If you’ve invested in real estate then you must decide early about what you wanted to do with this property. Extended vs short-term vacation rental bookings might confuse you as they both have lucrative deals to offer. Don’t get confused as we are here to guide you in take your decision, so sit back and relax.
Ever heard of the term ‘Sales Turnover’? Well, that is the end product of a Short-term vacation rental booking. Short-term vacation rental bookings are the sum-of-parts approach, where multiple booking lead to higher revenues than extended or long-term bookings. It is advisable to have several short-term bookings over a long-term booking to increase the breadth of the revenue stream.
However, the approach is not as easy to manage. It requires constant involvement from the property owner or the manager to keep it up and running. To keep the ball rolling, regular investment in listings, marketing, and advertising is required. Further, regular upkeep and maintenance of the property need to be adhered to. These might appear as an expensive way of managing a property.
Therefore, a thorough investigation of cash inflows and outflows is called for, while making the decision. If the short-term vacation rental booking involves more outflows in terms of advertising and management, as compared to the expected inflows, then an extended booking is a better option and vice versa. So, let us look at the factors contributing to this decision-making process.
Are you a long-term or a short-term player? Check out the below slides to find out where your VR fits in:
Extended vs Short-Term Vacation Rental Bookings
We will now discuss how to manage extended vs short-term vacation rental bookings. So read on and find out more.
How to manage your short-term vacation rental?
As mentioned earlier, short-term vacation rental bookings require constant involvement. You need to have systems in place to manage everything well. Renting on a short-term basis involves several considerations.
You or your property manager needs to be on your toes to face such challenges. The various aspects that need your attention are as follows:
Make sure you own software that syncs the bookings from all your listing platforms. This would give you confidence in the bookings, availability, and vacancy checkpoints of your property.
Further, it will also avoid double bookings and a higher vacancy rate. However, you need to be highly organized to be on top of everything.
Restocking & Bulk-buying:
To create the best guest experience, you need to restock supplies every time a new guest arrives. Instead of running to the store every time, make sure you have a bulk buying system in place. Some items that are non-perishable and have a long life can be stocked periodically for the long term.
If possible, have long term contracts with suppliers so that you can be sure of the cost of these supplies. This will lead to lower uncertainty in profits and revenues which will determine your margins. Further, it will also ensure you do not get a bad review if you are short on some supplies.
Please understand one key thing, you cannot enable your guests to complain about lack of maintenance. You need to keep the property in shape and be ready at all points in time. This would involve having a long-term contract with the housekeeping and maintenance agencies. They would periodically come for servicing the property even when it is not occupied. Email marketing is also a very good way to maintain a proper network and reach out to guests.
Key collection, deposit, airport transfer, and vehicle parking management all need to be taken care of. The best way to manage this is to enable self-check-in as the guests collect the key from the property itself or through the keyless entry.
Another option would be to hire an assistant who can be at the property when needed. This would ensure a high-quality experience but can be costly at the same time.
Further, you might need to have a business relationship with a transport agency to be available on an ad-hoc basis. This is required only for those guests who request airport transfers. In cases where the guest arrives on their own, make sure you have ample parking space or valet-parking arrangements.
Remember, with greater turnover, comes greater wear and tear. You might not be able to identify the guest who has caused property or appliance damage.
You can either increase your per-night rate to include such contingency costs or you may go for an insurance policy such as American Home Shield or Old Republic Home Warranty. It depends on the kind of bookings you are getting.
If you are choosing an insurance policy, make sure it meets your requirement and you have read the fine print. One disadvantage of these policies is that service can be delayed for days vs. calling a local repair person who can be there within hours.
Legal and reporting:
With a high turnover of short-term vacation rental bookings, you get less time to have all accounting and paperwork in place.
For such a fast-paced environment, you either need to have an accountant in place or you need to have a software package to manage everything.
You might want to hire a skilled property manager who can handle the logistics, finance, and property upkeep. Either you or your manager must wear several “hats” to run a short-term vacation rental.
Ironically, what these various aspects suggest is, to run a short-term vacation rental, you need to have long-term systems in place. These systems come at fixed costs.
Your overhead costs can soar when you go for long-term contracts. This needs to be supported by the number of bookings you get. It may not be cost-effective if you do not get enough bookings.
So, this is what you need to weigh, your booking projections need to be up to the mark. Further, your cost estimates need to be concrete.
Do not forget there will be certain hidden or unforeseen expenses that need to be buffered in, so, make sure you have enough gross margin.
There is only a certain extent up to which you can raise your per-night rate, so it might make sense to have other revenue streams in place. These could be a connection with local businesses to provide a commission for recommending them to your guests. For example, you may have a referral agreement with a bike or kayak rental agency.
Every guest who rents from them would bring you a commission. You may even advertise them on your website and social media pages. Multiple revenue streams reduce your dependency on just the price per night.
How to manage your extended-term vacation rental?
As we are discussing extended vs short-term vacation rental bookings, so now we will discuss extended-term rental bookings and how to manage it.
You might be thinking that the short-term model is not meant for you, but you also need to consider if the long-term model is. There are two sides to every coin and being impartial will put you on the road to success.
Hedged revenue stream:
In the world of finance and stock markets, hedging is a big deal. There are so many financial instruments that help you hedge your interest. You might be wondering how is that related to a vacation rental booking?
Well, the underlying concept is the same. If you rent the property for the long term, you lock in a certain rent.
Although you have secured your interests against the falls in the market rent, you have also let go of the potential upside. But to gain something, you need to give up something else, so it is up to you to decide.
If you expect that the rent is going to rise shortly, then the long-term model is not a good choice, and vice versa.
Guest screening process:
You need to have a stringent guest screening process in place. Once the agreement is signed, you may not be able to easily evict the guests.
So, your intuition and gut feeling might be a good beacon in selecting the right guest for your property.
You will also want to perform a credit check and ask for references. If you do not want your property to get spoiled, do not rent it out to rowdy spring breakers. Be prudent about such decisions. You might narrow down the target audience, however, you will also reduce the chance of property damage.
Think from the guest’s perspective, if the guest is going to rent a place for the long term, they want it to be comfortable. They might want to make a few property additions here and there, such as baby proofing the property. If you are up for such improvements, then you may think of renting to them for the long term.
You would want to discuss the frequency of housekeeping required by the guests. Maybe offer various packages. This would help you in getting the most cost-effective agency in place. You may have a base package that ensures that at least a minimum level of upkeep is maintained. If more than that is required, you may charge more.
This is a short analysis of extended vs short-term vacation rental bookings. Now the decision is yours, whether you meet the requirements of these models. If you go for the short-term model, ensure that you are listed on every platform available. This increases your chances of getting bookings, Rental Trader is an upcoming platform so make sure you check it out while listing online.
If you choose the extended-term model, then you may want to list on lesser platforms to cut down costs. However, make sure you are listed on all the free platforms. For more information, fill out the webform, or feel free to call us anytime.