Expert Insights: A Comprehensive Guide to Launching a Short-Term Rental Business

H&LA’s Adam Zarczynski weighed in with Porch Group for an article highlighting expert insight on short-term rentals and providing keen insights into launching a short-term rental business.

Published by: Paula Hernandez/Porch Group
Published date: July 2023

The short-term rental industry has experienced significant growth in recent years, driven by the rise of platforms like Airbnb, HomeAway, and VRBO. If you’re considering entering this lucrative market, it’s essential to have a solid understanding of the key considerations that can contribute to your success. To provide you with expert insights, we’ve consulted industry professionals that will share their advice on the fundamental elements you need to start a short-term rental business, discuss property preparation techniques to attract guests, delve into pricing strategies and revenue optimization, offer tips for decorating various spaces and highlight the importance of home warranties.

Tips to start a short-term business

Why are short-term rental businesses a good opportunity?

Short-term rental businesses present a compelling opportunity for entrepreneurs. The flexibility inherent in short-term rentals allows property owners to optimize their profitability. By leveraging the ability to rent out properties for short durations, owners can maximize returns while retaining the option to utilize the property personally or engage in long-term leasing as needed. This adaptability empowers owners to adjust rates in response to market dynamics and seasonal variations, bolstering revenue potential.

The lower barrier to entry is a notable advantage for short-term rental businesses due to the proliferation of software and hardware automation tools, including booking engines, pricing automation, remote access control, and cleaning on-demand services. Leveraging the technological advancements and user-friendly interfaces offered by these platforms streamlines operational management, allowing owners to focus on delivering exceptional guest experiences. Today’s automation tools also enable short-term rental owners to scale their portfolio of properties to other regions where there are opportunities to acquire lower-cost properties in desirable destinations to maximize ROI than at any other time in the history of operating this business. 

-Jason Crabb CMO | Keycafe

Short-term rentals provide owners with a great deal of flexibility with the design of their property as well as the location. Zoning regulations have historically limited where lodging facilities could be developed, but many short-term rentals are able to exist in neighborhoods and communities that previously were underserved in terms of accommodation options, and owners can benefit from the lower levels of competition. Additionally, short-term rentals can be a great option to help property owners pay their property taxes or even their mortgages in some cases. 

While some owners may look for separate units or outbuildings on the property when searching for their primary home, others may choose to rent their vacation home while they are not utilizing it to offset expenses. Whether your property is one unit or 30 units, short-term rentals have fewer expenses associated with them than many other lodging options, which can allow for a higher NOI and, ultimately, a return on their investment.

-Adam Zarczynski, CHIA Senior Associate Hotel & Leisure Advisors

What factors should be taken into account when setting rental rates for a short-term rental?

The first thing to pay attention to is the location of the rental property. It plays a significant role in determining rental rates, as properties in popular tourist destinations or prime locations usually command higher rates compared to those in less desirable areas. As well as this, you should take into account the seasonal demand. Short-term rental rates can fluctuate based on seasonal demand. Research the peak and off-peak seasons in your location to adjust rates accordingly. During high-demand periods, such as holidays or local events, you can charge higher rates. A wise landlord should also analyze similar properties in their area to gauge the market rates. Look for rentals with similar amenities, sizes, and locations to get a sense of what others are charging. This helps ensure your rates are competitive and attractive to potential guests, and you don’t have to wait a long time for your property to be rented.

-Gu Riva | Lofti

What are the key considerations when setting up a short-term rental business?

Looking back at when we first got started in this business, and with the benefit of lots of hindsight, I would say the following four bullets are the most important factors to consider when first starting an STR business.

  • Customer Segmentation: Identify your ideal guests – holidaying families, corporate travelers, or adventure enthusiasts. This will affect everything from how you choose to design your spaces to pricing and length of stay requirements.
  • Competitive Differentiation: Establish a unique selling proposition, such as location, design, facilities, or exceptional service to attract guests. The STR market is very competitive and getting more so every single day. Entering the business with a clear differentiator will save you a lot of time and angst in the long-run.
  • Market Selection: Consider tourism trends, competition, and regulations when choosing your initial market to avoid early setbacks.
  • Ensure thorough knowledge of all relevant zoning laws, hospitality taxes, and regulations to operate responsibly and legally, thus avoiding potential legal issues and promoting ethical business practices.

-Michael Ort |

How should Landlords prepare their properties for short-term rentals?

In the thriving realm of short-term rentals, landlords have a golden opportunity to optimize their property’s earning potential. However, achieving success requires meticulous preparation. In order to effectively and efficiently prepare properties for short-term rentals, landlords should take several specific steps and make thorough preparations:

  • Furnish and Equip the Property: Furnish the property with comfortable and durable furniture. Equip it with essentials such as linens, towels, kitchenware, and toiletries.
  • Immersive Amenities: Elevate the guest experience by offering unique and immersive amenities. Think beyond the basics and consider adding features like a hot tub, a game room, or a rooftop terrace. These special touches can make a lasting impression on guests and garner positive reviews.
  • Set Competitive Pricing: Research comparable properties in your area to set competitive pricing. Consider using dynamic pricing tools that adjust rates based on demand.
  • Safety Measures: Install smoke detectors, carbon monoxide detectors, and a first-aid kit. Ensure that there are clear emergency exit routes.

-Stacey Johns Member Support | Weekend Landlords

What are the key factors to consider when pricing a short-term rental property in a competitive market? 

When determining the pricing of a short-term rental property in a competitive market, considering factors such as comparable listings, location, and occupancy demand is essential. Research similar properties in your area to understand prevailing rates and gauge the competitive pricing range.

The location of your property, particularly if it’s in a highly desirable or prime area, can command higher rental rates. Assess the demand for short-term rentals, taking into account local events and attractions that can affect occupancy rates.

Also, to attract more guests or travelers, you can provide essential amenities such as high-speed internet, a fully equipped kitchen, on-site laundry facilities, air conditioning or heating, and inviting outdoor spaces. All those amenities not only enhance the overall appeal and ensure a comfortable stay but also help you beat out your competition.

-Jeff Gibb, General Manager | REBL Rentals

What are the key elements to consider when developing a pricing strategy for a product or service?

Developing a pricing strategy for a product or service, let’s take a short-term rental business as an example, involves considering several key elements:

  • Understand demand, competition, and trends through market research.
  • Evaluate the property’s unique characteristics, including location, size, amenities, and appeal to your target audience.
  • Identify the preferences and spending capacity of the target audience.
  • Consider seasonal fluctuations and demand patterns to adjust prices accordingly.
  • Calculate all costs associated with owning and maintaining the property to ensure profitability.
  • Analyze competitors’ pricing strategies to differentiate the short-term rental.
  • Highlight the distinctive features and value proposition of the rental.
  • Determine if different rates will be offered based on the length of stay.
  • Implement dynamic pricing strategies or use PriceLabs Dynamic Pricing Software and regularly monitor the results.
  • Monitor guest reviews and feedback to assess the rental’s value and make necessary adjustments.

Remember, developing an effective pricing strategy is an iterative process that may require adjustments over time to meet the business goals.

-Disha Parekh Head of Content | PriceaLabs

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