Owning a vacation rental property can be fun, but you need to be able to make a profit on that investment. Whether you’re a homeowner renting out your vacation home part-time or a real estate investor, it’s essential to look at the various ways to increase profits.
Let’s look at a few of the top profit-increasing strategies.
Smart Finishes for Higher ROI
When you vacation, what does luxury look and feel like? While a phenomenal view of the ocean or a gleaming chef’s kitchen may qualify, often it’s the smart finishes that elevate the rental from nice to luxe—and luxe can command a higher price.
In general, minor renovations can bring some of the largest ROI (return-on-investment) for a home rental. Projects like landscaping often bring a nearly 100-percent ROI, while a minor bathroom remodel has the potential to bring a 102-percent ROI. It’s the smart finishes that take these projects to the next level.
What kind of smart finishes have a potential pay-out?
- Kitchen countertops: quartz and granite both look beautiful but offer the durability needed for a rental property
- Quality appliances: stainless steel finishes, a wine fridge, specialty appliances like a waffle maker, a multi-function coffee bar, or even a fondue set
- Spa-like shower systems with rainfall/waterfall heads and integrated light and music options
- Heated floors in the main bathroom
- High-end bedding, including extra pillows
- Home-theater features including surround sound
- Automation for lights, audio, and window treatments
Tailor your luxury finishes to the theme or location of the rental. For a San Carlos condo, make sure your guests have access to a selection of fluffy beach towels and premium skin care products for pampering after a day out in the sun. Your Park City, Utah ski rental may benefit from items like towel warmers in the bathroom and a ski boot dryer.
Marketing is Key
Marketing a vacation rental property is a complex task. It’s more than having an eye-catching listing or a few social media posts. It needs to be a comprehensive approach that ultimately works to increase your profits. Whether you opt to go it alone or work with a property management company, marketing is key.
Marketing also takes time and effort. Many vacation property owners simply do not have the time or the expertise to market their rental to maximize profits. It’s hard to do when you’re working a full-time job, managing a family, enjoying a retirement lifestyle, and likely living a long distance from the rental property. Working with a property management company can make marketing the property easier and more effective than going it alone.
Let the management company handle taking the professional photos of the property, write the listing, and include it on their website. Your rental property will be seen by more potential guests and they’ll be able to book directly and without hassles. When it’s easier for renters to book a vacation home, they’re more likely to spread the word and to book again.
Stay on Top of Local Events for Seasonal Pricing
Something hotels are usually good at is leveraging supply and demand to determine the optimum price for their rooms in order to maximize profit. As a vacation rental property owner, it’s essential to be able to do the same. If you can figure out how to make seasonal pricing work for your property, you have the potential to increase your profits.
There are a couple of ways to do this, including an investment in revenue management software or using a property management company. Both the software and the professional management team will look at local seasonal events and be able to project when you should have higher rates and minimum night stays.
Revenue management software analyzes large amounts of data to help set and optimize prices. Major hotels use this type of software and you can opt to as well, but it requires having some tech-savvy and it’s another thing you’ll need to monitor. However, when you choose to hire a property management company, they have the tech and the expertise to handle pricing fluctuations in relation to local events like annual festivals or monthly concerts, farmers markets, or antique shows that draw visitors to your area.
Diversification with Distribution Channels
Distribution channels are the sites where your property rental is available to guests. Your distribution channels are different from your social media. Social media, part of your marketing plan, gets the word out about your property and directs potential guests to the distribution channels. The distribution channels are where guests can see the details about the rental and book their stay. In today’s market, diversification is the way to go.
If your rental property is available through more distribution channels, you’re reaching a larger market and that means more bookings and increased profits. Using a property management company like Casago makes this process easier.
Casago uses a superior technology system to make sure your rental is listed on the top sites like Airbnb, Booking.com, and Vrbo and that it’s ranked to be seen. We use our expertise to ensure your listing is eye-catching, up-to-date, and includes everything a vacationer may want to know, from its amenities to local attractions.
Automation for Smoother Experience
Hotels and resorts globally have embraced automation for a smoother, more relaxing guest experience. Keyless entry or contactless check-in/check-out not only makes it easier for guests to arrive on their schedule, but it means you don’t have to have someone available for that process. Beyond installing a smart lock, consider other home automation to enhance the guest experience.
With today’s technology, many areas of the home can be automated. For your vacation rental property, going full automation may be ideal if you’re attracting guests accustomed to luxury details. However, your rental may not need full automation, but a few of the basics are sure to be appreciated by guests. These may include but are not limited to:
- Entertainment systems
- Lights and fans
- Window treatments (blinds, curtains, shades)
- Virtual assistants like Alexa or Google Home
A home automation hub can serve as the device that connects all your systems and devices. As we know, modern life revolves around smart devices. Tying everything into one central hub run by its own app simplifies usage for your guests and for you.
If your vacation rental doesn’t already have some of these tech upgrades, consider them as they can offer a solid ROI and improve guest satisfaction. Higher guest satisfaction equals return guests, better reviews, more bookings, and increased profits.
Encourage Longer Stays with Discounts
It’s not uncommon for guests to book short-term rentals—weekend get-aways, mid-week business trips, and other one- or two-night stays. These bookings generate revenue, but cleaning and prepping the rental for the next guest can take time. Five short-term bookings in one month can cost more time and money versus one guest staying two weeks or the entire month.
Encouraging longer stays by offering discounts can be a way to increase overall yearly profits for your vacation rental property. Consider charging a slightly higher rate for any stay shorter than a week. Depending on your location and clientele, another option is to set a higher rate for stays of less than four nights. Maybe offer an incremental discount the longer the stay, up to one month.
You can also tie in discounts for longer stays with seasonal events. In Galveston, Texas, the annual Holiday in the Gardens runs from November through January. It’s a popular event that draws tourists from all over. This is the ideal time to encourage a longer stay. Guests can book a week or longer during the holidays and take in all the attractions and special events while enjoying a discounted stay.
People love their pets. In the United States, seventy percent of all households have one or more pets (Statista 2020). That seventy percent is likely even higher as the number of pet adoptions increased during the pandemic. Because people love their pets, many don’t want to vacation without them. It’s like leaving a beloved family member at home alone.
Going pet-friendly with your vacation rental can have an impact on your profit margins. It’s important to consider whether or not you might be losing bookings because your rental restricts pets. You can offer a pet-friendly stay, but with an additional fee.
Is your primary guest demographic one of the largest groups of pet owners? A 2021/2022 survey shows that Millennials are the biggest group of pet owners in the United States, with Baby Boomers the next largest group of pet owners. If your bookings are primarily from either of these two demographics, going pet-friendly may be something to consider.
Get Tax Savvy
Nobody likes to pay taxes, but everyone has to pay taxes. Keeping up-to-date on investment property tax breaks and small business deductions can be a game-changer. It can be worth the investment to consult a professional accountant, one knowledgeable in small business taxes, to see what deductions you can take. Your tax advisor will also be able to tell you if the city or county where your rental resides offers any tax breaks and/or if there are taxes to be paid to the municipality.
Go It Alone or Partner for Better Profits?
Going it alone with an investment property can be overwhelming and, in the long-run, end up costing you more. Rely on a management company like Casago for your vacation rental property and, together, we can do the right things to increase bookings and help your overall ROI. Your vacation rental offers more convenience, privacy, and space than a traditional hotel, and you should be enjoying a profit. We want your property to succeed.