Inman Handbook: Finding Success In The Short-Term Rental Market

With this summer’s short-term rental market poised to be one of the busiest ever, owners need to be on top of their game. Here’s how investors and independent Airbnb hosts can succeed.

Property investors rode a wild wave during the pandemic, with the short-term rental market stopping, then restarting, and property prices in many second-home markets soaring. What does the future hold for new second-homeowners and for managers of more robust property portfolios? We’ll explore that and more, all May long, at Inman.

With the advent of short-term rental platforms like Airbnb in the late aughts, suddenly the average person with an unrelated day job could potentially live out their dream of running a bed and breakfast.

A burgeoning online short-term rental community and a variety of platforms to support their businesses helped many individuals grow side gigs into full-time businesses as short-term stays started to pop up on travelers’ radar. Now, it’s not uncommon for individuals to earn most of their income from these properties.

Data from a study recently conducted by vacation rental management company Vacasa that was shared with Inman shows that this summer’s rental market is poised to be busier than ever: 59 percent of Americans surveyed are planning a summer vacation, and out of those individuals, 61 percent of them reported that this will be their first time traveling since the coronavirus pandemic began.

Thus far, the company reported that many of its top vacation destination markets already have double the number of reservations booked for June, July and August compared to booking numbers seen during the same period in 2019.

Platforms like Airbnb, VRBO, Vacasa and others have a number of resources for short-term rental property owners to draw from, and the way many of these platforms are set up guides owners through the process. However, in a year that may the busiest yet for the short-term rental industry, owners will need to take advantage of all the resources available to them to stay ahead of the curve.

Investors who want to set themselves up for success this summer should keep the following factors in mind.

Table of Contents

- - - Set your goals
    - Assess the market
    - Marketing
    - Key amenities and features
    - Tech and automations
    - Track local regulations and expenses
    - Get to know different platforms

Set your goals

As a property owner, one of the first things you’ll want to determine is what you want to get out of your investment.

Alanna Schroeder | Credit: LinkedIn

Ask yourself, “Who are you? What is my long-term goal?” Alanna Schroeder, founder of hospitality blog The Distinguished Guest, told Inman.

Short-term rental owners typically fall into two general categories: individuals who want to own properties as a hobby, and potentially live in the property when they retire, and investors who primarily want to generate income from the property and possibly build a portfolio.

Determining which category you fall into will help better guide your business decisions, and help you stay focused.

When self-assessing your role as a short-term rental owner, you’ll also want to consider whether you plan to manage your own rental property or hire out a manager. Each option has its pros and cons, and the deciding factor may simply boil down to your personality type and what’s most comfortable for you.

Self-management has the benefit of saving an owner money and also giving them a bit more control over the situation. For hands-on individuals who like being able to do things their own way, keeping the reins is probably the best course of action. However, if you do opt for this route, know that it is time-consuming. Running your property will be much more than just checking in every couple of weeks to see how things are going, so be sure you have the time and energy to spare.

Hiring a manager to help you run the property is also a great option. For individuals who don’t live in the city where they own their property, it may be a necessity too. Managers might help owners do anything from marketing the property to fielding guest questions to maintaining the rental and handling accounting.

Schroeder recommended that an owner interview at least three different people for a manager position (or cleaner, fix-it person, or anyone else you plan to work with to routinely manage your rental) to try and find the best fit. Helpful questions might include asking about the individual’s history and experience in the short-term rental industry, how they might handle specific situations with guests or maintenance issues, and clarifying their required salary and/or additional fee structure for the job.

There are also platforms like Vacasa, which is a full-service short-term rental management company that handles the entire guest experience start to finish, while still letting homeowners to stay in their property whenever they want.

In a conversation with Inman, Julie Brinkman, CEO of short-term rental revenue management platform Beyond, said that owners and managers really need to appreciate just how much of a manual business short-term rentals are in order to be successful. Although a lot of the process can be digitized, staying on top of those manual tasks is a huge factor in earning positive reviews, which ultimately helps attract more business.

“[If] you don’t have a good answer for getting those operational mishaps solved quickly, the guest experience is going to be really negative,” Brinkman said. “And in a review culture — which we’re very much in — your ratings will take a hit, you won’t be near the top on any sort of OTA [online travel agency], so you really have to make sure you have a good team who’s able to solve those issues as they arise.”

Shaun Greer, vice president of sales and marketing at Vacasa, told Inman that during this summer’s unprecedented demand, owners would be smart to get back-up help in place in advance in order to be ready for the influx of travelers. Unfortunately because of the hit the travel industry took last year, it may be more difficult to gather those people and resources than in any other year.

“It’s challenging right now,” Greer said, “because if you think of doubling any service, you need to have a support team there to help with that and you can’t just continue to use the same team process and other things.”

In setting goals and determining what kind of short-term rental business to run, owners and managers should also do their homework. Join an industry organization like the Vacation Rental Management Association (VRMA) or Host2Host.

Schroeder also recommends the following blogs for individuals who want to stay on top of industry tips and trends: VRMB.com, Vacation Rental Formula, Logify and Rentals United.

Additional resources:

Assess the market

Another crucial step in becoming a successful short-term rental owner is understanding your market. Many people, especially if they’re investing mostly as a hobby, may only consider their own home market. However, it’s important to assess whether or not your market is even a good place for a short-term rental. In some places, short-term rentals are heavily restricted or not even permitted.

Do some searching on portals like Airbnb, VRBO, HomeAway and others to see what kind of listings are currently available. If options are pretty limited, it could be an indication that there’s little demand in the area. On the other hand, if there’s an abundance of listings similar to yours in the area, you may struggle to attract the business you need to stay afloat.

Companies like AirDNA, which pulls analytics from Airbnb and VRBO, can access data from over 10 million vacation rentals across 80,000 cities across the world. The company can even provide custom short-term rental data for individuals looking for trends, forecasts, comps and more. Users can register with the company for more general insights or pay for monthly subscriptions ranging between $20 and $100 per month, depending on the amount of data they provide.

In addition to that option, owners can also contact local tourism boards for information about how many tourists an area sees each year and what months have the most traffic and where.

It’s also not a bad idea to consider the local economy — are new employers or industries growing in the area? Is the population growing or declining? What kinds of attractions are in the area? These are all helpful factors to consider.

If purchasing a new property, investors should also reach out to a real estate agent experienced in buying and selling short-term rental properties. Vrolio is also an online marketplace where investors can buy and sell their short-term rental properties, which can help generate ideas about different available properties. Vacasa also works with a real estate network in order to sell potential short-term property owners homes.

Brinkman, CEO of Beyond, said that for those individuals who are investing in more than one short-term rental property, it’s important to diversify geography between each property. As short-term rental owners learned over the last year, the popularity of different types of markets can fluctuate widely in response to world events or other trends.

Short-term rentals in urban areas saw bookings drop precipitously in response to the pandemic last spring, but rentals in drive-to markets, near beaches, or in proximity to other outdoor recreation opportunities picked up steam toward mid-summer as families and others sought relief from being cooped up at home.

Julie Brinkman | Credit: LinkedIn

“Each of those segments really experience different trends, demand and supply, and even regulations,” Brinkman said. “During COVID for example, in the last year, coastal and drive-to markets really had a pretty good year overall, but urban just didn’t. And you could imagine a world where the reverse might be true, where business travel returns, but no one wants to stay in hotels and urban short-term properties become high demand.”

Services offered through companies like Beyond can also help you to dynamically price your short-term rental appropriately to the market. Beyond’s technology automatically adjusts a property’s pricing based on a variety of factors at play in the market on any given day, in exchange for a fee based on the total booking amount, which varies as the price of the booking changes.

Additional resources:

Marketing

Making your property available on multiple platforms is one of the easiest ways to get more eyes on it. In addition, familiarize yourself with factors that will optimize your visibility on Airbnb and platforms like it.

Smartbnb notes that Airbnb uses over 100 different ranking factors to generate search results on the platform. But, doing simple maintenance like responding quickly to guests, updating your booking calendar daily, and focusing on excelling at the factors Airbnb asks guests about in its review process, can help boost your property’s search rank.

Also, make sure that your listings look appealing and leave no questions unanswered. It’s worth it to hire a photographer to take photos of your listing in full. Make sure every space in the property is photographed, so that potential guests aren’t left wondering why a photo of the bathroom was omitted.

Likewise, describe the rental’s location in proximity to attractions like restaurants, coffee shops, parks, grocery stores and points of interest. It’s also important to be explicit about how many rooms are in the rental, how many people it can accommodate and what kind of sleeping arrangements are available.

Highlighting special appliances or cookware available to guests could also help set your accommodation apart from others — for the family with three kids, a place that has a waffle iron could be the tipping point to make mom want to book.

In describing all the details about your rental property (with enthusiasm), you help create a narrative about what kind of a stay a potential guest will have there.

Shaun Greer | Credit: Vacasa

Managing reviews well is also a key marketing tactic that can be extremely valuable. Follow-up with guests throughout their stay to make sure everything is going well, and be sure to ask them for their review at the end of the stay, Greer advised.

“Those homes that have more positive reviews are shown more on the listing channels,” Greer said. “They typically have higher conversion rates, and therefore, earn more revenue.”

If you do end up with a bad review, it’s also important to address that as quickly as possible, and even potentially ask the guest to change their review later once the issue has been resolved.

“Be empathetic to the situation,” Greer suggested. “Everybody comes from a different place at a different time, and they all have different stressors. And some guests might not seem reasonable, but it could mean that you don’t have all the information for the situation. So just depending on what it is, I would definitely be willing to work with them to change their mindset and/or change their review.”

Additional resources:

Key amenities and features

“In addition to just the basics of real estate operation, with short term rentals, you are combining that with the hospitality industry,” Schroeder told Inman. “And that is often overlooked by investors who are trying to get in this market.”

Responding quickly to guests and taking their questions seriously is an excellent first step in giving them a great short-term rental experience. But providing them with other amenities and features that make the process easier can once again elevate the experience and help earn those 5-star ratings, which will then bring in more business.

“You’re also helping these guests create an experience, a memory for their family,” Schroder added. “You must learn from the very beginning to become a mind-reader — someone who uses empathy to anticipate your guests’ wants, needs, comfort levels and fears, and then deliver an experience that deeply understands them.”

In general, hosts should aim to meet their favorite hotel experience and then add all the comforts and conveniences of home on top of that. So, things like a well-stocked, cute kitchen; a large TV with streaming services; plenty of seating; a plush bed; a spotless space; and fun extras like local snacks, sweets and coffee all add on to a positive guest experience.

Greer added that homes with really desirable amenities like a hot tub or the ability to bring pets will gain owners bonus points with guests and also allow them to charge more per night for those listings.

Also, be proactive in thinking about the tools and features that help make a guest’s stay easier on them. For instance, Airbnb recently rolled out Flexible Dates search feature allows your potential guests to browse Airbnb listings within a broad date range, rather than narrowing their search to specific dates. Enabling this feature on your listings, therefore, allows you as host to gain more exposure to potential guests and enables guests to choose their travel dates depending on when their desired listing is available.

The short-term rental giant’s Instant Book feature is also recommended, as it allows guests to book immediately with one click, rather than having to wait for the host’s reservation acceptance to come through. If guests have the option between two comparable listings, one with Instant Book, one without, they’re likely to choose the former because of the peace of mind it offers that a reservation can be secured instantaneously.

Additional resources:

Tech and automations

Smart locks are another helpful tool for owners and managers that not only make the guest experience easier since guests don’t have to keep track of physical keys, but also make the stay more secure when each guest receives their own unique key code.

A few brands that are generally recommended among the experts are Schlage, August, Yale Assure or NextTouch, and Dormakaba (for enterprise accounts only).

Unexpected parties that can escalate at short-term rentals are a growing concern, particularly where rentals may be nestled within largely residential communities. Tech that can help prevent things from getting out of hand includes noise sensors like NoiseAware and Minut, which notify owners of unexpected noises, and in some cases can generate automated messages to guests in response to escalated noise levels.

Michael Driedger | Credit: LinkedIn

Michael Driedger, CEO at Airsset Technologies, recommended in a post contributed to Inman that property owners also look into smart controllers that help keep a home in one piece in case of emergency. Driedger notes that Ecobee and Tado smart thermostats can easily be synched with booking information so that heating and cooling systems can be turned on and off in order to avoid wasting energy or prevent accidents like frozen water pipes.

In addition, Driedger recommends Aeotec’s water sensor as well as Fortrezz’s automated water shut-off valve, both of which can sense accidents like leaks or floods and respond by turning off the water source.

Setting up an automated system for responding to guests can also help save a lot of time for owners in the long run, Schroeder said. One program she recommended was OwnerRez, which can help owners and managers manage properties on different channels, message guests, build websites and branding, and generate reports for listings.

The company also has a number of integrations with available with other services, like dynamic pricing services (including Beyond), smart locks, housekeeping services, payment processors and more, so it’s easy to do it all in one place.

Additional resources:

Track local regulations and expenses

As short-term rentals have risen in popularity over the years, opposition to them has also increased in some communities, which has been a big impetus for more and more regulations to be developed for the industry as it becomes a mainstream option for travelers.

So it’s crucial that owners and managers stay on top of their local rules and regulations because they are apt to change with some frequency.

Not all cities permit short-term rentals either, so for those investors just getting started, it’s very important to check this in advance. In Los Angeles, for instance, short-term rentals are only allowed at an individual’s primary residence, which means it’s illegal for investors to go snatching up properties in the city to convert into rentals.

Depending on the location, owners may also be required to pay permit fees, registration requirements or transient occupancy taxes, so if you have some flexibility on where you purchase your short-term rental, these are factors you may want to consider.

Some management platforms can also provide general guidance to owners on these matters, but it’s best to also source that information directly from local governments.

Additional resources:

Get to know different platforms

“Airbnb” has largely become synonymous with “short-term rental” today, but just because it’s the most well-known short-term rental platform out there doesn’t mean that it’s the only one worth using, or even the best option for your specific property.

Consider what kinds of guests your property will appeal to, or the kinds you’d like it to appeal to. Families? Couples? People with pets? Outgoing travelers? More quiet, independent types?

There are a lot of platforms out there and making sure your property is featured on the ones that best align with your own mantra as an owner will make both you and guests more satisfied with the experience.

Kid and Coe is a global platform that caters specifically to families, and guests can also list what kinds of kid-specific supplies they’ll need at their rental, like child gates or high chairs. Homestay, meanwhile, is a platform that’s just what it sounds like — a booking company that features accommodations where guests stay in the home of their host and have a more hands-on travel experience. And Welcome Beyond features “truly original” rental experiences, whether that’s a stunning beach house or a quirky B&B.

TripAdvisor Rentals, TurnKey Vacation Rentals, Agoda Homes and FlipKey are just some of the other platform options short-term rental owners might want to explore. The more you can align your property with listing platforms, the more bookings you’re likely to attract.