How to Start and Run a Successful Short Term Rental Business: The Ultimate Guide

Are you dreaming of starting your own short term rental business? The short term rental market is booming, with platforms like Airbnb and VRBO making it easier than ever for hosts to connect with guests looking for unique places to stay. If you have a spare room, second home, or investment property, turning it into a short term rental can be an exciting new venture.

In this blog post, we'll walk you through the key steps to get your short term rental business up and running:
•Deciding on a business model and location
•Preparing your rental space
•Setting competitive rates
•Marketing your listing to attract guests
•Providing great customer service to build 5-star reviews
•Managing reservations and keeping good records
•Expanding into multiple properties (optional)

The Short Term Rental Market Landscape

The short term rental market includes a range of accommodation types appealing to different audiences. At the higher end, luxury vacation rentals cater to affluent travelers looking for upscale homes and unique experiences. Mid-range rentals targeting middle-income families and groups make up a large segment of the market. Budget-friendly rentals also attract solo travelers, students, and those on a tight budget.

The short term rental market can be local, regional, or international in scope. Many hosts rent out properties in popular tourist destinations, appealing to travelers from around the world. However, renting out a spare room or second home in your local city or town can also be an attractive option for hosts, especially if located near points of interest. The key is finding a good match between your rental property, location, and target guests.

With the huge volume of travelers using sites like Airbnb and VRBO, the short term rental market shows no signs of slowing down. This is good news for aspiring hosts looking to tap into this growing source of income. By catering to the needs of your target audience and providing a great guest experience, you'll be poised to build a successful short term rental business.

Developing Your Short Term Rental Offering

The key to success in the short term rental market is developing an offering that stands out to your target guests. Consider the location, amenities, decor, and overall experience you want to provide. For example, a beach cottage with a private hot tub and sunset view will attract a different audience than a city apartment in a trendy neighborhood.

Think about how to make your rental space as desirable, comfortable, and convenient as possible for guests. Provide amenities like a well-stocked kitchen, luxury linens, entertainment options, and any extras that match your rental style. Your listing photos and description should highlight any stand-out features to capture the attention of potential guests.

The delivery of your short term rental product is all about the overall customer experience. Start by ensuring your rental space is clean, clutter-free, and welcoming for each new guest. Provide clear instructions for check-in/check-out, WiFi, appliances, and anything else guests will need to know. Be available to answer any questions and address issues that may come up.

Developing a short term rental business takes time and dedication. Focus on setting up one great rental property and building your reviews before expanding. Pay close attention to feedback from your first guests and look for ways to improve. Join industry groups and stay on top of trends in the short term rental market. With hard work and persistence, you can build a thriving business and portfolio of rental properties.

The Economics of a Short Term Rental Business

Running a short term rental business comes with various costs and economic considerations for hosts to keep in mind:

Cost of Goods Sold: This includes any costs directly related to providing your rental property. Things like mortgage/rent payments, utilities, WiFi, cleaning fees, linens/towels, toiletries, repairs/maintenance, insurance, and property taxes. Track all costs accurately to determine your break-even point.

Pricing Strategy: You'll need to set nightly, weekly, and monthly rates that cover your costs and generate a profit. Research rates for comparable rentals in your area to determine a competitive price range. You may be able to charge a premium for any luxury amenities or during peak seasons/events. Consider offering discounts for longer stays or bundling extra services.

Occupancy Rates: A higher occupancy rate means more rental income and a more successful business. Most short term rentals aim for at least a 50-60% occupancy rate to be profitable after accounting for costs. Focus on marketing to fill any gaps in your booking calendar.

Additional Revenue Streams: Some hosts generate extra income through add-on services like concierge assistance, cleaning, laundry, or airport transfers. You may also earn referral bonuses when guests book tours/activities through your listing. Look for ways to boost your rental revenue through upselling and partnerships.

Recordkeeping: Keep detailed records of all your costs, rental rates, occupancy rates, expenses, income, and tax obligations. Short term rental businesses must pay income taxes on their profits. Accurate recordkeeping will ensure you pay only what you owe and can identify opportunities to improve your financial performance.

With the right pricing strategy and high enough occupancy rates, a short term rental business can be very profitable. But hosts must go in with realistic expectations about costs and understand it may take time to become profitable while you build up reviews and repeat guests. The key is providing great value to your target audience.

Marketing Your Short Term Rental Business

To attract guests and fill your booking calendar, you'll need to implement an effective marketing strategy for your short term rental business. Some of the top strategies include:

Search Engine Optimization (SEO): Optimize your listing content and photos for search engines like Google. Include keywords related to your location, amenities, and rental type. SEO helps people find your listing when searching online.

Social Media Marketing: Create profiles for your rental business on platforms like Facebook, Instagram, and Pinterest. Share photos, videos, and updates to raise brand awareness and engage potential guests. Run social media ads to reach new audiences.

Email Marketing: Build an email list from your website and guest bookings. Send newsletters with special offers, seasonal discounts, and announcements to stay in touch with past guests and attract new ones.

Online Listings: List your rental property on sites like Airbnb, VRBO, Booking.com, and TripAdvisor. These platforms already have huge volumes of travelers looking for places to stay. Competitive rates, great photos, and 5-star reviews will help your listing rank higher in search results.

Local Partnerships: Team up with other businesses in your area like tour companies, restaurants, and activity providers. Cross-promote to each other's customers and offer bundled packages and discounts. Local partnerships are a great way to tap into new audiences.

Direct Marketing: For a more personal touch, you can also market directly to potential guests. Send postcards or flyers to advertise seasonal specials. Pitch your rental to local companies and organizations as an option for visiting staff, clients or event attendees. Sponsor relevant community events to raise brand visibility.

A multi-channel marketing strategy targeting both online and offline audiences will help establish your short term rental business and drive more bookings. While it takes time, consistent marketing and providing amazing guest experiences will build momentum through word-of-mouth and repeat customers.

Sales Strategies and Processes for Your Short Term Rental Business

To convert potential guests into actual bookings, you need to implement effective sales strategies and processes. Some recommendations:

Respond quickly to all guest inquiries and booking requests. Speedy communication is key, especially when someone is ready to book. Have a system to promptly check new messages and get back to people within 24 hours.

Upsell additional services and amenities. When a guest expresses interest in booking, mention any add-ons you offer to provide more value. For example, concierge service, airport transfers, cleaning fees, etc. This can increase the total booking amount.

Offer special discounts and promotions. Provide seasonal specials, last-minute deals, and loyalty programs for repeat guests. Time-limited offers create urgency and incentive for people to book right away before the promotion ends.

Suggest longer stays. If someone wants to book for a few nights, mention you offer weekly and monthly rates if they're interested in staying longer. Longer bookings mean more rental income.

Provide the booking link and encourage advance payment. Make it as easy as possible for interested guests to complete their booking. The faster they book and pay, the less likely it is they'll change their mind or find another option.

Follow up after receiving an inquiry. If you've responded to an initial inquiry but haven't received further response from the potential guest, reach out again to check if they have any other questions and reiterate your interest in hosting them. Your follow up could prompt them to book.

Thank guests after booking and request reviews. Express your appreciation for their booking and let them know you're looking forward to hosting them. Kindly ask them to leave a review after their stay, as reviews help to attract new guests.

Refine your sales process over time based on what works. Keep records of how guests found you, what prompted them to book, what add-ons or special offers they purchased, how long it took them to book after first inquiry, etc. Look for patterns to improve your sales strategies.

Operations and Execution for Your Short Term Rental Business

To run a successful short term rental business, you need to execute efficient operations and processes. Some key things to focus on:

Prepare the Rental Space: Ensure your rental is clean, clutter-free, and ready for each new guest. Change linens, towels, empty trash, sweep, mop, dust, vacuum, clean bathrooms, replace toiletries, etc. Consider hiring a cleaning service to help, especially if managing multiple properties.

Check-in/Check-out: Have clear instructions for guests regarding accessing the rental, returning keys, checking in/out times, etc. You can provide house rules and recommendations for the local area. Make the check-in/check-out process as simple as possible.

Guest Communication: Respond promptly to all guest messages and inquiries before, during, and after their stay. Provide your contact information in case of any issues. Check in on guests to ensure they have everything needed and are enjoying their stay.

Maintenance and Repairs: Conduct regular inspections of your rental property and schedule any necessary maintenance or repairs. Address any issues reported by guests immediately. Well-maintained rentals lead to better reviews and repeat guests.

Reservations and Payments: Use a reservation system, like the one provided by Airbnb or VRBO, to manage all booking requests, payments, and calendars in one place. Cross-check new reservations with your own calendar to ensure no double bookings. Send payment reminders and receipts to guests.

Reviews and Feedback: Kindly ask guests to leave a review after their stay. Monitor reviews on all listing sites and respond professionally to any negative feedback. Reviews are critical for building trust and credibility with potential guests. Look for trends in feedback to make improvements.

Accounting and Reporting: Keep accurate records of all income, expenses, occupancy rates, and other key metrics. Track performance over time and look for ways to increase bookings and optimize costs. You may need to file taxes on your short term rental business income. Consult an accountant for advice.

Legal Considerations for a Short Term Rental Business

Operating a short term rental business comes with legal responsibilities for hosts to keep in mind. You must ensure your business follows all local laws and regulations regarding short term rentals to avoid potential issues. Do thorough research on rules specific to your city and neighborhood.

Some things to consider include:

•Any restrictions on renting out your property for less than 30 days. Some cities prohibit short term rentals entirely or have limits on the number of nights per year.

•Safety and security regulations like installing smoke detectors, fire extinguishers, proper outdoor lighting, etc. Your rental must meet all standards to legally host guests.

•Zoning laws on using residential properties for commercial purposes. You may need a permit or license to operate a short term rental. Requirements vary in different cities and counties.

•Hotel and tourism taxes that must be charged and remitted for short term rentals. Many cities require Airbnb and other hosts to collect and pay occupancy taxes on all bookings.

•Properly insuring your short term rental for liability and property damage. Standard homeowners insurance typically does not cover renting out your property to guests. You need a policy that specifically includes short term rental coverage.

•Keeping records of all rental bookings, payments, expenses, and taxes for reporting purposes. Short term rental income may be subject to income taxes. Meticulous records will ensure accurate filing and prevent issues with audits.

•Advising guests of any HOA rules like noise restrictions, parking limitations or pool access policies. Provide house rules to set the right expectations for your guests and avoid complaints.

Consult a lawyer who specializes in hospitality law and short term rental regulations for guidance. They can review your business model and property specifics to determine what licenses, permits and insurance you need to legally operate. Remaining compliant with all laws and regulations is essential to running an ethical short term rental business.

Ready to Launch Your Short Term Rental Business?

The short term rental market provides an exciting opportunity for hosts to turn their extra space into a viable business. By following the steps in this guide, you can develop a successful short term rental offering, implement effective marketing strategies, optimize your sales process, and ensure efficient operations and legal compliance.

While launching a short term rental business takes dedication, the rewards of building a thriving business and providing amazing experiences for your guests make the effort worthwhile. If you go in with realistic expectations, start small by setting up one great rental property, and pay close attention to feedback and reviews, you'll gain momentum over time.

If running a short term rental business is your dream, don't wait any longer. Develop your plan, prepare your space, and get your listing in front of travelers looking for unique places to stay. With hard work and persistence, you'll be building your own short term rental success story in no time!