Are you thinking of investing in a vacation rental or maybe owning a property you’d like to use for vacation rentals? Well, before taking a huge leap into buying a property or investing in this fast-paced and booming business, it is important to take a step back and consider that there are many factors to take into account. As much as it is great to invest in a vacation rental business- decisions are not made overnight.
First and foremost, it is crucial to develop a vacation rental business plan that will allow you to identify potential risks beforehand. Take note, a well-thought-out vacation plan is a key to ensuring and determining the chances of achieving success as a host and in your business. More so, a strategic business plan will help secure funds from investors to develop your business.
Without further ado, let’s dive in:
In simple words, a vacation rental business plan is a set of rules and practices, goals, and frameworks that will help you make intelligent decisions beforehand ensuring your business is on the right path.
And not only is it a useful tool to refer back time and time again, but it also helps to rely upon and identify risks, plan and strategize on how to run your vacation rental business guaranteeing it’s worth the revenue.
It’s thrilling and exciting when buying your first property especially to property investors - who wouldn’t? They are eagerly ready to hit the ground and get the business up and running. However, keep in mind, before diving in, the vacation rental business plan is what’s going to ensure that you maximize your profits, set measurable goals, keep you on the right track, and accurately measure success.
Think about it - Without a business plan, it is like jumping into a pool of unpredictable risks and losses. A business plan is what keeps your business in place. For example, how do you know if your average daily rate is too low or whether you are spending too much on marketing? Remember, with a good vacation rental plan, your business will blossom and earnings will be tenfold than expected.
The secret to any good business is timing. Honestly, who wants to be in a mountain of debt? Nobody! Running a vacation rental is no small project. It takes a lot of effort, research, and process. Therefore, before jumping into the deep end, it is highly recommended that you draw up a business plan to truly judge whether your investment is worth the while.
Apart from that, ask for experts’ advice; those who have clearly proven success and have experience in the vacation rental market. Remember, a well-thought-out business plan is what justifies your means as well as guarantees a secure and blossoming investment.
As your first business venture, it is common and understandable to want to welcome as many types of guests as possible but expect that you might not attract everyone.
Keep in mind, your vacation rental is not everyone’s cup of tea and that is perfectly alright. It’s better to narrow down your target niche and focus on that because you add more value to your vacation rental than having to attract none.
Do not be overconfident that your vacation rental is the best value in the area. Be aware, other competitors in the market feel the same way and just might be better in price, style, availability, uniqueness, and might as well be everything; in comparison to your short-term rental. Therefore, try to assess your rivals and strategize on how you can outdo other vacation rentals that put you at an edge in the market.
When venturing into your first business, it is common to dream big and want to make millions but take note, it will not happen overnight and neither in the first year of the business.
As great as it is to think positive and aim high, keep in mind when it comes to money, you need to be realistic. It is important to not overestimate your overall profits and underestimate your budget.
The title may sound intimidating but don’t let that fool you. An executive summary is an overall glimpse of what your business has to offer and why it is worth the investment. To put it simply, your executive summary is the cherry on top of the icing.
In simple words, it sums up what your vacation rental business plan is - which includes information about your properties, employees, future goals, prior success and accomplishments, and third-party vendors.
More importantly, the trick to outlining your summary is asking yourself the 5W’s and 1H (who, what, where, when, how, and why).
Peak season and weekdays:
Reasons for the source of income:
Business goals are indicators of what success in your business appears like. Are you happy with the number of return guests? Are you content with a few bookings of the month?
Goals are what help identify steps and track the progress of your business. More importantly, business goals motivate you to achieve the ultimate which is a significant role in your vacation rental business plan. But for that to happen, business goals must be written realistically and detailed. Take note, an unclear goal is harder to achieve. Other than that, it’s ideal to give goals some sort of a deadline to accomplish what you aim for.
Think about what makes your vacation rental different, who and what type of target guests you hope to attract, and how the business stands out from the other rental properties in the market.
In simple terms, the value proposition is the unique selling point of the business by knowing what are the strengths and using them to highlight to your advantage. Doing so will attract more guests and maximize your occupancy though keep in mind to do a thorough in-depth analysis beforehand that will help improve your unique offerings and achieve a profitable business.
Business management structure ideally explains the structure of the company whether it is a partnership or single owned individual, living up to its potential. Adding on, what is the current state of the business, and what property management services will you use?
To sum up and simplify, this section describes the business management structure that will help improve productivity as well as ensure all the members of the company accomplish their true capabilities.
In this section, your operations plan is an insight into how your business will run. It is a simple part of your business plan as you most probably have even already planned it in your head.
More so, day-to-day activities include hiring new staff- do you need to outsource additional staff to help spread out responsibilities especially if you are having multiple properties, or do you want to take a role in being heavily involved in the business? How to keep track of your inventory or manage guest services? What about maintenance and cleaning, administrative duties, managing taxes, insurance, licenses, and third-party services such as property management software, etc.?
These are just a few questions to keep in mind when operating your vacation rental business. Additionally, think about how your current setup is and whether you require more improvements needed as you expand the business.
In this section, think about how do you plan to finance the business? Are you self-financing it or taking it out on a loan? Also, consider what the interest is like or what level of monthly payments can you manage?
Either way, the financial section outlines all the financial aspects of your business as well the history by discussing all of your previous success and how today it led to the state of your business.
Additionally, when creating a detailed financial plan and projections, it also includes:
Take note, when acquiring funds or investors, it’s more ideal to work with an accountant to ensure that your documents meet the financial reporting standards required by the commercial lenders.
This section plays an important role in your business plan, especially for all new hosts. Take note, the presence of OTAS’s and listing sites like TripAdvisor, Booking.com, Airbnb are quite essential for your business. Therefore, your distribution plan should consider which channels will you be advertising, how much they cost, how will you handle channel management, and when you get a booking, what are the terms of payment- is it PayPal, bank transfer, or cash/card? Note that, your distribution plan will benefit you from understanding how you will advertise your business in order to generate bookings.
More so, your marketing strategy should cover tactics on how will you market your vacation rental to key targets which include both online and offline marketing such as what social media platforms will you use, will you design and print flyers for local tourist boards, invest in paid advertising, etc. Doing so will help you achieve booking and increase the occupancy rate in the future.
When running a vacation rental business, you need to be on top of your ongoing expenses, incoming profits, and not to forget the overall finances of your business. Apart from that, you also have to include details of rates you aim to charge per night along with yield management and pricing tools you aim to use.
More so, remember to also include taxes, utility bills, staff costs, and your target monthly income in your revenue management plan. It might sound overwhelming to think about it but fear not as there are software tools such as QuickBooks to help with your revenue management plan.
How your business makes money is through your guests or customers. Without a doubt, it is significant to understand and know your audience, as well as their wants/needs, to help run a successful short-term rental business.
With that said, in this section, customer analysis is really where you describe and identify your ideal guest including creating different buyer personas based on the types of guests or customers that your business attracts or aims to attract.
More so, when building a detailed profile of ideal guests include information such as their names (fictional names), age, income, profession, or whether they are a family or not? These are just a few get-to-know information that will help you understand what type of guests to target and how.
Take note, to achieve more bookings, these guest profiles created can be used time after time in all aspects of your business. And with good customer analysis, you will identify and understand what to expect from your guests, their likes/dislikes about your vacation rental property.
Other than understanding your own business and market, it is also important to carry out competitor research for your vacation rental business in order to thrive and help win booking over the competition.
Investigate and do thorough research of who the other local short-term owners are and how they do their work. Apart from that, find out and analyze what is the pricing strategy of the other competitors, who their target customers are, what additional services and amenities do they offer and if so, what are they? And also, what type of OTAs do they use for booking and marketing?
By doing a competitive analysis, you will understand and strategize on finding opportunities for your business to be on the top of the game. More so, there are some great software tools to help out in data analysis.
Think about the future of your vacation rental business and how you can expand it further. More so, what are the plans and goals as well as key milestones in accomplishing these targets such as how much do you want to take a month or how many guests do you plan to host in the first quarter, and so forth.? You may also want to include:
With that said, key milestones and goals are a useful tool to refer back and keep track of the progress as well as ensure you're in the right direction. After all, it is easy to remain where you are if no goals are set.
To help keep things running in a business, only the most vital information must be included in your business plan that is valuable to your business. More so, add an appendix for any supporting documents or information needed so that you do not require to look around when it is required such as tax information, or contacts when maintenance is required. This also includes: