Are you looking to snap up a vacation rental property? Perhaps you’re already a vacation rental owner and all you need is tips to become successful.
The U.S. vacation rental industry generated over $13 billion in revenue in 2021, so there’s definitely money to be made. As the COVID-19 pandemic gradually becomes a thing of the past, more and more people are taking vacations. What’s more, a recent survey revealed that 54 percent of vacationers prefer staying at a vacation rental every time.
Although owning a vacation rental looks rosy, the truth is there are many challenges you’ll encounter. This article explores some of these common challenges and offers practical solutions for overcoming them.
Let’s dig in.
Local Rules and Regulations for Vacation Rentals
In an ideal world, you should be able to buy or build your vacation rental, set it up nicely, and start receiving guests without consulting anybody. However, this world is far from ideal. Vacation rental owners, much like other business owners, have to play by various rules and regulations.
The rules for setting up a short-term or long-term vacation rental typically vary from location to location. In most cases, though, you will need to secure at least a business license and a vacation rental license.
There are also zoning codes that can affect your decision to start a vacation rental. For example, some local authorities place a cap on the number of vacation rentals that can be established in a certain zone, so you could miss out on a license just because the limit has already been met. Some jurisdictions have a complete ban on vacation rentals in certain places.
Vacation rental owners have no choice but to adhere to local laws and regulations. To stay compliant, it’s important to do plenty of research before splurging your cash on a rental. Be familiar with the regulatory environment and try to forecast how those laws can change in the future, as well as how those changes will affect your operations.
Your primary goal should be to buy a vacation rental in a location that has a friendly regulatory environment.
Strong Competition
The vacation rental industry already has one goliath-sized competitor: the hotel and resort industry. Although vacation rentals have caused significant disruption, hotels aren’t going anywhere.
Hotels, though, aren’t a vacation rental investors’ biggest worry as far as competition goes. It’s other vacation rentals in the area that are the primary competitors.
You see, most vacationers aren’t going to switch to a hotel just because your property doesn’t excite them. They’ll likely find a better rental in the same location.
As the industry grows, expect more properties to come up in your area. Unfortunately, this is only going to increase the competition for guests.
Investing in effective vacation rental marketing can be a good way to stay ahead of the competition, but your success will depend on your ability to provide an unmatched guest experience.
Low Season Blues
Seasonality has long been a key characteristic of the hospitality industry. There are peak periods (usually during summer) when facilities are fully-booked and low seasons (usually during winter) when attendance is minimal.
As a new vacation rental homeowner, you might think that your market isn’t affected by seasonality, but it is. You’ll probably get a handful of guests during season downturns, but for the most part, you’ll struggle to see consistent bookings.
A low season can have a big impact on the financial side of your operations. If you took out a mortgage to buy your rental property, for example, declining revenues during season downturns may mean you won’t have the income to pay off your loans and maintain the rental.
Adequate financial preparation is key to weathering the storms that may come during the low season. Anticipate a revenue decline and budget accordingly.
During the high season when bookings are the order of the day, practice financial prudence. Don’t blow through the cash thinking the summer feast will last forever. Winter will always come.
Keep Up With Quick Guest Turnaround Times
Guests typically check in from 3 pm and check out no later than 11 am. Although you’re free to adjust these times to improve guest experience, one thing doesn’t change: the time between check-in and check-out is only a few hours.
This should pose any challenge during slow seasons or when there’s a free day between bookings. You’ll have enough time to prepare the rental for the next guest.
However, when you’re dealing with back-to-back bookings, you’ll only have a few hours to clean the place and get everything in order. Depending on the size of the rental and the availability of amenities like a swimming pool, you may be unable to get the place ready for the incoming guest.
When that’s the case, guest experience and satisfaction will suffer. The last thing you want is for a new guest to check in and feel that the place was hurriedly cleaned up. They’ll probably give your property’s online listing a bad review, and may never book with you again.
The secret to combating this challenge successfully is hiring reliable cleaning service providers. They’ll deploy their resources (staff and equipment), ensuring your rental is cleaned and readied for the next guest in good time every time.
Deciding on a Management Method
Should you self-manage your vacation rental or outsource to a management service?
Taking this vacation rental management quiz can help you make an informed decision, but in many instances, it’s best to outsource. Yes, self-managing your property will enable you to save on professional management fees, but you probably aren’t best suited for the job.
Vacation property management requires expertise and experience. The job has many moving parts, from property marketing and maintenance to bookings management and legal compliance. Only a trained professional is in a position to competently handle these tasks.
Be a Successful Vacation Rental Owner
Being a vacation rental owner is a smart move. You’ve made an investment that will earn you passive income and set you on a path to wealth.
However, your new position comes with several challenges, as we’ve demonstrated in this article. They have solutions, though. All you need to do is implement them.
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