If you want to start a business in the growing market for vacation rental, there are essential factors to consider (check this article on What you must know when you start your own vacation rental business).
The decision to invest in new property is one to ponder. Many first-time rental business owners fail into their venture. The reason: the lack of a strategic plan and the focus on unreasonable goals: 100% occupancy and $50k+ in booking revenue.
Before you purchase your vacation home write down a business plan to guide you through your future decisions. You will have to take risks and deal with the unexpected in reaching your ideological goals. The method keeps you focused on the set of rules, tactics, and actions to follow for a successful endeavor.
So what is a vacation rental business plan?
It is a framework that will guide you through your business actions. The definition of your strategy from the start and a tool to refer to make sure you are focusing on your goals.
Your vacation rental business plan should include the company, industry, customer and competition analysis, separate strategies for operations, marketing, distribution, financial and critical milestones to reach. If you are a first-time business owner, knowing what to include in your strategic plan can be a bit complicated.
We will guide you through the priorities to consider in the following overview. Vacation rental success depends on a complete understanding of:
- your company,
- the industry,
- the customer,
- the competition
Research and write down in this section the Unique Selling Points (USP) of your vacation rental business, highlighting the unique offer you will put on the existing market.
Start by writing down the high points of your vacation home, and make a comparison to other similar rentals. See if your offer is better because of location (oceanfront or high on the mountain), price (cheapest rate, discounts) or home decor (rustic or minimalistic).
Success in any field starts with the necessary knowledge of the domain. Before entering the vacation rental business perform a thorough review of the industry.
- the general economic outlook,
- key market trends,
- consumer trends etc.
Landscape the industry by looking at the top vacation rental operators. Evaluate their price strategy, the clientele and their USPs, such as self-catered with the best meals around.
Advertising tactics are essential aspects to consider:
- research for offline and online strategies,
- collaborations with local travel agencies
- publish your property on the largest rentals websites online (but keep in mind to calculate
- the net earnings too, as such sites take big commissions)
Your guests should be the central element of your plan. It is impervious to know right from the start who are your customers and separate them into important segments.
Make one or several profiles for your ideal customers to understand and target them better. The customer analysis includes everything from your customer age to their occupation and lifestyle, habits and preferences.
A clear customer profile will help you address their potential consumer needs and offer them the vacation they dream of. You will be able to understand and solve complaints once you know what they expect to find in a vacation home.
While you keep the focus on your business and customers, you should also keep an eye on your competition. Make a detailed analysis of your immediate competitors rather than whole industry.
That means that these rental businesses target the same customer as yourself. If your holiday home is on the coastline, your business rivals will be the other vacation accommodations with ocean view in the area.
Competitive analysis should be looking at the
- number of competitors and their prices,
- the barriers to entry the competition,
- competitors price,
- accommodation standard,
- level of amenities,
- other services like airport pick-up service, etc
This will help you set the guidelines for your daily operations. Take into account the people you will work with, the level of professional expertise, who will manage administrative work, cleaning team, etc.
The quality of staff will significantly influence customer relationship so this is an essential section of your business plan. I will stress out that you should probably hire someone to deal with reservations and complaints as this is the part that makes or breaks your business.
To achieve the goals you set for your business, you will have to advertise your offer. A good marketing strategy includes both offline and online tactics to target your customers.
The first action to make in marketing your vacation rental is to provide the best value money can buy.
If you know your customers well, place your ad so they can find out about your business. This could be announcement sites, specific real estate listing sites or local fairs and tourist attractions. Keep your marketing actions diverse: build your rental website, purchase online ads to reach internet users and hand out business cards and flyers for a traditional approach.
For a vacation rental business, the distribution strategy connects to its marketing channels. To be found by your future guests, it is essential to publish your offer on listing and travel sites such as TripAdvisor.
Consider which channels you will be using, the cost of listing and managing several channels. To receive online bookings, you will need to set up an online payment account such as PayPal. A vital detail is to sync your data listed on several channels to avoid double booking. Synchronizing tools such as iCalendar solves you this problem quickly.
The numbers section will include the rental rates, all your earnings, and expenses. The general finances might be an overwhelming part of the plan, but there are a lot of tools to help you out.
You should pay attention to the price strategy that should cover government taxes, utility bills and staff salaries. Set realistic prices that will ensure a healthy profit from each booking.
If you are yet to buy the property consider the cost of renovation and the expenses required for making it rent ready: home decor, utility, linens, etc.
Your business plan will need to establish your financial resources. These could be your savings if it’s self-financed (or the second job income). If you plan to take out a loan, make an interest rate analysis before and plan how you will pay it back. Prepare your estimations for expenses and earnings for the first five years, but the goal is to have profit.
If you set out your primary goal and the course to take you can track your progress by setting achievable milestones. For a holiday rental business, this could be a monthly earning target or the booking percentage. Set up a customer base growth rate per year to make it more manageable instead of targeting a fix number or bookings.
You should keep in mind that success comes in time so these milestones will help you break your strategy into manageable pieces. With a clear direction in your mind, effort and focus on excellence will ensure steady progress.