Investment properties are hot these days. Hotter still are investment properties that can be put on Airbnb (like vacation homes or apartments). The basic economics of short-term investment properties are attractive and outweigh the returns of long-term rentals.
You can buy an investment property (let’s say a one-bed in Pittsburgh) and you can either rent it long-term for $1,300 a month as a landlord, or put it on Airbnb for $150 a night and potentially make $4,400 a month. That’s well over three times the yield.
While the math is attractive, there is far more complexity to renting short-term over long-term. If you or your clients plan to invest in an Airbnb property, you’ll need to navigate regulations, listing practices, communication, operations and guest expectations that are now often on par with a hotel experience. Doing that requires skill, planning and a sense of hospitality.
If you are selling investment properties, you probably know that many owners are not willing or able to deal with all this on their own. You need to speak confidently about the industry you’re selling, but even better, make sure you refer your clients to a trusted local professional short-term rental property manager. If you’ve ever thought “why don’t I just manage these properties myself, after I’ve sold them,” you’re not alone. It’s a great business; make the commission and then set yourself up for permanent recurring revenue. But you have to commit to it. Running a successful portfolio of short-term rentals is not a part-time gig.
If you want to try management (or want to sound educated when talking to a potential short-term rental investment buyer who asks about Airbnb), you’ll need to know some industry terms.
Associations
If you don’t want to manage yourself, find someone who will and build a relationship with them. Comprehensive listings are maintained by associations like VRMA (Vacation Rental Managers Association), NWVRP (North West Vacation Rental Professionals) or if you are in the UK, the STAA (Short Term Accommodation Association). If you are managing, joining associations like these is highly recommended. They are great for industry connections, trends, and information. They also track local market licensing and bylaws, which you will need to navigate to get started in a short-term rental.
The OTAs
Online Travel Agents have been around for a very long time. Booking.com is the largest and has been distributing vacations, hotels and rentals since the late ’90s. However, when it comes to short-term rentals (rather than hotels), the oldest OTA is VRBO (Vacation Rental By Owner) which was started in 1995. While everyone immediately thinks about Airbnb when they think about short-term rentals, Airbnb really just reinvigorated a concept that had been around for a long time and introduced many forms of “alternative accommodation” to the digital generation.
The big three OTAs in North America and Europe are Expedia (which owns HomeAway and Vrbo), Booking.com and Airbnb. There are hundreds of smaller OTAs that can also bring investors revenue.
Channel Management
Professional managers understand that in order to optimize occupancy and revenue, you need to be seen by as many people as possible. Most successful Airbnb hosts and professional property managers are on multiple OTA sites (i.e., channels) to maximize top-line revenue. Channel management software (like Rentals United or BookingPal) is critical to avoiding double bookings. If you don’t use channel management and your property appears on all of the OTAs, separate people could book your property at the same time from different sites from around the world and then you have to deal with the thorny issue of ‘double bookings.’
Property Management Software
Property Management Software (PMS) is critical when managing a short-term rental business (even just a few units). Often PMSs function as channel managers but they also have critical operational functions like tax tracking, reporting, guest communication tools, cleaning and maintenance management tools, as well as many others. Many PMSs started as surprisingly local initiatives to deal with local laws (around tax and compliance) or other logistical issues faced by short-term property managers.
Even if you wanted to only advertise on Airbnb, you’ll soon find yourself overwhelmed by guest communication. (Did you know: Airbnb scores and displays your properties based on how quickly you respond to a message?) A good PMS will allow you to automate many of the most common questions guests will ask.
This is where a good PMS will save you both time and money. Managing communication promptly is also critical for optimal SEO. A PMS like Guesty has a unified inbox that allows you to have a central place to answer all guest queries and responses which go back through OTA apps like that of Airbnb. There are also PMSs like MyVR and Hostaway that have email and response templates to answer common questions. A PMS like Cloudbeds can be beneficial if you have a lot of units that you manage in a hotel-like scenario.
The PMS you choose will likely depend largely on your needs. If you are in North Carolina, you will need to have one with trust accounting, since the state requires that, which means you’ll need Ciirus or Streamline (although there are other ways to demonstrate trust accounting). No matter what you choose, make sure you account for not just legal issues but SEO and other operational factors.
Managing your listing’s SEO
Search Engine Optimization (SEO) is the name of the game in a large market with lots of competition. If people can’t find your property, they can’t book it! While SEO is most commonly used as a term for website searches, think of your listing as a landing page that people need to find on either Google or one of the OTAs. The OTAs are incredibly sophisticated when it comes to providing a listing as a service. Your photos, reviews, timely responses to guests, and a host of other factors will affect how easily potential guests can find and book your property.
Secure Self Check-In
If you can’t let people into the unit effectively and securely 24/7, then you can’t market your rental to business travelers (the highest cost per night with the lowest risk), or even many leisure travelers who today expect flexibility. To offer secure self check-in, you’ll need to think about access control (Yale has a complete line of smart locks to help). It’s also a critical element in a Smart Stay (a property that has property automation) to create a positive first impression with the guest.
Offering a ‘Smart Stay’ guest experience
You never get a second chance to make a first impression with a guest. That’s why streamlining the check-in process is critical. For every moment that a guest is waiting outside for you to deliver a key, or the more instructions they need to read to find a well-hidden lockbox, the more uptight and stressed they become. That stress is going to carry over to the rest of the stay. The smarter you can make a stay at your property, the better the experience for the guest.
A Smart Stay starts with pre-stay communication. Automatic early check-in (even an hour can make people feel good and valued) can be offered – if the cleaning is done. Services like VRScheduler are excellent for managing cleaning workflows. When the guest arrives at a property offering a Smart Stay, they securely ‘self’ check-in (a smart lock, no app needed) and are immediately messaged with a personalized digital welcome that shares info like WiFi password and who to contact for anything they need (e.g., mid-stay cleaning, arranged food delivery, or transportation – by the way, these are good upsell opportunities).
A Smart Stay is the way forward for property managers and hosts and is only possible with property automation software that is easily implemented and managed with keyless entry. Operto, the company I co-founded in 2016 is one such company offering property automation.
During a Smart Stay, devices like thermostats can be easily activated to adjust temperature and streaming options include music and video from guests’ accounts. Noise monitors ensure a pleasant stay (NoiseAware has good hardware for this) while occupancy monitors reduce risk, by making you immediately aware of guest violations. A Smart Stay ends with self check-out and a digital “Thanks! Please leave us your comments, and hope to see you again!” message.
You see, in Smart Stays, interaction with guests only happens when they need you, not when you need them. And, not surprisingly, Smart Stays make all guests happier. Happy guests lead to happy reviews, which leads to higher revenues. Best of all, everything here is possible and happening today, with minimal investment, and considerable reductions in operating costs.
Reviews
Good reviews are everything in the world of short-term rentals. If your reviews aren’t great, then the OTAs simply won’t show you at the top of the listings. If other potential guests read bad reviews about your property, they won’t book. If people have bad experiences, they also won’t rebook (all property managers love good repeat guests). The PMS’ mentioned come with templates for guest reviews as well as messages asking for reviews – but you have to earn those five stars!
While keeping the property clean is super important, the modern traveler thinks of their “alternative accommodation” like a hotel. If you don’t have towels, decent knives, good coffee and excellent WiFi you will hear about it (as will everyone else) in the review. You don’t need to go crazy on cool furniture but make sure the bed is excellent; the basics are there, and that WiFi is amazing (WiFi has been the top-rated amenity for multiple years in a row).
Managing guest expectations is the most important thing for a property manager or host to get right. If you pre-warn people that there is no iron or ironing board, they are unlikely to leave a bad review. If you say you have one and they don’t find it, they will complain publicly. The best thing is, to be honest about everything in the property. If the property is boat access only with no WiFi, make sure to call that out – some people are looking for a digital detox adventure (in which case there are specific niche OTAs you’ll want to list on).
In Summary
Short-term rental property managers get into the business because they love creating fantastic guest experiences. My favorite quote from Heather Bayer at Vacation Rental Formula is “I started doing this to make dreams come true.” Remember that short-term stay management is far less transactional and far more personal than dealing with a long-term tenant, and at the same time, a much higher pace. Being a landlord is very different than being a great host.
If you are up for being a great host, then managing properties on behalf of clients is definitely for you. If you are not, there are passionate people in every city to lend a hand, and you or your clients can sit back and watch the investment pay off.