Airbnb is a game changer for sure in the vacation rental marketing world. But as is the case with everything, a certain amount of caution must be exercised.

Prepare Yourselves: Facebook To Be Profoundly Changed.

Here’s a very interesting article that we found on….well…Facebook. Imagine that.

Are you Rental Ready?

“My Rental Ready is a management company that has recognized the changes in travel trends of those that frequent the Panama City Beach destination. This consumer isn’t necessarily looking for a “hotel” they are looking for a “vacation rental”. These customers are interested in larger spaces, fewer intrusions and the creature comforts of a home. This isn’t news, obviously, given the sheer number of condominiums constructed over the course of the last 7 years vs. the number of branded hotels that have been erected. What was once a fantastic way for developers to sell their projects at a premium has served to change the expectations of the traveler in general forever. The evidence of this transition can be seen in the success of companies like VRBO.com and its parent company Homeaway.com. These are sites that allowed owners of individual vacation rentals, like you, to compete with national hotel brands. Individual vacation rental owners who were once relegated to utilizing a real estate firm or an onsite management company were given a place in the market. Homeaway has been so successful that they were able to place an ad during the Super Bowl earlier this year! (here’s a link if you missed it: http://www.youtube.com/watch?v=k24N5DQ_XaY)

Nonetheless, all of that was simply to put into perspective the fact that travelers and their vacation expectations are changing. This means that marketing channels that have traditionally been used by branded hotels and management companies have started to open up for individual owners. Management companies have had to try to combat this intrusion into their market share by flooding the vacation rental owner sites with their own product in an effort to keep their inventory. So this begs the question: Why do you continue to share a percentage of your revenue with your management company if they are merely using the same channels that you ,an individual owner, could use yourself for a fraction of the cost? Some of that can be answered easily enough. Many owners don’t have the time to deal with all of the nuances of successfully marketing and managing a vacation rental property. Up until a few short years ago it made more sense to be lumped into a pool of like units and managed as a hotel would be because all of the marketing channels were designed for a hotel environment. As I already mentioned that has changed at the customer level but has it changed at the management level? The answer is no. Management companies don’t know how to change their model in an effort to address this fact. What’s worse, there really is no incentive to change. Even if an owner decides to list their unit with a competing management company the model will be the same. Owners will be charged a percentage of gross revenue and all of the other little charges that seem to make their way onto the bill. This is the universal reality of vacation rental management.

At My Rental Ready we have found a better way. We have realized that the only reason sweeping changes to the industry haven’t taken place thus far is most often attributed to greed. The same management company that is charging you 35% for the maintenance, marketing and monetization of your unit is charging you at least twice for that privilege. That bears explanation. Let’s say there is a guest in your unit that complains that the light bulbs are out in the bathroom. Maintenance will happily respond and replace the bulbs on your behalf and will charge you the cost of the replacement plus an up-charge as well as a delivery fee. If you have a rental guest departing from your unit today that guest will be paying a departure cleaning charge. You won’t see any of that money but the guest is paying it as part of their rent. Those are small examples really and are part of any management company’s contract. This is the cost of doing business and charging for these things is justifiable within reason. We even charge guests for housekeeping departure cleans and service calls. The problem is that you are paying a 35% management fee to have that sort of stuff managed and the management company is up-charging the service so that they can realize a profit!

You may go ahead and let that type of charging slide because in the grand scheme of things those charges are minor and the real benefit from the management company is in their ability to market your unit. Unfortunately, that is also a false misconception. If your management company is marketing your property with Expedia, Hotwire, Travelocity, Bookit or any other channel manager you are losing at least 25% of the total vacation value in commissions. If “Guest A” books your unit on Bookit.com and pays $1,000.00 for the week, Bookit is keeping a minimum of $250.00 for their trouble. That leaves you to compete with the management company for the remaining $750.00 and as you know, they are going to get their $262.50 plus all the a fore mentioned fees. How is it that their 35% commission isn’t adjusted to reflect this reality?

My Rental Ready, charges a flat annual fee for our services. Our goal is to make a reasonable amount from each unit and enable the owners to make more money. This way you’ll renew with us every year! Our total cost to manage your property is $3,500….”

So much for brief.

What Now?

In most cases the real estate agent that worked through the process, either on the buying or selling side, will encourage you to utilize the rental management division of their firm. Theoretically this makes good sense and given the fact that they were so very helpful with you it would stand to reason that their rental division would be just as good. This is an easy conclusion to arrive at because your assumption is that the two sides are intertwined and equally vested. Not so. The reality of the situation would be that the operational side of the brokerage is seldom involved in the sales  of the property. Neither is the reverse true. This is also a fundamental truth in the “time share” world as well. Don’t get me wrong, this isn’t to say that the referral from the agent is bogus in any way. As a matter of fact it is in the best interest of the real estate professional to keep you close in case you want to buy the empty condo next door. It’s just important to note that the real estate agents motives are not necessarily your motives.

They’re here…

Maybe you’ve decided to go with the “on site” guys. After all the company is present, appears to be professional and they provide services that your guests would want. This isn’t a bad choice because there is something to be said for uniformity. If the majority of a given property is utilizing the same management company then there will be a cohesion of values, processes and procedures.  Those are all great qualities if the management company is a benevolent, Santa Claus, type. Alas that is never the case. The “onsite guys” will always run the program to the benefit of the “onsite guys” because it is a business. All of the overhead they carry is paid for by someone and I assure you it isn’t them. Onsite management companies make money on every single operational offering and the majority of the time this becomes an expense that is passed on to you the owner. If your guest discovers a light bulb has blown in the kitchen expect to be charged at least $25 for the repair. If your couch is broken prepare to be blocked from rental until you repair it. If your carpet is dirty prepare to pay top dollar to have it cleaned by the vendor of their choosing. If management decides that all the draperies must be blue to match the logo, be prepared to shell out the cash.

Never forget that as a vacation rental owner you are competing not only with other properties in the area but with your next door neighbor. In a rental environment that is run like a hotel your unit is one number amongst many. In an environment where you are allowed to maintain a certain amount of autonomy with respect to furnishings your success is dependent upon your placement and presentation in advertising, all of which are controlled by someone else.

DIY

Many billions of  dollars have been spent in the US in an effort to kindle the “Do it yourself” spirit. I don’t know that I’ve ever met a man alive that didn’t at one time consider building a tree house for his kids only to quickly realize that the devil is in the details and decide otherwise. We all have indulged this impulse in one way or another at some point in our lives. This is often the way that we define our boundaries relative to what we can and ought not do. “Do it yourself” rental management is favorite iteration of this spirit.

There are many success stories in the world of owner operated vacation rentals. One of the most popular means with which to present your vacation property is a website known as VRBO.com. This site will allow you to represent your property with photos, videos and all the details you can muster. This type of marketing places you in a group of other units that represent your region, community and destination. You can even buy your way to the top of the search group by paying for the privilege. Of course, be advised, the conversion rates for owners that are new to the site are abysmal. For every 40 rental inquiries you get you might get one booking. The odds aren’t great but if you have the time and inclination, farming your leads can be profitable. That said, VRBO.com has become the place where desperate owners compete with each other in a race to the bottom of the rate barrel which is clearly not the best business plan.

Stay tuned

In the next post I will discuss the operational areas of concern for the vacation rental owner and ways that owners can maximize their revenues while providing a top notch rental experience.

For more information about My Rental Ready, visit us on the web at www.myrentalready.com

Always a great sign that business is moving in the right direction.

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