Feedback
While most people can intuitively understand why collecting feedback is important, for a person running a vacation rental business — or any business for that matter — knowing how to incentivize guests to leave valuable feedback is also critical. Before we get to that though, let’s first review the three types of feedback we should be concerned with.
(a) Conversations: These are a great source of feedback because although difficult to neatly quantify afterwards, they can give us important information. The things that guests will say to you in conversation usually flow naturally and tend to be more authentic. When a guest is taking a survey, they are aware that it’s a survey, and it can cause some bias in the way that they answer. It may also cause them to withhold some things that they wouldn’t necessarily do in conversation. This authenticity within conversations is where their value lies.
If ten guests all tell you how much they loved the pool, then maybe change the cover photo of your property to the pool (if it isn’t the cover photo already).
The other huge value they provide is in catching potential problems early on. In most cases if there is something significantly wrong, a guest will message you. However, if it’s a relatively minor thing they may not message you about it, but it could show up in the review. That’s why it’s important to do at least one check-in on your guests during their stay.
(b) Surveys: What surveys lack in authenticity, they make up for in quantifiable data. It’s nice to be able to look at a chart of responses and see that 90% of guests said they would stay with you again. Then you can hone in on the 10% that said they wouldn’t and read the answers to the follow-up question (“If you answered ‘no’, can you please tell us why?”). Those answers can then give you possible ideas for improvement. Maybe there was something broken in the house that you didn’t know about. Maybe they are doing construction next door and they couldn’t sleep. Whatever it is, it’s valuable information.
(c) Reviews: Remember how I was emphasizing the importance of having professional pictures? Well if good quality photos draw a potential guest to click on your property, then it’s the reviews that keep them there. Reviews not only give you feedback, but they can be the difference-maker between a guest choosing your property or someone else’s. Not only that, but they play into the search algorithm of the rental platforms. If you get great reviews, you will show up higher in search results. So make it a point to encourage guests to leave reviews — especially if you learn through conversation that they are really enjoying their stay.
This brings me to the how part of this section, as in how do you get your guests to take your survey and leave you a review. The first way is simply to politely ask. If you find that you aren’t getting enough people participating, then you can also offer a reward of some sort. In fact, you can be proactive and offer a reward anyway. For example, in exchange for filling out your survey or leaving a review, you can provide your guests complimentary airport pickup the next time they stay with you. Of course you have to clear this with the property owner, but assuming they understand the value of collecting feedback, this shouldn’t be an issue.
This is also a great segue to talk about the next point.
V. People Love Freebies
If there is one thing that really took me by surprise throughout this learning process, it’s that people really — and I mean REALLY — like to get free stuff. It could be free breakfast, free airport pickup, or something else, but the power of giving guests something for free can have a positive effect on booking rates. The crazy thing is that if you do it right, you can actually make even more money while giving away free services to your guests.
I came to this conclusion about two months into managing my first property last year when I kept getting messages from potential guests asking if we offered free airport pickup or free breakfast. After realizing that some of our competitors within that market were giving freebies and we weren’t (remember learning point number two earlier?), I spoke with the owner and we did some trial runs. We had positive results and even figured out a way to flip it into making more money.
How?
Well it comes down to perceived value. When you offer someone a free airport pickup, you can raise your nightly price by the same amount to break even on the ride OR you can even make it slightly higher. As long as the guest believes that they are getting an added value for the free airport pickup then they will book with you. It’s really more about psychology than money to a certain extent. If your property is already within a price range that a guest is thinking about, that means they can afford to pay. By throwing in a free service like breakfast or an airport pickup, you psychologically compel them to feel like they are getting more for their money — even if they really aren’t. It’s just human nature. I mean I know enough about marketing to understand this, but even I still appreciate when I’m getting something ‘for free’, even if in reality it’s built into the price.
VI. Know Your Seasons
Here’s the thing with the vacation rental business — each location and property is its own beast. You need to understand not only your competitors, but you have to have a grasp of overall tourism trends in the region where the property is located. There are high seasons and there are low seasons. High seasons are great. We all love high seasons. They make our job easy. It’s the low seasons you need to really prep for and have a solid marketing plan in place so you can hit your revenue goals.
The other important thing about understanding seasonal trends is to be able to gauge your pricing accordingly. Yes, knowing your competitors pricing is important, but so is knowing when to make adjustments. If you are managing properties in multiple countries, you really need to do some research about holiday trends and anything else that may have an impact on demand.
For example, in Thailand, there is a famous lantern festival called Loy Krathong in November and during that time, demand for vacation rentals goes up. So if you are managing a property there, then you’ll want to probably adjust your cost per night to be higher than the days before and after the festival. You can also adjust your minimum stay per night if it’s normally only 1 or 2 days. Make it 3 so that guests will be forced to stay with you at least 3 days.
This principle applies to anywhere in the world. You must understand your seasons so that you can make the appropriate adjustments to maximize revenue.
VII. Google Sheets + Formulas Make Life Easier
This last point has more to do with keeping track of all of your data than it does with managing the property. If someone hires you to manage their vacation rental business then they will obviously want to track your performance. Numbers matter and for that spreadsheets are your friend. I created a spreadsheet that has since undergone several iterations based on things I learned about running a business like this.
While you can certainly use Excel or some other tool, I prefer Google Sheets because it is free and it is easily shareable with others. Also, because everything is stored in the cloud and instantly updates, you never lose any data.
My spreadsheet contains the following information that you may want to consider adding when creating your own:
- Basic Info: Guests’ names, how many individuals in the party, number of nights they will be staying and the dates of their stay.
- Country of Origin: Remember our fourth point about knowing your guests’ origin? This is where you track it.
- Platform Used: Where are most of our guests finding us?
- Financial Data: Total amount of the reservation minus platform fees, additional cleaning fees, actual payout, average price per night that each guest paid.
- Other Data: Occupancy rate for the month, advertising costs, etc.
This isn’t a comprehensive list of all the data I track, but these are some of the basic things that I think you should include if you’re going to make a spreadsheet of your own.
My last bit of advice on this topic is to learn how to use formulas because they will save you enormous amounts of time. If you don’t use formulas, you will end up doing a painstaking amount of math with each reservation and you’ll have to manually fill in data for each category.
For example, let’s say you have a line item for ‘total reservation amount’ and then another one that shows ‘total reservation amount minus cleaning fees’. Instead of manually calculating this every time, you can just create a formula that takes into consideration the cleaning fees. This way, any time you put a value into the total reservation amount column, the other value will automatically appear without you having to calculate it or type it in yourself. It’s a huge time saver and worth the up front time investment to learn.
Conclusion
That is all ladies and gents. I hope you enjoyed reading this and found some value in it. I’ve certainly enjoyed this past year of learning the vacation rental business. I’m sure as 2019 unfolds, I will probably learn even more.
If you have any valuable advice to add or any questions, then please feel free to fire away.
As always, I appreciate you taking the time to read my thoughts.
See you on the next one!
Martin
All images used throughout this article are either my own or free for personal and commercial use with no attribution required per the source (http://www.pexels.com).
The images I used, which were not my own, can be found at the links below. The rest are mine.
(1) https://www.pexels.com/photo/blur-cartography-close-up-concept-408503/
(2) https://www.pexels.com/photo/crowd-on-the-road-258644/
(3) https://www.pexels.com/photo/bright-celebration-crowd-dark-431722/
