5 Strategies for Success in a changed vacation rental landscape

5 Strategies for Success in a changed vacation rental landscape
liggraphy / Pixabay

Following a national 45% decrease in bookings related to the pandemic, short-term rentals are back in demand. Sites like Airbnb and Vrbo are now at 81% of their 2019 levels. Many owners who rely on their vacation rental property for income have to navigate a new landscape with caution and clever marketing.

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Q2 2020 hedge fund letters, conferences and more

Avalara has published a comprehensive guide for vacation rental owners detailing how to succeed in this post-COVID paradigm.

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5 Strategies for Success in a changed vacation rental landscape

The re-emergence of domestic travel following the relaxing of stay-at-home orders and restrictions has brought a surge of activity to the short-term rental industry. As some markets see a spike in new guests, many short-term rental owners and property management firms are still speculating about what the future of running their short-term rental businesses will look like moving forward.

This guide addresses challenges and opportunities seen by hosts in the first wave of travel post lockdown. When the goal is maximizing bookings and rental revenue, practices like enhanced cleaning policies, new marketing and communications tactics, and automating tiresome, repetitive, or risky tasks can make all the difference. Economic, safety, and regulatory conditions are changing rapidly and are expected to remain in flux throughout the year — it’s critical to be flexible and look for opportunities in order to ride out any uncertainty, drive new revenue streams, and increase efficiencies.

Just a year ago Americans booked 2.3 billion trips according to the U.S. Travel Association. While 2020 travel is much more fluid it’s important to remember travel is not a passing trend and Americans will find travel opportunities wherever possible. As ShortTermRentalz reports, “With international mobility compromised for the foreseeable future,domestic tourism can be expected to recover first. The uncertainty around when borders will be open and challenging travel procedures will inspire travelers to seek out places to visit that are in close proximity to where they live, often somewhere easy to drive to.”

Moving forward, the most successful short-term rental owners will be those who can best assess this changed landscape and pivot accordingly with new strategiesand - in some cases - new business models.

As owners and managers look to take advantage of the uptick in domestic travel and seasonal vacation time frames such as summer and the holiday season, Avalara offers the following five key areas of focus to be aware of and proactively plan for when opening your doors to guests.

1. Think clean. Think safe.

For the foreseeable future, it will be essential to place a primary focus on providing a clean, safe environment for guests. Cleanliness standards will be a top-of-mind concern for travelers, and can be used to help you stand out from the competition, or provide the same level of acceptable accommodations as other properties in your area.

As travelers emerge from COVID-19 stay-at-home orders, guests will come to expect ultraclean properties with comforts that make it easy to stay in if they feel unsafe venturing into town, including in-home options for food, entertainment, and recreation. On-site property amenities such as large kitchens, pools, video and other games, exercise equipment, and touch-free experiences will likely take center stage.

Proactively market your efforts to prospective guests, as highlighted by a Los Angeles Times article that reported on how national hotel chains are promoting increased safety measures. Similarly, short-term rental owners can help their properties stand out by leading with messaging that emphasizes their commitment to cleanliness.

Skift notes that providing technology that bypasses interpersonal contact is another way to appeal to health-conscious travelers. Targeting property cleanliness is a marketing strategy that will help guests feel comfortable and keep your property booked. Take steps to start converting your vacation rental into a modern smart home with keyless entry, app-enabled temperature control and security features, as well as use of fintech to accept payment remotely. In doing so, you’ll stand out from the competition as vacation rentals continue to reopen. Not only are these process improvements useful tools to market your property, they can also boost margins in the mid and longer terms by reducing inefficiencies.

2. Keep flexible rental options in your back pocket.

Today’s short-term rental hosts may be experiencing unprecedented demand due to an uptick in popularity among local vacationers, but with the possibility of a COVID-19 reemergence, it’s best to be open to accommodating both short-- and long-term occupants at your properties. Broadening your customer base is a great way to ensure consistent rental activity for your properties. Remaining flexible with your listing times and cancellation policies is another good way to keep your property rented should you need to consider market demand for longer-term rental requests.

For short-term rental properties located in more rural or remote areas, hosts can take advantage of the change-of-scenery trend, as those cooped up for months in their own homes look for another space to take a break. With so many employees now working from home, workers and their families can find a refreshing change of pace and outside activities that aren’t available in their current residence. These types of shifts in flexible thinking can provide new opportunities for you as a host, keeping in mind the types of experiences most valued by potential guests.

3. Enhanced marketing is essential.

While the effects of stay-at-home orders and a reduction in global travel due to the pandemic shake out, optimize your marketing capabilities to better target both the short-term rental and longer-term audiences to ensure success in 2020 and beyond. A recent webinar presented by Skift offered the following marketing tactics to consider under this new dynamic:

  • Announce the listing on media channels such as social media, local newspapers, and search engines.
  • Feature stringent cleaning procedures prominently in listings — even in the title.
  • Include outdoor space as a featured amenity to differentiate from an enclosed hotel.
  • Calm fears about going into public spaces, by highlighting activities within the property such as free streaming services or games.
  • Recommend restaurants and other local businesses that can deliver to the property. Consider partnering with them and offering guests exclusive promotions for discounts on local entertainment and activities.

Each vacation rental property is different, and the tactics used to promote them should be tailored to each unique space. Carefully consider the amenities and location of your property and what type of guest would find those features to be the most appealing. And take time to research your competition — short-term rental listings are readily accessed online, and typically feature amenities related to the property as well as recommendations on where to go and what to see.

Another marketing strategy for long-term success is to draw a clear distinction between the short-term rental and local hotels. If the listing offers a full kitchen where guests can safely prepare their own meals, that is — now more than ever — a strong advantage over a hotel’s crowded restaurant. And as hotels have had to shutter resort amenities such as gyms, buffets, and their typical pool experience, short-term rental hosts have the opportunity to get creative with their marketing and shine a light on their available property and area amenities.

4. Keep an eye on compliance.

Many states and municipalities have taken hits to their coffers since the pandemic began. It is therefore likely that finance directors will be looking to recoup funds at every turn, which may include enforcement efforts related to lodging tax and licensing revenues.

Nationwide, taxes from travel and tourism comprise about 6% of all state and local tax collections, according to a 2018 Bloomberg analysis of data from the U.S. Travel Association and U.S. Census Bureau. According to Tourism Economics, California alone is poised to lose an estimated $72.8 billion in tourism-related revenue due to the coronavirus pandemic.

With all of this money at stake, short-term rental owners are an easy target. While cost-cutting efforts are tempting and potentially warranted in some areas of operation, stay the course in matters of compliance, including maintaining municipal short-term rental permits, licensing and registration, as well as collection, remittance, and reporting of lodging taxes. Ensure you’re managing your compliance and tax remittance properly.

It’s also wise to anticipate the possibility that your local jurisdiction may have changed its regulations. Owners and managers who have stayed current on their compliance documents and other responsibilities have the advantage over those who haven’t been following regulation changes. The cost of getting compliant at a later date could be substantial, and owners could be subject to new regulations since refiling for a short-term rental license can be considered the start of a new entity.

Lodging tax compliance can be complicated, time-consuming, and present business risks if mismanaged. Avalara MyLodgeTax is a reliable, proven resource for managing the complex compliance issues facing short-term rental hosts and managers. With each state operating independently and treating short-term rental properties in vastly different ways, the regulations can be difficult to track.

5. Automation will give you a competitive edge.

Already underway prior to COVID-19, the push toward smart-home technology has a new sense of urgency as guests seek out no-touch experiences. Your ability to compete with other properties in your area will hinge in part on your willingness to embrace readily available smart automation technology. Automation tools can be accessed on a smartphone, and include:

  • Keyless locks
  • Noise monitoring devices
  • Security motion detectors
  • Temperature controls
  • Control from remote locations
  • Smart light bulbs and outlets
  • Online food ordering service apps
  • Smart security features

Equally important automation opportunities lie within products that allow for faster, smarter, and safer management of everything from booking the rental to automated scheduling of cleaning services. Owners and managers can even automate pricing around peak times and events as well as tasks that manage the business side of your short-term rental, including time-intensive and onerous mandatory tax requirements. All of these automated tools and services provide a more predictable, hands-free management regime, allowing you to focus on core business-generating activities.

To help with the typical booking process, if you add an extra layer of automation that adjusts prices depending on length of stay and other key factors, you could benefit from a more effective way to remain flexible and responsive to the market. Other variables that can be automated while determining rates include:

  • Popular local events
  • Seasonality
  • Days of the week
  • Nearby short-term rental supply
  • Number of guests

Once you put an effective automation plan into place, it likely won’t need additional investments or upgrades until the system has paid for itself many times over. Offering more than just convenience, these technologies can increase profitability, save you time, and also improve the guest experience. Forward-thinking property managers are investing in these dynamic tools, and hosts should seek out these automated updates when searching for the right property management partner.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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