How to Start a Vacation Rental Management Business in 2023

Industry Insights, Property Manager Tips
How to Start a Vacation Rental Management Business in 2023

Are you ready to turn your love for creating memorable experiences into a successful vacation rental management business? If so, you’re in the right place. In this article, we provide guidance and expert industry insights to help you thrive in the bustling year of 2023. 

The Bright Future of the Short-Term Rental Market

The future is brimming with potential, even amidst talks of recession. As reported by AirDNA, travel indicators have consistently improved, signaling a strong resurgence post-pandemic in travel. But here’s where it gets really interesting: bookings reveal a growing enthusiasm for off-the-beaten-path destinations in previously underserved small cities and rural gems. This trend will continue throughout 2023.

Now, let’s talk numbers. Even the most conservative projections show demand surpassing pre-pandemic levels.  AirDNA projects that year-over-year growth is expected to stabilize at a steady 5.5% in 2023, aligning with previous forecasts and reflecting a maturing market recovery. This means there is still ample room for success and profitability in the STR market.

So, if you’ve ever dreamt of being a part of the thriving STR industry, now is the time to seize the moment. 

Do I Need to Own Properties to Start a Vacation Rental Business?

In short, the answer is no! While building and renting out your properties is one approach, there are various other avenues to explore. One popular option is managing properties on behalf of their owners, which involves setting up a vacation rental management business.

What is Vacation Rental Management?

Vacation (or short-term) rentals cater to travelers, business professionals, and nomadic workers seeking temporary accommodation. These rentals go beyond hotels, providing a range of facilities such as fully equipped kitchens, appliances, private outdoor areas, and frequently an opportunity to connect with the local culture. From cozy cottages to luxurious villas, STRs offer a unique lodging experience that surpasses the boundaries of traditional hospitality. 

Where do you get Started to run a Vacation Rental Management Business?

Running a vacation rental management business involves curating a portfolio of attractive homes, ensuring their upkeep, and crafting compelling marketing strategies to attract guests from around the world. 

Managing properties on behalf of owners offers several advantages. You can start the business with lower upfront costs since you are not purchasing properties. And, you have the flexibility to work with multiple property owners to expand your reach and increase revenue streams. 

To kickstart your venture and pave the way for a thriving vacation rental management business, keep these essentials in mind.

Step 1: Learn the Requirements for Property Management Businesses

Before starting your vacation rental management business, familiarize yourself with the requirements and regulations that govern the industry. 

  • Check Local Zoning Laws: Different municipalities may have specific regulations and restrictions regarding vacation rentals. Ensure that the properties you plan to manage are zoned for short-term rentals and comply with any occupancy limits, noise ordinances, or other relevant zoning requirements. For top industry insights, check out A Guide to Short-Term Rental Regulations in the US from Safely.
  • Research Local Laws: Research the broader legal landscape governing vacation rental management businesses in your area. Look into any specific licensing or permitting requirements for short-term property managers. Some jurisdictions may require a business license, a transient occupancy tax permit, or other permits specific to managing vacation rentals. Understanding and adhering to these legal obligations will help you avoid potential penalties or complications down the road.
  • Comply with Safety Regulations: Guest safety should be a top priority in your vacation rental management business. Familiarize yourself with safety regulations applicable to your area, such as fire safety standards, smoke detector requirements, and emergency exit protocols. 
  • Liability Insurance: Protecting your business and the properties you manage is essential. Consider obtaining liability insurance that’s specifically tailored to vacation rental properties, such as  the Safely Protection Plan provided by Safely’s affiliate, On Demand Insurance Agency, LLC. This coverage can provide protection in case of property damage, accidents, or legal disputes. Consult with a reputable insurance professional today to determine the appropriate coverage for your specific needs. 

Step 2: Market Research: Find the Right Market for Your Vacation Rental Management Business 

Selecting the right market to operate in can make or break your vacation rental management business. That’s why market research is so important and will help you to identify the most suitable location for your business. Let’s explore some key considerations:

  • Proximity to Your Home: Consider the proximity of the potential market to your home base. Managing properties within a reasonable distance can facilitate easier property inspections, timely responses to guest needs, and effective communication with property owners. Geographical proximity to your market allows you to provide a higher level of hands-on management and maintain a strong presence in the local community.
  • Seasonality: Some destinations may experience high demand and peak seasons during specific times of the year, while others may have a more consistent flow of guests throughout the year. Understanding the seasonality patterns will help you plan your operations, marketing efforts, and pricing strategies accordingly.
  • Demand: Assess the demand for vacation rentals in your target market. Look for indicators such as tourism statistics, visitor numbers, and the popularity of the area among travelers. Identify any unique selling points or attractions that draw visitors to the location. 
  • Supply: Analyze the existing supply of vacation rentals in the area. Evaluate the competition and the saturation level of the market. Determine if there is room for growth and if your business can differentiate itself from the competition by offering unique features, exceptional service, or appealing amenities. 
  • Local Laws: Consider the local laws and regulations that may impact vacation rental management businesses in your desired market. 

Choosing the right market means aligning your business with a receptive audience, maximizing occupancy rates, and positioning yourself for long-term growth and profitability.

Step 3: Define Your Range of Services

This step allows you to clarify your business model and tailor your offerings to meet the needs of both property owners and guests. Here are some of the key service options:

  • Full Service: With a full-service approach, you take on the responsibility of managing every aspect of the vacation rental property. This robust offering includes marketing, guest communication, bookings, housekeeping, maintenance, and more. A full service approach by an expert allows property owners peace of mind, and ensures that guests can relax and enjoy themselves..
  • Marketing Only: If you specialize in marketing services, you focus on promoting vacation rental properties to maximize their visibility and attract a steady stream of guests. Your expertise lies in crafting compelling property listings, implementing effective online marketing strategies, managing booking platforms, and driving direct bookings. Property owners who choose this option can rely on your marketing prowess to generate bookings.
  • Operation Only: In an operation-only service model, you take charge of the day-to-day operations of the vacation rental property without involvement in marketing efforts. Your responsibilities may include guest communication, check-ins and check-outs, coordinating cleaning and maintenance services, and ensuring the smooth operation of the property. 

You may also choose to offer a combination of these services based on the requirements of your target market and your business goals.

Step 4: Decide on a Revenue Model  

The revenue model you choose will dictate how you generate income and determine the financial relationship between your business and property owners. Let’s explore some common revenue models:

  • Commission-Based (Most Common): The commission-based revenue model is widely adopted in the vacation rental management industry. Under this model, the property management business earns a percentage of the generated rental income. Typically, a predetermined commission rate is agreed upon between the management company and property owner. In most cases this split is 80/20 with the owner receiving 80% of the rent revenue. As the property management business successfully generates bookings and rental income, they receive a portion of that income as their commission. This model aligns the interests of both parties, as the management business’ revenue is directly tied to the property’s performance.
  • Guaranteed (Fixed) Rent: In some cases, a vacation rental management business may opt for a guaranteed or fixed rent revenue model. With this approach, the management business guarantees a fixed amount of rental income to the property owner, regardless of the property’s actual performance. The management business assumes the risk and responsibility of generating sufficient bookings and rental income to cover the guaranteed amount. This model provides stability for property owners though places the burden of performance and financial risk on the management business.
  • Fixed Fee: Alternatively, a fixed fee revenue model involves charging property owners a predetermined fixed fee for the management services provided. This model is mainly used by independent contractors or businesses that provide a limited range of services.

Once you decide on a revenue model, be sure to clearly define the terms of the revenue-sharing or fee-based agreement, including any additional charges for specific services. 

Step 5: Obtain the Required Licenses and Permits 

Compliance with local regulations ensures that you operate within the legal framework. Here are the key considerations:

  • Research Local Regulations: Start by thoroughly researching the local regulations governing vacation rental management businesses in your area. Regulations can vary significantly from one jurisdiction to another, so it’s important to understand the requirements specific to your location. Some of the most popular vacation rental locations have very specific hosting restrictions and regulations. For example, Miami, New York, San Francisco and Santa Monica all have strict policies relating to limiting the number of rental nights per year, requiring a licence or permit, or a ban on un-hosted rentals in some areas. 
  • Business License: In most areas, obtaining a general business license is a requirement for operating any type of business, including vacation rental management. This license grants you the legal authorization to conduct business activities within the jurisdiction. Check with your local government or municipality to understand the process and requirements for obtaining a business license.
  • Transient Occupancy Tax Permit: Many jurisdictions require vacation rental management businesses to collect and remit transient occupancy taxes on behalf of property owners.  
  • Permits for Short-Term Rentals: Some areas may have specific permits or registrations for short-term rentals. These permits may involve inspections of the property to ensure compliance with safety and health standards.
  • Compliance with Health and Safety Regulations: Ensure compliance with health and safety regulations, and other applicable regulations. As a property manager, you are responsible for the safety and well-being of your guests during their stay and need to secure liability insurance, which is often required by cities and counties. For example, hosts in San Francisco must have at least $500,000 of liability insurance, while Colorado requires a minimum of $1 million

Property managers must also conduct regular safety checks and maintenance to minimize potential hazards and to ensure that the property is maintained in a safe and code-compliant manner. Other requirements may include registering with the Secretary of State, obtaining an Employer Identification Number (EIN) from the IRS, or obtaining a sales tax permit.

Remember, compliance with licenses and permits both establishes your business’s credibility and legitimacy and protects you from potential legal issues. 

Step 6: Set up Your Office and Online Presence 

As you establish your vacation rental management business, you’ll want to set up a professional office space and create a compelling online presence. Doing so will build a foundation for effectively managing your operations, help you attract property owners and guests, and build a reputable brand. Let’s explore the key considerations for this step: 

  • Establish a Physical Office Space: Having a dedicated physical office space creates a professional environment where you can meet with property owners and conduct day-to-day operations. Consider factors such as location, space requirements, and accessibility when choosing your office. 
  • Develop a Professional Website: By investing in a professional website you will showcase your vacation rental management services, highlight your unique selling points, and provide essential information for property owners and potential guests. Ensure that your website is mobile-responsive, optimized for search engines, and offers a seamless booking experience.
  • Property Listings and Online Platforms: Establish a strong presence on popular vacation rental listing platforms such as Airbnb, HomeAway, VRBO, or Booking.com. Create compelling property listings that highlight the unique features and amenities of each property you manage. Optimize your listings with high-quality photos, accurate descriptions, and competitive pricing to attract potential guests. Regularly update and maintain your listings to stay competitive in the market.
  • Online Booking and Reservation System: Implement an online booking and reservation system that allows guests to book and manage their reservations easily. Offer secure payment options and ensure seamless communication between guests and your management team. Consider using technology solutions that automate processes, streamline operations, and enhance the overall guest experience.
  • Social Media and Online Marketing: Social media platforms such as Facebook, Instagram, and Twitter can help expand your reach and engagement with your target audience. Develop a content strategy that includes sharing high quality photos, promoting special offers, and providing valuable travel tips and insights. Engage with followers, respond to inquiries promptly, and encourage guest reviews and testimonials to build credibility.
  • Online Reputation Management: Reputation is paramount in the vacation rental industry. Monitor and manage online reviews and ratings to ensure a positive reputation. Respond to guest feedback, address concerns promptly, and strive to exceed expectations. Encourage satisfied guests to leave reviews, as positive testimonials can significantly enhance your online reputation and attract new guests.

Step 7: Find Your Initial Homeowners 

Now that your vacation rental management business is taking shape, it’s time to find your initial homeowners. These initial homeowners are the cornerstone of your business, providing the properties that will fuel your success. Here’s a brief overview of this exciting step:

  • Tap into Your Network: Start by reaching out to your personal and professional network to find potential homeowners. Spread the word about your new venture and emphasize the benefits of entrusting their properties to a dedicated and professional vacation rental management business like yours.
  • Local Connections: Leverage local connections and networks within the real estate community, property investment groups, or vacation rental associations to identify homeowners who may be interested in partnering with a trusted management service. Attend local industry events, network with property owners, and establish relationships that can lead to mutually beneficial partnerships.
  • Online Platforms and Direct Outreach: Online platforms and listing websites can help you find homeowners who may be looking for a vacation rental management solution. Property owners who are already advertising their properties as vacation rentals may be open to partnering with a management service to handle the day-to-day operations.
  • Showcase Your Value Proposition: When approaching potential homeowners, clearly communicate the value proposition of partnering with your vacation rental management business. Highlight your expertise, comprehensive services, marketing strategies, operational efficiency, and dedication to delivering exceptional guest experiences. 
  • Build Trust: Demonstrate your commitment to professionalism, transparency, and open communication. Provide references or testimonials from existing homeowners to showcase your track record and reliability. By building trust, you can form strong partnerships that pave the way for long-term success.

Step 8: Build a Local Network of Professionals

These professionals will be your trusted partners, and will ensure the smooth operation and maintenance of the properties you manage:

  • Cleaners: Connect with professional and reliable cleaners. A clean and welcoming environment is key to providing exceptional guest experiences.
  • Concierge Services: Consider partnering with concierge service providers who can assist your guests with local recommendations, booking activities, and providing personalized services to enhance their stay.
  • Handyperson: Establish relationships with skilled maintenance professionals who can promptly address any maintenance or repair issues that may arise in the properties. 
  • HVAC Repair: Collaborate with HVAC repair specialists who can handle any heating, ventilation, or air conditioning issues that may occur. 
  • Other Professionals: Depending on the needs of your properties, consider building a network of professionals such as electricians, plumbers, landscapers, and pool maintenance experts. Having a reliable team of professionals at your disposal allows you to promptly address any property-related concerns.

Step 9: Create a Marketing Plan 

It’s time to showcase the allure of your properties and attract guests from near and far:

  • Define Your Target Audience: Identify your ideal guests, those who are most likely to be attracted to the properties you manage. Consider their demographics, preferences, and travel behaviors. By understanding your target audience, you can tailor your marketing efforts to effectively reach and resonate with them.
  • Showcase the Unique Features: Highlight the features and amenities that set your properties apart from the rest. Whether it’s breathtaking views, luxurious amenities or charming local experiences, capture them visually and craft compelling descriptions that evoke a sense of wanderlust.
  • Engaging Photography and Visuals: Invest in professional photography that showcases the best aspects of your properties. High-quality visuals evoke an emotional connection with potential guests, and can lead to more bookings.
  • Create Captivating Content: Develop engaging content that tells a story and showcases the destination. From blog posts and social media content to videos and virtual tours, share valuable insights, local tips, and unique experiences to inspire and captivate your audience.
  • Optimize Your Online Presence: Ensure your vacation rental listings and website are optimized for search engines. Using keywords relevant to your properties and destination improves visibility in search results. 
  • Utilize Online Booking Platforms: A booking platform’s built-in marketing tools can optimize your property listings with accurate information, competitive pricing, and positive guest reviews.
  • Harness the Power of Social Media: Engage with potential guests on social media platforms such as Facebook, Instagram, and Twitter. Share stunning visuals, behind-the-scenes glimpses, guest testimonials, and local recommendations to foster a sense of connection and build an enthusiastic community of followers.
  • Establish Strategic Partnerships: Collaborate with local businesses, travel influencers, and complementary service providers to expand your reach. Cross-promote one another’s offerings, tap into their established networks, and leverage their expertise to attract new guests.
  • Encourage Guest Reviews and Testimonials: Positive reviews establish trust and credibility. Encourage satisfied guests to leave reviews and engage with them by responding to feedback promptly. Add guest testimonials to  your website and marketing materials to build confidence in your properties and services.
  • Monitor, Analyze, and Adapt: Analyze data to identify trends, measure the success of different campaigns, and make data-driven decisions to refine your marketing strategy.

With a compelling marketing strategy, you’ll attract an enthusiastic audience of guests who are eager to experience the exceptional hospitality you offer. For a deeper dive into this, check out Safely’s article, How to Market your Vacation Rental for the Best ROI.

Step 10: Find Short-Term Rental Insurance You Trust 

Finding reliable short-term rental insurance provides peace of mind and safeguards against unforeseen events. Here’s what to do:

  • Assess Your Insurance Needs: Evaluate the specific insurance requirements for your vacation rental management business and understand the level of protection you need to safeguard your business and the properties you manage.
  • Seek Insurance Providers Specializing in Short-Term Rentals: Look for insurance providers who specialize in short-term rental coverage such as the Safely Protection Plan provided by Safely’s affiliate, On Demand Insurance Agency, LLC. the premier provider of short-term rental protection. 
  • Coverage for Property Damage: Ensure that your insurance policy covers property damage, including accidental damage caused by guests or natural disasters. 
  • Liability Coverage: Liability insurance protects your business against claims arising from injuries or accidents that occur on the property. 
  • Read and Understand Policy Terms: Thoroughly review the terms and conditions of insurance policies before making a decision. Pay close attention to coverage limits, deductibles, exclusions, and any additional requirements or endorsements. Seek clarification from the insurance provider if you have questions.

As the premier provider of insurance protection and guest screening to the short-term rental market, the the Safely Protection Plan provided by Safely’s affiliate, On Demand Insurance Agency, LLC. has you covered! 

Step 11: Scale! 

Now it’s time to take it to the next level. Step 11 is all about scaling your operations and expanding your reach. Here’s an overview of the actions to take:

  • Evaluate and Optimize: Fine-tune your operations, streamline processes, and embrace technology to enhance efficiency and profitability.
  • Expand Your Portfolio: Grow your property portfolio by adding new properties that align with your target market and location preferences.
  • Refine Your Marketing: Continuously refine your marketing strategy to attract a broader audience. Use digital channels and data-driven insights to drive bookings and increase brand visibility.
  • Strengthen Partnerships: Collaborate with local businesses, travel agencies, and event planners to tap into new networks and expand your reach.
  • Embrace Guest Feedback: Actively listen to guest feedback, respond promptly, and use insights to enhance the guest experience. Build a loyal customer base with your exceptional service.
  • Leverage Technology: Adopt property management software and automation tools to streamline operations and provide a seamless experience for guests and property owners.
  • Invest in Your Team: Train and empower your team to deliver exceptional service and foster a culture of continuous improvement.
  • Stay Ahead of Trends: Stay informed about industry trends, innovations, and market dynamics to adapt your business strategy accordingly.

For more on this, check out our article – How to Scale a Vacation Rental Business as a Property Manager and get ready to soar even higher as you create unforgettable experiences for guests worldwide!

Short-term rental protection when you need it most.

As the premier provider of short-term rental protection, Safely offers rigorous guest screening and robust insurance coverage to protect property managers and homeowners while providing a better guest experience. Safely has protected over $60 billion in homeowner liability coverage and one million guest nights, from individual homeowners to professional property managers. No matter the size of your business, Safely can help protect your investment and grow your business.
Get in touch today.

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Grace is the Chief of Staff at Safely and a licensed insurance agent. She began her journey at the company over a year ago in the Customer Happiness department, where she learned the ins and outs of the customer experience, getting to know Safely’s customer base and exploring Safely’s value proposition in the market. Grace was asked to step into the Chief of Staff role in 2023 and spends her time working on company-wide initiatives including investor relations, compliance, and expansion. Outside of working hours, you can find her trying new restaurants with her husband, walking her dog along the river, and exploring the city of Atlanta.

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