I’ve talked to a number of perspective vacation rental owners and many have immediately stated they either want to manage the property themselves (RBO) or hire a Property Management company (PM). Regardless of their decision I have to ask why they made that decision. Often times it’s based on a limited amount of information, often times provided to them from someone with a bias. We all are biased in our decision making and obviously as a Property Management business owner the same could be said about me. I want to attempt to remove my PM lense and explore the value of taking the RBO or PM route and discuss the scenarios that may be the most appropriate for each path.
What’s your objective?
You dream about guests staying in your house, imagining all the great things they must be saying about your decor, complementing your choice in colors and style. If hospitality is your passion, you’ll thrive in the short-term rental market. You’ll meet people from all over the world and be a small part in their vacation experience. If you’re more interested in this being an investment, you’ll likely be annoyed by the stupid questions: ‘Is your property available?’…well, did you see my calendar – duh! Guests are great and we are constantly reminded of the blessing we have in serving others, and that’s what gets us through phone calls at 11:30 at night when a guest hasn’t read their access instructions and is asking about their key code.
Beyond your desire to be hands-on in the hospitality business, you need to decide what side of the ownership spectrum you fall on: A) owning a second home that you occasionally rent-out; or B) having an investment property that provides a passive income and allows you to occasionally use.
On one hand, renting out your second home just requires you to ensure it’s clean for the occasional guest and make sure there’s nothing in the house you would be devastated about losing (being broken or stolen). On the other hand, you need to be prepared for the operational requirements of managing a short-term rental property. As an example, each of our properties receive about 300 messages a year (email, chat, text, phone call), inquiring about renting the unit or where to have dinner; 80-100 bookings take place in each property and require the proper cleaning / maintenance. You’ll also have to consider it’s not an 8-5, Mon-Fri job. You’ll need to be available during “non-working” hours and have solutions to help the guest when you’re on vacation or generally not available.
Do you want to maximize revenue or operate it like a hobby?
Advertising on VRBO or AirBnb is relatively simple. If you’re in an urban market AirBnb is probably your best choice. Destination markets are primarily best served with VRBO. In the peak of the season this is a pretty simple rule of thumb to operate by. If you’re looking to simply make some money on the side to help fund your next family vacation or help pay the property taxes, focusing your attention on a single Online Travel Agency (OTA…also referred to as channels) is probably the best solution for your revenue potential (and simple enough to not cause you stress).
If you’re really trying to cover all of your expenses and maybe even put some cash in your pocket, you’ll need a more complex strategy. To start, you’ll want to build a Revenue Management Strategy (adjusting rates based on demand and availability). Each OTA has its strengths and weaknesses to support revenue management (same day bookings, responsive adjustable rates, supply/demand insights, etc.). Each OTA also has a set of travelers that utilize their platform and the demographics can be somewhat distinct to each platform (Millennials, Europeans, Small Groups, Large Groups, Long-Term vs Short-Term Planners, Frugal vs Affluent Individuals, Singles, Families, Short-Distance vs Long-Distance, Single Night vs Multi-Night Stays,etc.). In order to fill your shoulder and off-seasons, you’ll want to leverage the uniqueness of each channel. You’ll discover certain channels attract guests with a tendency to charge-back or cancel at the last minute. The caution with this approach is the complexity in managing rates and calendars across multiple channels can be very time consuming and expensive.