If you own a Vacation Rental Business, you already know that you need to evaluate the performance of your vacation rental or serviced apartment to guide you about the profitability of your business.
Long before vacation rentals, hotels (like many other businesses) have used key performance indicators (KPIs) to measure their effectiveness when it comes to achieving their main business goals. KPIs are important because they can support businesses to make better decisions, maximize profits and above all, measure overall success.
We already know that you can learn a lot from hotels, and tracking KPIs is no different. Digging into your website performance metrics using a tool like Google Analytics can provide you with a rich source of information to help improve the way you do things. What is a bit more difficult, however, is knowing exactly which metrics to focus on.
There are many indicators known as KPIs, Key Performance Indicators, that can help measure different aspects of your business performance depending on your business strategy. If you want your short term rental business to endure as a successful organisation which is stable, safe, high performing, and of course fixated on growing, you need to monitor some key performance indicators to maximise profitability. Property management KPIs are the information that you need before making any important decision related to your vacation rentals, serviced apartments, hotels, guesthouses, or your Airbnbs in general.
Vacation rental metrics (or KPIs) help you to track the status of specific processes that are important to hosts and short-term rental managers. From occupancy rate to net income, there are several vacation rental key performance indicators (KPIs) that will show if you are still on track to meet the goals of your rental business.
Keeping a close eye on key property management KPIs can help you to maintain business efficiency and growth. As they offer quantitative evidence, the decision-making of hosts and property managers will not be clouded by their own feelings. In short, tracking KPIs gives you an understanding of where you should make improvements making it simpler to reach your objectives.
The vacation rental market is known as a highly fragmented market, which means there are many competitors of different sizes instead of one big one. This allows everyone to try their chance in the industry; however, it takes a manager to keep an eye on the market and the right property management KPIs. Among the many property management KPIs, you need to identify the ones which give you the best insights into your business growth in a very fragmented market.
As your business grows, you need to make all the revenue sources and all the money leaking visible and accessible to check how your vacation rental business is operating. On the surface, it may seem overwhelming to strike a balance in distributing and channeling your attention. In an industry, as fragmented as vacation rentals, tracking the right KPIs can become the vital difference between a growing business and a broken one.
As a property manager, you need to be as critical as possible toward your own business, and property management KPIs help you evaluate your performance over the course of time. To build a growing and healthy business, you need to make operational decisions which are informed and suited to your goals and strategies.
Occupancy rate is a vital property management KPI for a vacation rental or a serviced apartment. You should be aware of the occupancy rate at any given time and check it against the regional average rate of occupancy. In other words, to have a clear insight into your performance, you need to have an overview of your rental occupancy rate in relation to the average rate in your region. If your occupancy is lower than the average, this leads you to check the guest acquisition operations, and if your rate is higher than average, you probably need to make sure if you have chosen the right rates for your listing. High occupancy rates do not necessarily mean you are making profits!
This property management KPI will show you if the money you are investing in marketing is paying off. It is also important as it indicates the income that each channel manager offers you. You may realize that although some channels offer you more reservations, their high commission will have a negative effect on your net income.
You will also probably find out that you do not need to invest in acquiring a guest because you are getting reservations from other sources. This now brings us to the next property management KPI, which is Reservation Sources.
Where do your reservations mostly come from? Which listing website gives you more visibility? property management KPI helps you with decisions about which listing websites are worth investing in. You should see whether to make stronger partnerships or to stop wasting time and energy on a website. This is a property management KPI that you need to check first.
Assessing reservation sources shows you where most of your income is coming from. It helps in having multiple sources of income as you do not put all your eggs in one basket. Awareness about the diversity of your income sources protects you from losing time and money on too many possibilities, which might not pay off in the end.
If you are managing more than one property, you need to know how much you are making from each one. Every property has different operational costs, occupancy rate and also local enquiries. This KPI can show you which property is converting more compared to others. It is very valuable to have a realistic idea of the parts of your business that are more beneficial and worth the time and resources you are spending.
This metric shows the average number of nights booked by one guest. To calculate it,__ divide the total number of booked nights for the month by the number of bookings.__ The average length of stay is vital to track as too many short stays can increase your operating costs which could make your venture less profitable.
“There are a lot of different metrics to track. Occupancy rate is most important because it determines the cash flow coming in, but it’s also important to track the average length of stay. This can impact your net operating income because short stays require more frequent cleanings. Make sure you are factoring in all operating costs when you calculate your net returns.” - Deidre Woollard, Editor at Millionacres.com
This property management KPI is a key metric that shows the average price of your property, which is more likely to fluctuate constantly in the vacation rental business. That is why you need to study average daily rent in a period of a month, a season or a year. To take advantage of this indicator, you need to analyse the market and compare it with others in your region. The valuable information this property management KPIs yield helps you to make the right decisions, leading to revenue growth.
In addition, the indicator lets you make more informed decisions about setting rates and gives you an overview of the amount of money on average you are earning from a property in a given time.
This key indicator gives the most clear insight into the company’s performance through different months and years. While the other indicators provide you with more detailed information to study, showing the parts that needed improvements, this property management KPI gives you a bigger picture to see whether your short term rental business is on the right track or not.
Net income is simply the income minus all the operational costs such as cleaning, maintenance, and channels’ commissions, which shows you the actual profit that you are making. This allows you to take actions in optimising your vacation rental business’s performance by lowering your expenses or finding the money leak by checking other property management KPIs.
This KPI simply clarifies how well you have operated your vacation rental business through the year. A high level of renters’ satisfaction brings in more new renters or encourages the same ones to come back again. This can easily be made possible by online reviews and ratings. Satisfaction shown through online reviews helps with your growth and visibility.
Property management KPIs are metrics that you need to calculate yourself, or you can just rely on the automated reporting features of the property management software you choose to use. A well-featured and highly-integrated PMS is essential for accumulation of data required for KPI reports.
Hostaway offers a revenue manager and detailed reporting tools that are intended to liberate you from all the calculations and human errors. It gives you automated real-time analytics of how well your vacation rentals or serviced apartments are performing.