How to Maximise Revenue from Short-Term Rentals
The short-term rental (short-term/STR) market has exploded in recent years, generating an average of 30% more income than annual rentals (long-term/LTR). In the most popular holiday locations, this percentage is even higher! Short-term rentals are one of the most profitable ways to make money in the world of real estate investment.
However, this type of investment is not suitable for every property or buyer. There is a greater level of commitment for a landlord, as guests expect a quality experience. One bad review can cause a dramatic drop in interest. Additionally, STR is notoriously unpredictable and prone to seasonal fluctuations.
In this article, I’ll give you some tips on how to deal with these risks!
What Is “Peak Season” in Tourism?
In the travel and hospitality industry, “peak” or “high season” is when travellers are most active and rates are highest, aka the main tourist season in a particular location. Each location will have different visitor traffic, depending on its attractiveness. This attractiveness is influenced by factors such as the time of year, attractions, amenities, popularity, festivals, and other special events. Therefore, peak season for one destination may be transitional or low season for another. In addition, the leisure market’s high season is off-peak season for the business market.
When done right, short-term rentals are extremely lucrative. Best of all, you can visit and enjoy your own piece of paradise whenever you want (unlike with long-term rentals, which is practically a waste!).
What Is a Short-Term Rental?
Short-term rentals are popular with people on holiday or business trips. As such, stays range from a few nights to several weeks. A short-term rental is a property rented to guests for no more than 30 consecutive nights. Month-to-month leases are usually not considered short-term without a specific end date.
The first step to earning a sustainable income from short-term rental investments is choosing the right location and property. To earn regular income during peak and off-peak seasons, research both emerging locations – which have yet to reach their full potential – and timeless, iconically beautiful places.
Talk to local real estate agents for expert advice on profitable properties in promising locations. Also, check the latest analysis - AirDNA is a great resource. Remember that once you’re up and running, you’ll need to maintain profitability by implementing marketing tools and pricing strategies to maximise revenue.
Once you’ve decided that your property and investment style are up to the task, weigh the pros and cons of STR and plan the entire process (I write about this HERE, using Airbnb as an example).
What should consider to ensure a sustainable income from short-term rentals? What financial challenges await you? Here are some top tips to maximise your rental income, lower costs, and outclass your competitors.
1. Conduct Research on Short-Term Rental Properties
Use the aforementioned AirDNA and other available marketing tools. Research the real estate market in your location and its needs, and know your target groups and seasonal characteristics. For example, some spaces are more suitable for a romantic getaway for two, while others are more family-friendly or for remote work. Some are ideal bases for outdoor adventurers, while others are attractive to business travellers. Once you analyse this, creating a customised and effective year-round marketing plan will be much easier.
2. Create an Attractive and Relevant Description, and Take Exceptional Photos
I have already written about this in previous articles, but it is worth emphasising. The description and photos are the showcases of your property. The description should tell potential guests everything they need to know while piquing their interest. The best descriptions showcase the visitor’s experience and explain the home’s features, surrounding amenities, transportation tips and other important details that guests should know pre-booking. Highlight local attractions; for first-time visitors, suggestions of places to visit are greatly appreciated.
Tailor your description for your target audience. For example, when targetting off-season business travellers, you can spare details of kid-friendly attractions. Use more formal language and highlight features such as reliable fibre optics, comfortable and well-lit workspaces, a laundry and ironing service with pickup and delivery, etc.
Use listings that make your property unique and appealing to specific target groups. If you don’t know how to write an engaging, attractive, relevant and clearly written property description, contact a copywriter or experienced real estate professional!
There is no better way to attract and keep the attention of potential renters than beautiful, professional photos of your property. If you have no experience with photography, entrust this task to a professional.
60% of people are more likely to click on a search if it contains an image.
Websites with images have 94% more views.
Renters spend 60% of their time looking at pictures during property searches.
Nuances like this make all the difference. With careful budgeting, a single professional photo shoot or use of copywriter services will significantly increase your monthly occupancy rates and revenue. A worthwhile expense!
Make sure to regularly update the content of your listings, adding new photos, reviews and features to the description. Apply this strategy across all channels, such as your official website and social media.
3. Take Care of Reviews
Remember that your success heavily depends on reviews. Keep the property in great condition – the increased guest turnover for short-term rentals means significant wear and tear to the property. Expect guests to be ruthless in their reviews; short-term rentals must be held to an exceptionally high standard.
As a rule of thumb, go further than basic online communication. Provide helpful local tips, leave flyers for current cultural events or guides, check if guests need anything every few days, etc. Your efforts are guaranteed to pay off in the long run! Simple touches like restaurant recommendations will improve your guests’ experience. Likewise, small welcome gifts of local delicacies leave a lasting positive impression.
Most guests will need some incentive to leave exceptional reviews. This can be as small as reminding guests how important reviews are to your business just before the end of their stay.
4. Use Social Media to Promote Your Property
Social media platforms are a great way to promote your investment. To start your social media strategy:
Create a Facebook business page with all your rental information and booking links.
Create a page for your rental on Instagram. With its photo-focused, visually pleasing interface, Instagram has become a popular marketing tool for short-term rentals. It also allows visitors to share their own photos of their stay, tagging your profile.
Create a virtual tour of your property on YouTube, highlighting its uniqueness.
Ensure your username and # are visible to guests, such as on the refrigerator or in the welcome packet, next to the WIFI password. This will make it easier for guests to follow you and share photos of your trip with your # on their accounts!
It’s also worth investing more in advertising (on Google or social media).
5. Automate Your Rental Tasks
Time is money and the most valuable asset we have! Don’t waste it senselessly by spending hours on administrative tasks and other easily automated work.
I have already mentioned a great tool for market analysis: AirDNA collects short-term vacation rental data from thousands of sources, including Airbnb and Vrbo/HomeAway, to get a comprehensive picture of the short-term rental market. AirDNA’s Airbnb Calculator, or Rentalizer, is the most popular short-term rental data collection and analytics tool on the AirDNA platform. This tool provides revenue projections on how any property (at home or abroad) would perform as a short-term rental. A free version of AirDNA MarkerMinder is available to start with.
You can outsource the management of short-term rentals to a professional company. This is a great solution for people who want to earn 100% passive income (I write about this HERE).
The alternative is to handle property management yourself. Fortunately, this has never been easier, thanks to various listing sites, property management, and accounting software. If you opt for multi-channel distribution and use remote management systems, the most tedious tasks are dealt with while you focus on scaling your business and implementing effective marketing.
Popular sites offering short-term rentals (and more):
Airbnb
Booking.com
VRBO
Expedia.com
Agoda
Homestay
Klook
Kid & Coe
Welcome Beyond
Clickstay
Holiday Lettings
Sonder
Interhome
Plum Guide
Vacasa
Many of these (like Airbnb) offer tools such as synchronising calendars with other sites, making it easier to manage your rentals.
Even if you have already listed your property on all the popular short-term rental sites (such as Airbnb and VRBO), I recommend creating your own direct booking site to maximise rental income – especially if you manage multiple holiday properties. Booking apps can be integrated into your website, allowing potential guests to book rentals directly on your site.
Take advantage of automation software.
There are several short-term rental services that can streamline business management. These include amenity services, automated reservation services, cleaning and maintenance management software, guest communication and payment services, and more. Property management software is increasingly combining these services into one. Systems worth checking out include Guesty, Hostaway and Lodgify, Evolve Vacation Rental, Landlord Studio, and TIDY.
Why you need them:
Using a property management app allows you to quickly and easily manage your accounts anywhere, anytime, with just a few clicks on your smartphone.
Keeping all your tenant and contractor information in one place helps you remember who’s who. What’s more, you can easily automate communications, saving time and ensuring timely payments.
Automating reminders means you’ll never forget important events – like a property fire inspection.
Simplified data backup and recovery and ongoing analysis.
Remember that the channels, marketing strategies and platforms used to rent your property are also subject to trends! Always check which are still popular and which are slowly falling out of favour.
6. Plan Your Budget
Budgeting is a vital part of short-term rental property management. Every expense must be accounted for. To assess your monthly cash flow and develop an effective pricing strategy, map out your operating expenses and revenue potential.
7. Price Your Offer Well (and Adjust the Price Often)
Pricing can make or break a holiday rental. To ensure maximum rental income, set the right price for your property and learn to adjust it according to the season.
Some sites (such as Airbnb) do this for you, suggesting rates calculated by analysing their own data.
During the off-season, keep an eye on local events and other attractions, which can affect demand and rates. Pre-plan your rates well in advance so you never miss a bargain!
Consider offering discounts a few months before the peak season and announce them in your offer. However, don’t forget to limit how long guests can use them. For example, establish a stricter cancellation policy in exchange for lower rates.
8. Take Advantage of Tax Benefits
Make sure you actually take advantage of all deductions before focusing on other ways to earn more.
9. Be Pet-Friendly.
In recent years, pet-friendly amenities have significantly risen in search popularity. According to Airbnb statistics, the number of searches that filtered pet-friendly listings increased by 55% on their platform.
10. Thoroughly Vet Guests
If safety is a priority for you, consider limiting guests based on your preferences. Perhaps you only want to serve adults, out-of-towners (to avoid locals, who are more likely to host parties), or small groups (who are unlikely to disturb your neighbours). On Airbnb, you can also turn off the instant booking feature, allowing you to chat and get to know potential guests before confirming their reservation. Making repairs/renovations after ‘carefree’ guests is not only a cost (remember about the insurance) but also a time when the property can’t make money!
11. Be Energy Efficient
Investing in energy-efficient solutions for your property will lower your utility bills and help your budget. For example, install smart metres or lights to better regulate the temperature and energy consumption of the property, solar panels, etc.
12. Think Creatively
Short-term rentals aren’t the only option. While high-demand locations will generate income in the off-season, some major cities have completely outlawed STRs; renting an apartment for less than 30 days is illegal. A new solution for landlords struggling with this problem has recently emerged - medium-term rental.
What is a medium-term rental?
Medium-term rentals are apartments or houses where guests stay for at least 30 days and less than 12 months. They are ideal for anyone who doesn’t want to be bound by a 12-month lease. Like STRs, medium-term rentals are usually fully furnished. The only difference is that the owner or STR management company is more responsible for cleaning, monitoring check-ins and check-outs, organising laundry, replenishing toiletries, etc.
Encourage longer stays after the season!
If your property’s profitability heavily depends on the season, encourage guests to stay longer out of season in exchange for a convenient discount. Hesitant to rent to strangers for an extended period? Start by advertising the offer among friends (and friends of friends) via social media or contacting an agency (realtors often have regular clients who look for attractive off-season deals year after year).
Keep in mind that during the off-season, your property is likely to attract a different demographic of visitors, so make sure to research your target market beforehand!
Since the pandemic, many employees have appreciated and preferred working remotely. Because of this, guests stay in vacation homes longer - with a 68% increase in stays from 21 to 30 days (according to the VRBO Report). In the case of Airbnb, more than 30% of those surveyed said they plan more long-term trips in recent years.
You can attract these types of guests by offering discounts on monthly stays, as Airbnb encourages on its platform. When you do, provide kitchen amenities, cleaning supplies and more linens and towels.
What are typical rental periods for medium-term rentals?
Standard rental periods are 1 to 3 months, 3 to 6 months, or 6 to 9 months in the off-season.
Who benefits from medium-term rentals?
Landlords because:
They can rent out medium-term apartments to tenants in cities that don’t allow short-term rentals, retaining both regular investment income and more flexibility than long-term rentals.
This type of rental is also less labour-intensive than short-term rentals.
If your STR does well in the summer months but suffers in the winter, renting to medium-term tenants (for 3 to 6 months) provides a steady income during the off-season and allows you to maximise your rental income during the peak season.
Renters:
Students who want to secure housing during the semester but not pay rent during the summer.
Those in professions that require temporary relocation.
Remote workers and digital nomads: remote work allows you to live in a new city for a few months, for example, before a planned move or for the sheer pleasure of a change of environment.
Construction and blue-collar workers, who often stay for weeks or months in cheap hotels that lack the privacy that medium-term rentals can provide.
Contact me if you have more questions about short- and medium-term rental strategies. I’d be happy to help!
Edyta
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