Whether you’ve done your research and are ready to purchase a property or if you’re daydreaming of being your own boss and starting your very own Airbnb business, you’re going to need to get down to brass tacks and make a vacation rental business plan before you make any moves.
You can always find excellent resources from trusted places like the National Federation of Self Employed & Small Businesses. They have a standard guide on how to write a business plan, but, as we all know, vacation rentals are unique and don’t fit the cookie cutter business plan model. There are an endless number of ways in which a vacation rental business may be set up.
- Rent your primary home for just a couple weeks a year while you go on vacation
- Rent a spare room on a short-term basis
- Offer your second home for short-term rental on a permanent basis
- Ask a property management company to rent your vacation rental
- Rent a portfolio of properties that you own and/or manage on behalf of others.
Even though there is a wide variation in the types of vacation rentals, there is one unifying factor: your best chance of success is to plan everything meticulously in advance and not leave everything to chance!
Learn exactly what you need from our in-depth guide and then use our tailored print out to easily complete your vacation rental business plan template!
Table of Contents
Creating a Vacation Rental Business Plan
Any good business plan starts with an Executive Summary. This provides a useful summary for your investors or your bank. The Executive Summary should address three basic questions: What are you selling? Who will your customers be? How will you sustain and grow this business?
Paradoxically, the Executive Summary comes first but should be written last, after you work out all the details of your business plan.
Your detail business plan should broadly include the following sections:
- Market and Competitive research.
- Sales and Marketing
- Operations and Compliance
And should be accompanied by a 3 year forecast based on key metrics.
Getting the Lay of the Land
You’ve got the basics of your vacation rental business plan laid out. It’s time to start doing market research.
First let’s take a look at the vacation rental industry, and narrow it down to your specific market. Write a general overview of what the vacation rental space looks like where you’re looking to set up shop. Once you have the general summary, pivot to how you will position your vacation rental within that existing space.
The vacation rental industry is rapidly growing, which means it’s a competitive space. While they aren’t your enemies, the saying ‘…keep your enemies closer’ rings true. Understanding your competition is vital to finding where you’ll fit in the marketplace and ensuring your business has room to grow.
Look at direct competition and check-out similar vacation rentals in your area. And do not forget to consider other forms of accommodation as a possible competitor. Hotels and B&Bs are another choice. So pay close attention to details like their occupancy levels, average daily rates, seasonal pricing, and the facilities and amenities they offer etc. Take fastidious notes!
Next, you must put in place a coherent sales and marketing plan.
Understanding Your Fit in the Marketplace
Armed with this competitive knowledge, you are ready to describe your property (or property portfolio), its unique selling point, and explain how it will appeal to your target audience.
First, identify your target audience:
- Families with young kids
- Millennial couples
- A business or corporate travellers
- Large groups and/or extended families
- Mature, affluent, retired adults
- Any combination of the above
By creating a target audience, you are not excluding any potential guests. You are simply identifying the people who are most likely to book and have a great experience at your property.
This audience can shift for different types of accommodation and at different times of the year. Families will tend to get out during school holidays, pensioners will be a better audience to target in the low-season.
You may also notice micro-trends with who books 8 weeks out, 2 weeks out or even 2 days out. All of this information will help inform how best to present your property. For example, if your audience consists of large groups, showcase that your dining room can comfortably seat 12 people or that your media room has sofa space for 20. Appeal to your target audience for the best results!
Next, you need to describe the main value proposition for your business, in fact, for every accommodation type on offer.
- Why should your target audience stay with you?
- What is most unique or exciting about your place?
In writing up your unique selling points, you need to be sharp, truthful but you also need to bring forward your property’s best assets, including its location. Do not overplay things, as you will disappoint your guests and risk bad reviews. But do not be shy either – if you’ve got it, flaunt it!
Building Your Vacation Rental Presence
Building your vacation rental’s online presence is key to growth, getting bookings and developing repeat business, which can equate to thousands of pounds in consistent annual revenue. Vacation rental marketing is mostly comprised of advertising and online travel agencies (OTAs), social media, email and your website.
How you will take your message to market ?
The answer lies with Online Travel Agencies (“OTAs”) and Booking Sites, major online advertisers and of course, your own website!
Airbnb and Vrbo have made their name in the Vacation Rental space, but why leave it at that? You should also consider other powerful emerging vacation rental channels like Booking.com, TripAdvisor Vacation Rentals, or Google Vacation Rental. Combined, they are sure to give your business maximum exposure.
The more agencies you work with, the more exposure you get, but this can easily become really overwhelming. You could spend every minute of the day managing your listing manually on these major booking sites – ouch! So now is the time to invest in a smart software tool to help you automate all this.
High-quality vacation rental software, like eviivo suite, includes a channel manager, a booking engine, automated guest communications and full payment integration. With eviivo suite, you can update all the major channels, including your own website, in one place and one single swoop, and avoid any overbookings.
Be careful when you evaluate this type of software. Many channel managers synchronise rates and availability, but very few are able to synchronise photos, content, policies, taxes and other fees as well.
Repeat Guests Are a Goldmine!
Marketing and communications go hand-in-hand. Think about how you will communicate with your prospective guests, new or past guests alike. Utilise all the marketing channels mentioned above, and any other communication strategies you can implement.
One third of the guests who visit major travel sites like Airbnb, TripAdvisor, Vrbo will also visit your own website. So you need to have a great online presence!
The key to success here is not the most expensive web technology but rather, quality high-resolution photography and crisp enticing descriptions for each property and its surroundings.
Rather than spending a fortune on technology and development agencies, it’s better to understand your competition and your target audience. And spend your budget on stunning photography and clever wordsmithing.
eviivo suite comes with a free website builder that lets you create your own business personality online, using simple drag and drop tools. It’s free because we think you should spend your budget on quality photography and 3D tours instead!
The most profitable business is repeat business. So make your guests love the place so much that they’ll keep coming back!
You need to nurture them with special offers, promos, regular communications, and above all, that special je ne sais quoi, and you build out with the right amenities and the quality of the information you make available to them on-site and/or online. While you may have a gorgeous property, but if you aren’t offering the right amenities say goodbye to easy bookings.
You may consider a full in-person meet & greet service. However, if you are managing the property remotely, remember that a lot can be achieved through mobile technology, with contactless check-in and check-out options, and the transmission of clear directions and access instructions.
Regardless, make sure your vacation rental PMS is able to automate the collection of payments and safety deposits, and the sending of customised guest emails before, during and after their stay, as doing all this manually would be such a drain on your time!
Dig Into the Nitty Gritty. Let’s Talk Money.
We’ve made it to the juicy part of the plan – money! Here’s where we’ll be considering revenue (yay!), minus all the overhead and expenses (ugh). There are a lot of pieces to account for and forecast to understand all of the costs for your vacation rental business.
Remember the fastidious competitor notes you took? Bust them out now! Think about how many potential customers you think you can realistically compete for and how popular your destination is. Does that mean that you’ll have an occupancy rate of 40% or 80%? And how will that fluctuate in different seasons and over time?
With all that research in play, it’s time to map out all your rates for a year, taking into account any seasonality in demand. You should also consider how best to flex your rates when combined with different policies, minimum length of stays, and/or promos, or packages (if you wish to bundle-in certain activities or meals). Psst—these will most likely change. The goal isn’t 100% precision. What we want is the most accurate estimate of annual revenue to set you up for success.
Once business is going, with the right software, it is easy to monitor market rates closely and adjust them frequently to stay competitive. This won’t be a set it and forget it setup, it will be key to stay on top of your pricing to stay competitive.
Next, we need to round up all your expenses and include some room for unforeseen expenses. This will include bills associated with your property like the mortgage, insurance and utilities, as well as costs for inventory, staffing, maintenance and services. And if any of this may seem overwhelming or foreign, brush up on understanding key vacation rental data and how you can calculate it.
Lastly, we have to look into local regulations and taxation. Short term rentals are a relatively new type of accommodation, and because of this, how governments manage, tax and regulate them shifts frequently. Look for regulatory information for your property at the local level with your city and country governments, and check the relevant tax information with the relevant authorities. When in doubt, enlist the help of an accountant and/or a lawyer familiar with short term rental laws in your area.