Do you want to start a vacation rental company? If YES, here is a complete guide to starting a vacation rental business with NO money and no experience. Those who have a vacation home are usually those who can afford to get away at certain periods of their life from the daily grind to a place that is deemed relaxing or a tourist destination.
While not everyone own vacation homes, almost everyone has at one time or the other traveled for a holiday of some sort and must have loved the idea of having a private place to themselves without having to deal with hotel staff and procedures. Therefore, if you are fortunate to have a vacation home and are looking for extra money, then you should be rest assured that a vacation rental business will likely help you out.
There are a variety of reasons why people choose to rent out their vacation homes and it ranges from people not wanting the place to be empty, people trying to offset the costs of owning such a place, while others do not mind people living in their homes for a fee. If any of your reasons fall here, then you might need to know all about the industry you intend going into as this will help you know if you need to hire a property manager or if can handle the vacation rental process yourself.
Once you have decided that you want to rent out your vacation home to others, then it is time you start viewing it as a business so that you will be able to make the profit that you should. The first thing you need to do is to set your goals and objectives as clearly as possible. This would help you determine all you want to accomplish as regards the business and why you are going into the business in the first place.
If your intention is to offset a portion of your cost or all of your costs, you will need to state it and also state if you are aiming to make profit. This outline will then allow you create a clear formula that you can then use to make your vacation rental business a success.
Ensure that all items that are deemed valuable or irreplaceable are removed and stored somewhere safe. Once you have ensured that all the necessary requirements are in place, you can then prepare the home for the guests. Market your vacation rental home by ensuring that it is listed in vacation rental listing websites and other websites including your own.
17 Steps to Starting a Vacation Rental Company
1. Understand the Industry
Before the internet, vacation rentals were in existence but they were mostly regarded as a mom and pop industry. Most vacation rentals during that period advertised their businesses via real estate agents, classified adverts, or mailed catalogs to acquired mailing lists.
However, all this is in the past as the industry has grown tremendously and is believed to be worth $100 billion globally, and it is also estimated to reach $170 billion by 2019. Over a quarter of the market share is believed to come from the united states. According to Skift, the first quarter of 2016 saw startups in this industry in Europe and the United States attract nearly $100 million in funding from venture capital.
The vacation rental industry can be said to be in its growth stage and this has led to some hotels looking to get a share of this market in a bid to diversify their services and grow their businesses as well. It is expected that over the next five to ten years, there will be bigger players in the industry.
The industry is regarded as a fragmented one as most of the major players account for only a little of the overall market share. The industry is also having a lot of consolidations and convergence and this has led to there being a lot of professionalism in the industry as operators look to give their guests the best services.
It is expected that demand in this industry will rise as the demography majorly responsible for the growth of the industry (18 to 44 years) will continue to prefer vacation rentals to regular hotels and resorts. According to a research study, even though the industry is one that has seen tremendous growth, it is still largely believed that the industry has not been able to penetrate the core targets of families and groups.
Only 40 percent of Americans in a survey claimed to have stayed in a vacation rental, which means that even though the industry has gained prominence, there was still a lot it has to do to create awareness for itself.
In the third quarter of 2013, 35 percent of travelers booked their vacations in advance, the figure is more than the first and second quarters experienced in the same year. This is because booking in advance is likely to see travelers’ book vacation rentals as opposed to booking at the last minute which might force them to go with options that are traditional in nature such as hotels.
Hotels have been finding it hard to cope during summer as most people that travel do so in groups and this has made it better for vacation rentals as a large group will prefer the convenience that a vacation rental will offer them compared to a hotel, especially if this group is a family with young children. Vacation rentals are therefore offering families the opportunity of staying under one roof just as they would if they were at home as opposed to staying in rooms that may be far from each other.
In the United States, revenue that accrued from the vacation rentals segment in 2017 was more than $10.6 million. It is expected that the revenue will grow at an annual rate of 6.8 percent between the periods of 2017 to 2021, which therefore means that the market volume will be worth more than $13.8 million in 2021. The user penetration is expected to be 7.4 percent in 2021 from the 6.2 percent that it is in 2017. Globally, the United States generates the most revenue which is valued at more than $10.6 million in 2017. The average revenue per user in this industry is valued at nearly $660.
The vacation rental business is considered to be an $85 billion industry and even though this might seem huge, it is actually small compared to the more than $590 billion generated by hotels every year. However, with the tremendous growth that the company is experiencing, it is expected that the gap wouldn’t be too much in a decade or two.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who require the services of a vacation rental include those who are tourists, those who are looking to take a vacation, those who are recuperating from an illness or other personal matters, writers looking to write a book or script etc.
Therefore if you are looking to define the demography of your vacation rental business, it would be for young to middle aged adults, business executives, celebrities, wealthy people and those within average to high class income looking for a private place to use for a while.
3. Decide Which Niche to Concentrate On
When starting a business, there are several things that you would need to put in place in order to make your business stand out especially if it is an industry that is stiff with competition and these things can be referred to as niches. A niche can be referred to as an area of specialization that you can leverage on to have an edge over your competitors. While there aren’t really any niches in the vacation rental business, there are still some things you can use to stand out.
Therefore some of the niche areas that you can explore to make your vacation rental home unique are;
- Vacation home that allows pets
- Vacation home with access to gym facilities
- Vacation home with access to Spa
The Level of Competition in the Industry
The level of competition in the vacation rental business is such that you can only compete with others in the same area as yourself. While you do not need to physically be around to meet with your guests, your vacation home has to be in the area that will attract people.
When it comes to renting out your vacation home, distance can never be a barrier as you should be able to accommodate guests that are coming from outside the country. What guests are on the lookout for is a place that meets with their needs and is also safe, secured and within their budgets. Once they are sure these are in place, they would not mind renting your vacation home no matter what part of the world they are coming from.
There are a lot of vacation rental businesses scattered all over the United States of America and so if you are looking to start your own vacation rental business regardless of the area, you should be prepared to meet with intense competition. The vacation rental industry might be a fragmented one with no clear company having dominance, it is however stiff with competition.
4. Know Your Major Competitors in the Industry
In every industry, there are brands that stand out and become well known not only by those within the industry – players, clients and stakeholders – but also by those outside the industry as well. The vacation rental business is no different as there are some that have become well known through their quality of service, location, prices as well as their customer relationship strategy, especially as the industry is fragmented with no clear leader.
Below therefore are some well-known vacation rental businesses in the United States of America;
- Airbnb Rentals
- HomeAway Vacation Rentals
- Sterling Reef
- Majestic Beach Towers
- Splash Resort
- Emerald Isle
The vacation rental business is one that has seen tremendous growth in the last five years especially as the internet has allowed the industry to be able to exploit mobile and instant bookings. According to an economic report, tourists are now choosing more than ever to stay in vacation rentals than to go to hotels, motels or a bed and breakfast.
The reason why this is so is because customers are looking to enjoy more privacy when vacationing and the vacation rentals offer them just that. A study by Skift has it that vacation rentals startups in the first quarter of 2016 in the United States as well as Europe were estimated to attract nearly $100 million in venture capital funding.
According to a research study, the vacation rental business has experienced an average growth of 3.5 percent between the periods of 2011 to 2016, with most of the growth rate being experienced more between the periods of 2014 to 2016.
A VRMA study has it that 22 percent of tourists as at 2012 preferred a vacation rental to a hotel or resort, this rate went up from that of the 20 percent that it was in 2010. The growth in this sector has also been driven by affluent travelers who preferred vacation rentals to hotels or resorts.
According to research, women between the ages of 18 – 34 were the major demographic that dominated the search for vacation rentals and completed most of their bookings from social media platforms, while men in the same age range are more likely to book hotels instead.
5. Decide Whether to Buy a Franchise or Start from Scratch
When starting up your business as an entrepreneur, some of the decisions you will have to make are whether to start your business from scratch or to buy a franchise. This is a very important decision that could have an impact on how you run your business in the short and long run and so it is necessary that you make sure that whatever decision you pick aligns with your corporate goals and objectives.
If you intend to buy a franchise, you should ensure that you conduct a thorough research so that you will know if what you are getting is in line with your own corporate goals and objectives. In the vacation rental business however, there are no franchise opportunities which would mean you will have to start your business from scratch.
There are various advantages and disadvantages involved in starting your business from scratch and a silly mistake could see your business crumbling which is why it is essential that you conduct a thorough study about the industry you intend to go into in order to have an idea of what you are likely to encounter. Starting a business from scratch can be a bit overwhelming especially if you have no previous idea about the business which is why you must involve those who know about the business to put you through.
6. Know the Possible Threats and Challenges You Will Face
When intending to start any business, it is necessary that you are prepared for all the threats and challenges that are likely to crop up in order to show your commitment and passion for the business. Now while it is easy to handle several of the threats and challenges that might crop up, some will not be so easy to handle, and when this happens, the best that you can hope for is that the period passes with less damage to your business.
Some of the threats and challenges that you are therefore likely to face during the course of starting and running your vacation rental business are; having to face intense competition from already existing rentals, economic downturn that will see people’s purchasing power drop, government regulations and competition from new entrants into the market.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
There are several factors that you would need to consider when deciding on what legal entity to use and they are, how flexible the structure you intend to go for are, the level of personal liability, the ease of ownership and setup and what the taxation rate would be like. If you are not sure of what legal entity you would need for your business, you might need to engage the services of an attorney or accountant to help out.
You should however know that some legal entities differ depending on the state where you will be operating your business from. So, while you might be looking to try one kind of legal entity that favors an entrepreneur in one state, you might find that it doesn’t end up favoring you.
There are five basic legal entities that an entrepreneur can use in the course of starting a business in the United States and they are sole proprietorship, partnership, S Corporation, C Corporation and Limited Liability Company (LLC).
While you might want to start off with a sole proprietorship kind of legal entity, you should be aware that it offers you no protection whatsoever when things go wrong as an LLC, S or C Corporation will do and this is because in the former, the owner and the business are regarded as one and the same.
8. Choose a Catchy Business Name
When starting any business, it is important that you consider carefully what you are going to call this business because the name you eventually choose for your business will define your business. A business name should not only be catchy and unique but it should also be memorable, easily pronounceable and indicative of the industry you are in.
Below are therefore some catchy business names that you should consider for your vacation rental business;
- Bar Resort and Rentals
- Spring Forth Rentals
- Ocean Splash Condo
- LayView Rentals
- Splashy Rentals
9. Discuss with an Agent to Know the Best Insurance Policies for You
Whatever business you are looking to start in the United States of America, it is important to note that you would require insurance policies. Insurance policies help protect you personally from any liability that might crop up especially on your property during the course of running the business.
It might have to do with someone you hired getting injured while carrying out repairs in your house or something happening to your guests while they are renting your vacation home. If you do not know what insurance policies will be best for your business, it is best that you engage the services of an insurance agent or broker to help with what insurance policies will be best for your vacation rental business.
Below therefore are some of the insurance policies you will need to consider purchasing should you intend to start your vacation rental business in the United States of America;
- General Insurance
- Liability Insurance
- Workers’ Compensation Insurance
- Property Insurance
- Health Insurance
- Business Owner’s Policy Insurance
- Overhead Expense Insurance
- Payment Protection Insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
The vacation rental business is one where guests who travel to tourist destinations or any other place for pleasure or other purposes and do not want to be bothered by lodging in hotels, could rent a private home for an agreed period of time. This therefore is not a business that requires applying for intellectual property protection.
If your desire however is to run your business actively and make a name for yourself, then you can apply for an intellectual property protection in order to protect your business name, logo, slogan or any other material you deem important.
11. Get the Necessary Professional Certification
The vacation rental business has to do with offering services by ensuring that tourists and those on vacation who deserve a bit of privacy get it with quality services than when compared to a hotel. The advantage of a vacation rental business is that one can run this as a passive business by earning income on the side or one can actively engage in the business full time without needing professional certification of any sort.
All guests are looking for when they rent a vacation home is that they get all the services that they paid for. Also, apart from getting the necessary licenses with which to run your business and knowing about the zoning regulations, there are no requirements in the industry demanding you to have professional certification before you can start the business.
12. Get the Necessary Legal Documents You Need to Operate
When starting any business in the United States of America, it is compulsory that you have all your documents in place as not having them will mean that you will run into trouble with the law. If you are not sure of what legal documents you will need, you might need to visit the state department in the state or country where your vacation home is in or you get an attorney to brief you on what you will need in order to be able to run your business legally.
Below are some of the legal documents that you will need in order to start off and successfully run your vacation rental business;
- Certificate of Incorporation
- Operating Agreement
- Business License and Permit
- Insurance Policy
- Sales Tax Permit
- Written Agreement
- Rental Rules Agreement
- Employer Identification Number (EIN)
- Federal Tax Identification Number
- Contract Documents
- Employment Agreement
13. Raise the Needed Startup Capital
When starting whatever business, it is expected that you will need money to handle several aspects of the business before you can be said to be running your business legally. While you might not need such a huge amount of money to start and run your vacation rental business because you are capitalizing on your property to generate revenue, you will still need finance to register the business, get permits, advertise and promote the business, pay off workers and also ensure that the home is in order.
Below therefore are some of the financing options that are available to you when looking to start your vacation rental business;
- Get start-up capital from savings, sale of stocks or properties
- Source of soft loans from family members and friends
- Get capital from private investors and business partners
14. Choose a Suitable Location for your Business
When starting your vacation rental business, one huge factor that will determine the success of your business is where your vacation home is located. Your location also determines the target market you will need to focus on and how often you might generate the needed revenue that will grow and sustain your business.
You should realize that the location of your vacation home is not something that you can change on a whim like an official facility, which is why if you are intending to start this kind of business, you need to make a thorough research about the industry in order to determine your chances of survival.
If your vacation home is located in an area that is very far away from where tourists are likely to visit or there is no attraction at all in that area or region, then you might have a hard time getting the desired clients for your business.
Knowing about the past and current zonal requirements where your vacation home is located is very important as this would determine if you would be able to run the business. You can engage the services of a real estate agent to help you out.
Finally, no matter where you are located, it is important that you take into account the renovations that you might have to make or the additional expenses that you would have to incur to make the place rentable and decide if it will be worth your while.
15. Hire Employees for your Technical and Manpower Needs
The vacation rental business offers tourists and leisure travelers a place that feels like home and offers more privacy than when compared to a hotel or bed and breakfast inn. The industry is fragmented as there are a lot of vacation rental businesses in existence leading to intense competition amongst players in the industry.
There are several factors that need to be taken into cognizance when starting a vacation rental business and they are; location, price, and services. As one who is looking to generate revenue and grow your business, you should ensure that these three factors are in place.
You do not need much equipment to run your vacation rental business as most of how your customers will get in touch with you is either via phone or email. And so it is important that you have a good phone, a computer that is connected to the internet, a printer and several office supplies.
It is necessary that you have people that would be on ground to ensure that your vacation home is up to standard for your intending guests and so you will need to hire a property manager, a handyman, cleaner, security guard, accountant and marketing executive. Over and above, you will need at least 6 key individuals to run your vacation rental business efficiently.
The Service Delivery Process of the Business
Once you have set up your vacation rental home and have properly advertised it, you are likely to get contacted via phone or email. It is important that you screen the guests that will stay in your home as this will save you a lot of heartache.
Your screening could involve asking your potential clients who will be accompanying them and also asking if there will be any pets so that you can let them know if you are for or against it. Also, once you have decided to make your potential clients turn to real clients, you will need to encourage them to take good care of your home.
Taking payments is another important process as you must have a lot of options in place so that your potential guests can feel comfortable dealing with you. Common safe payment methods are via personal checks, credit cards, bank wire transfers or Paypal.
These methods are not only safe, they offer you convenience and flexibility as well. You should note that money orders, instant cash wire transfers and cashiers’ checks are payment methods that should be avoided as they are mostly used by scammers.
Once you have confirmed bookings and before you receive payments, it is essential that you ensure that your guests sign a written agreement so as to protect yourself and your guests. Ensure that your guests get this agreement and go through it thoroughly before they can pay for your home.
16. Write a Marketing Plan Packed with ideas & Strategies
One sure way by which you can generate revenue for your vacation rental business is via marketing. While marketing might seem like something very easy as all you would need to do is market your services using certain channels, it is not so as it is a far more complex matter. Marketing not only helps you penetrate your intended target market in order to get a fair share, it also allows you to stand out and have an edge over your competitors.
The first thing you would need to accomplish before marketing your services to your intended target market is to ensure that you understand the requirements of the market and know which possible means you will need to use in order to be able to meet up with these requirements.
It is important that you conduct a market survey in order to determine what you are up against. Your market survey should enable you pinpoint your target market, identify their characteristics, know what they expect from you and also what you should expect from them. Also, it is through your target market that you can easily determine who your true competitors are and what their weaknesses are so that you can capitalize on it.
The vacation rental business is one that is becoming so popular and has increasing competition not only from those in the industry but also from traditional vacation places like hotels and motels. It is therefore pertinent that you hire a marketing consultant who thoroughly understands the industry you are in to help create the right marketing strategies that will help grow and sustain your business.
The marketing consultant will also need to understand your corporate marketing goals and objectives so that he or she will be able to create marketing strategies that will totally align and help achieve your set goals and objectives. Below therefore are some of the marketing ideas and strategies that you can deploy in order to promote and generate revenue for your vacation rental business;
- Ensure that your website is listed in popular and successful vacation rental listing websites
- Advertise your vacation rental business in local and national newspapers as well as on radio and television stations
- Make use of your social media platforms such as Facebook, Twitter, Instagram and on Snapchat to advertise and market your vacation rental home
- Empower a marketing consultant to help create the right strategies that will attract guests to your vacation home
- Distribute handbills and fliers in various strategic locations so as to market your vacation rental home
- Advertise your vacation rental home in popular forums and blogs
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
One thing that is likely to create awareness for your vacation rental business is how much publicity campaigns you are willing to engage in. Regardless of the reason why you are going into the business as long as your intention is to get customers, then you need to boost the brand awareness and create a corporate identity for your vacation business.
Entrepreneurs running a business know how important this aspect of the business is as they not only get to create awareness for their brand but also generate revenue as well and so they do not mind spending as much as they deem necessary to boost the awareness for their brand and create a positive corporate identity as well.
Because the vacation rental business has become so popular and competitive, vacation home owners have had to deploy means by which they would get the attention of their target market, and so if you are new and intend to compete against those who are in the business already, you have to realize that your publicity campaigns will be much different.
The first thing you have to do is to make a thorough research of the market you are going into by studying your competitors – those in the area where you intend to rent out your home and those that are successful in the industry – and know what publicity strategies they have used to be able to get a fair share of the market.
The fact that you would need publicity strategies that will make you stand out in order to grow and sustain your vacation rental business does not in any way mean that you should overspend as there are several strategies that do not require much money and yet are still very effective than the ones that do.
Below therefore are some of the strategies which you can use to boost awareness for your vacation rental business as well as create a corporate identity;
- Ensure that your vacation rental business is listed in specialty websites such as that of the Chambers of Commerce and other popular websites where a lot of tourists are likely to visit
- Create a website for your vacation rental business and post photographs of your home so as to create awareness for your home
- Encourage your satisfied customers to give you reviews on vacation listing websites and also spread the word to their friends and colleagues
- Use your social media platform such as Facebook, Twitter, and Instagram to create awareness for your vacation rental business
- Paste fliers in various strategic locations in the area where your vacation home is and also where you are based
- Engage in community events in order to raise awareness about your vacation rental home
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