What it’s Really Like to Own a Vacation Rental – High Season Edition – The Good

As we begin to explore this great adventure of buying and owning a vacation rental homes together, I thought it might be interesting to do a series of blog posts about what it’s really like to own a vacation rental home.

To keep these posts a little shorter, I think I’ll do them in a series, The Good, then the Bad, and the Ugly.

The Good of What It’s Really Like to Own a Vacation Rental

For us, we’re in our summer season, which is our high season since we’re in Orlando, where families go to visit theme parks. This tends to be the easiest time of year to keep the houses full and inquiry and nightly rates high. The busy season comes as a bit of a catch-22, more guests equals more revenue, but also equals more issues to address and possible costs, so it’s good to have the right perspective.

Almost Fully Booked

When you look at your calendar for the next three months, it’s pretty satisfying to have it look like this:

calendar

As you can see, for May-July, we are/were almost fully booked. The small hole in June is a good thing for us, it allows me to get the pest control people in the house while there are no guests to annoy. The week in May was a bit of a fluke, but since I NEVER do any kind of “last minute” deals with guests (we’ll talk more about value propositions at a later time), I was okay to have the house rest a bit. All but the last week of August is also already booked, and I’m hopeful we’ll fill up the last week.

Our nightly rate is $129, plus tax, cleaning fees, and pet fees. No pool heat needed this time of year, so that’s actually a pretty reasonable rate, considering on property Motel-6 level accommodations are closer to $200/night.

 

Our monthly revenue in the summer is around $3600-3800, not including pet fees (we take pets). We don’t carry a separate mortgage on our vacation rental (it’s wrapped into our main home), so our profit margins are pretty high. As you might imagine, we like summer, and it allows us to take some of that profit and set it aside for both the months that aren’t fully booked, as well as the months that we as a family use the house.

More Confidence in Pricing and Inquiry Response

One of the advantages to being fully booked is that you can have a lot of confidence in your pricing model and what you’re offering, and most importantly, there is no temptation to do discounted or “last minute” deals on your home. With every “product,” including vacation home nights, it’s important to establish a pricing strategy and stick to it. Concentrate on value, not price. I’ve done this with my own rental. We decided early on that we wanted to attract guests that were willing to spend just a little more for a quality, well-run home. We’re about $10/night more for the market in our area, and we NEVER discount below our published rates. Of course, we use seasonal rates like everyone else, but it’s important for us to stand firm on pricing. This helps us establish value at a certain price point.

Each owner has to determine what their pricing structure should look like, and how to handle those empty nights. For us, I know that my guests, who are willing to pay a little more, are typically more conscientious about taking care of my home. Stereotypically, many super-bargain hunters represent a higher risk to your property. Before you get upset with me on that statement, realize that I mean that those guests to whom price is the most important factor are not as desirable as those that are more interested in value.

I’d rather leave the house empty than run the risk of guests not taking care of our home. We’ll talk more in a later post about attracting guests that you can build a relationship with and that will take good care of your home.

Dealing with Bargain Hunters

Being fully booked also helps you respond with confidence to “what’s your best price” or “what kind of deal can you give me” inquiries. These are one of the most annoying and rude inquiries I get on a regular basis, but it’s very easy to be nice and professional in response. Having confidence that you’ll get better inquiries allows you to reject these types easily. I usually just say “Due do the high demand for our property, we do not offer discounts. We have priced our nightly rates competitively, and feel that we provide excellent value at that price. I have attached a quote showing the total cost for the dates you have requested, if you are interested in booking a stay, please use the link in the form.”

Review and Referral Opportunities Increased

This is pretty straight forward math, but the more guests you have, the better opportunity you have to get great reviews and referrals. Happy guests bring more happy guests both through your review process or by telling others about your property.

Don’t forget to ask! I make it a point to ask every guest to fill out a review on my VRBO listing, and also ask them to go over to FlipKey and copy and paste that same review there. Currently, I have about an 80% review rate, and all but one of my currently 31 reviews are 5-star (the other is a 4-star, but very positive). I also make it a point to say in that request email that if there was anything that would prevent them from giving me a 5-star review, please let me know…this encourages them to leave good reviews and also gives me a chance to address anything that might have been an issue.

With any luck…fully booked means more guests=more guests! ;->

With Good Systems, Smooth Sailing

Having good systems in place for your vacation rental home is paramount for a lower-stress ownership experience. Again, we’ll talk more about topics like picking vendors, management teams, on site systems, etc., but for now, let’s assume you have those in place.

When you’re in the high season, since you’ve setup your systems well, and have someone “on the ground” to help with guest interaction, home management, and the like, your home should essentially be on autopilot. If you’re calendar is up to date (and it should be), then it’s likely you simply won’t get inquiries for most of the duration of the high season. These days, I’m getting mostly next year inquiries and the occasional “I know the calendar says your booked, but…” inquiries, but for the most part, people see the booked status, and look elsewhere, which is fine with me.

I have all of my utilities on autopay, and my pest, lawn, etc. services automated, so the only work to be done is to do my sales taxes once a month (some management companies do this for you…but it’s easy with the right templates), and respond to those occasional inquires.

Like I said above, most owners REALLY like the high season, for all of the reasons above. But, it’s not all sunshine and roses. We’ll talk about the Bad and the Ugly next time.

What It’s Really Like To Own A Vacation Rental – High Season Edition – The Bad & Ugly

The Bad and Ugly of What It’s Really Like to Own a Vacation Rental

As with all things, too much of a good thing can actually be come too much of a good thing. Vacation Renal Homes and high occupancy is no exception. Today, we’ll be continuing our What it’s Really Like series and talking about the bad and ugly parts of owning a vacation rental home in the high season.

More Interaction with the Property:

We discussed in our first post that with the proper systems in place, the sales, marketing, and inquiry parts of running a vacation home actually get pretty easy during the high season because being fully booked will lead to less effort required and will also produce fewer inquires (if you’re calendar is kept up to date.)

The opposite is actually true from the property management standpoint. Since you’ll have guests in the home pretty much every day of the high season, there is always the potential need to address some guest or house concern. Because I don’t recommend a full blown “hands-off” property management setup (more on this later,) as an owner, you’ll need to engage more to either address or delegate these issues.

Case in Point from My Own Home:

http://www.dreamstime.com/-image24603364I always check in on my guests within a few days of their arrival to make sure that I’m engaging with them and showing concern for them and the quality of their stay. When I emailed my guest from last week, they were super happy, but also pointed out a couple of issues from the house, one being a broken blind in the living room, and also a torn towel. These are pretty minor things, but they do facilitate not only dispatching my on-site team, but also a claim form to our “guest protection policy” company.

When there are guests in the house all of the time, it’s much more likely that this will happen. It’s a fairly straight-forward and low-time commitment activity, but the point is that during the high season, that 30 minutes a week of extra interaction is required.

Wear and Tear on the Vacation Rental Property:

There’s a direct correlation with the number of nights the house is occupied each month and how much wear and tear is occurring. That only makes sense, right? A home is really just a big group of systems, from A/C, to pool, to plumbing, and appliances. The more they get used, and the more people use them, the more likelihood an issue will arise.

This is actually another reason I don’t do highly discounted nights to “fill voids” in my schedule. Sometimes, especially during the low-season, I feel like it’s better to just let the house “rest,” and I’d actually rather it sit empty than squeeze every ounce of revenue I can. There’s a balance between wear and tear and those costs (a pool heat pump is $3200,) that come with additional guests.

Plan and budget:

Again, during the high season, this is just one of the things for which to plan. You’re making more revenue, but you should always have a funds available to address issues with systems as they arise. The high season is a good time to continue to build and maintain your “emergency fund,” so that the money is there either during the high season or more importantly, during the low season when revenue is less. You can’t really just tell guests that you don’t have the cash to pay for the new pool heat pump, it will have to be replaced.

Higher Touch and Interaction:

As I said before, I do my best to check in with each guest that starts with us at some point during their stay. I also do a follow up and review request for each guest, which then I use for my Facebook page, my website, and my newsletter.

Obviously, during the high season, these to-do-list items are much more frequent during the high season than in the low season. Just like other items, this isn’t necessarily a bad thing, but it’s something to be planned for. If you allot only 30 minutes a week for marketing and guest interaction, you may find yourself either ignoring part of these items during the high season, or you might do them poorly. I spend roughly three times the amount of time doing these things during the high season than I do in the low season.

In addition to the marketing side, the paperwork side takes longer, whether it’s paying bills, preparing and sending in your sales tax payments, or other related items, more guests typically means more paperwork as well.

Higher Operating Costs:

Just like the wear and tear that comes with more guests, your variable costs will also increase. Each home will have some variation in these costs, but in most cases, the primary two are electricity and water. My house is in Florida, so both of these are expensive, and if you have an island house, yours will be even more expensive. Either way, owners should plan for these additional costs.

This is also a great way to identify potential issues at the house. If you see a huge spike in water usage, you may have a sprinkler system leak. If you have a huge spike in electricity usage, you may have an appliance issue, like the AC or pool pump is working way harder than it should. An electricity usage spike could also mean inconsiderate guests leaving doors open (the pool door, garage entry door, etc.) and wasting electricity.

Finding Information:

Referring to your billing history is the easiest way to plan for these increased costs. This information is easily found online if you don’t have a sophisticated filing and tracking system. You could also create a spreadsheet to track it, but I find that a quick look at my billing history online will give me most of the information I need to make informed decisions and plans.

Screen Shot 2014-06-10 at 7.19.11 PM
This is a usage analysis graph from my electricity provider.

What If You Just Bought the House?

If you have recently purchased the property, and don’t have your own history to refer back to, you can request this information from the utility in most cases. If you’re unable to get the information this way, you can do some educated guessing by doing a ratio of days with guests to cost. This won’t account for seasonal factors like high cooling requirements (or high pool heating) that are weather related, but it will give you an idea.

Example:

Last month you had guests staying 15 days, or about 50%. The average number of guests was 5, which is your standard average. The electricity and water bills together were $600, giving you a daily average “occupied” cost of $40. Clearly, there are 15 “unoccupied” days that also factor, but for the sake of the guesstimate, we’ll ignore those. You can expect that the future month, you’ll have about 75% occupancy, or about 22 days.  That would bring your bills to closer to $880.  It ‘s difficult to account for all of the factors in this case, but this will at least give you some planning info so you can set aside an extra $100-200 to cover these expenses.

Planning is Key:

With the High Season, there’s a mixture of both good and bad factors that come with additional guests. You get extra revenue for sure, but you’ll want to make sure that you’re planning for possible issues that might arise at any time. For most of us who own vacation rental homes, we’re okay with some of the additional issues that come with the high season, those checks and automatic deposits that arrive each week definitely make it easier to spend an extra 30 minutes on paperwork.