How To Win The Vacation Rental Game
By JD Esajian on July 10, 2015
How can real estate investors win at vacation rentals, even in the most competitive U.S. markets?
The U.S. vacation rental property business is quickly growing into an even larger, multi-billion dollar industry. As the economy improves, more individuals and families are going on vacation, and are spending more on vacation. That’s in addition to the new generation of professional nomads. Yet, this surge is also attracting more competition too. Just look at Airbnb, which many B&Bs and hotels are complaining is putting them out of business. So how can real estate investors capitalize on the vacation rental boom, and maximize the profitability of their rentals?
The Vacation Rental Property Challenges
There are a number of potential challenges coming to vacation property investors and operators including:
- Regulations and community rules to limit short term rentals
- Threats to condo buildings and neighborhoods from bad tenants
- Competition for tenants
- Bad online reviews
- Rising asset and operational expenses
How to Find Your Edge
What most vacation rental investors worry about is keeping up occupancy. By making your rental standout as a top choice, and delivering a superior experience, you’ll not only win more first-time guests, but even more profitable repeat and referral business.
One of the best ways to find your own edge is market research and doing a little mystery shopping. Have you shopped other competing vacation rentals? Have you gone through their booking process? Stayed in their units? What have your stays at local rentals and experiences at hotels taught you? Where are they dropping the ball? What did they do that wowed you?
Remember that great properties will always be in demand.
Online Reviews
Online reviews have become a pivotal, make or break factor for most businesses. This is especially true in real estate, and even more so with vacation properties. No one wants to take a gamble on a once a year vacation, honeymoon, or anniversary getaway. They just can’t afford it. And they’ll be thorough in checking out reviews before booking. So what do reviews say about you and your rentals?
Don’t fall into the trap of fake reviews, but do encourage reviews, and investing in creating the experiences that will generate great ones voluntarily. Taking a look at recent hotel rankings with measured reviews and social media conversations; some of the highest starred hotel chains actually have the worst reviews. Why? A lot of it is about expectation. If you splurge for an expensive hotel you expect it to be perfect and awesome. Anything less than that disappoints. Contrast that with those booking average accommodations but are wowed by better than expected units or service. They get the best reviews. So think more about how you can under promise and over deliver versus over selling it.
Don’t Neglect the Basics
There are somethings that no vacation property operators can afford to get wrong, no matter how cheap the deals, or how low expectations might be. This especially mean safe and clean accommodations. There are no shades of right or wrong here. Either it is immaculately clean or it is dirty and unacceptable. If your cleanup crew can’t get it right they need to find another career. It shouldn’t smell, towels can’t be dirty, coffee makers can’t be crusty, there can’t be any bugs, and there can’t be any discarded drug paraphernalia. Can you imagine even just going to a campground and finding old syringes on your tent site? That isn’t just a situation in which you can say you are sorry or offer a free stay. That’s lawsuits and law enforcement issues. Be meticulous in getting these basics right, with a zero tolerance policy for staff messing up.
Going the Extra Mile on a Budget
Wanting to go the extra mile to wow guests is one thing, doing it on a budget that can keep your investment property profitable can be another thing. You can beat some others by giving what they hold out on like Wi-Fi. But there are plenty of small additions that can be made affordably. Think about who your guests are and what they are looking for in their vacation. Better bedding, a welcome basket, games and entertainment for kids, ease of process, and more can all help.
Concierge Services
Going even bigger on services doesn’t have to hit your wallet and net profit hard either. Be creative. How about collaborating with local businesses for your mutual benefit? How about discounts on spas, childcare, gym passes, car rental, and dinners out?
The Next Level
After time those consistent visitors to your area are going to realize it makes sense to by their own vacation property. Don’t lose their business, even if your main investment focus is passive income. How about fractional ownership condos or beach cottages, or vacation property sales? Perhaps you can find additional revenues streams in managing those properties too.
Summary
Vacation rentals are hot. Investors can win by finding their edge and over-delivering. Insurance, protecting communities by renting smart to good people and giving back can increase sustainability and protect future income. Don’t be cheap on upgrading service, but leave some fat in your profit margins to account for rising costs, and be prepared to take it to the next level with sales.