Factors That Effect Vacation Home Rentals
Orlando is a year-round, global vacation rental market. With a strong enough marketing program, homeowners will enjoy bookings virtually each month, provided there are no major external factors (such as COVID-19 where currently experiencing). However, if you take a look through Online Travel Agencies (OTAs), you'll find many times that there are homes with almost no bookings, some with calendars that are 90% full, and others with bookings spread throughout. Why is that? What causes that level of fluctuation? In this blog, we look to answer those questions and more.
- Rate Management
Rate management is essentially a vacation rental home's key to rental performance. It's the direct correlation of supply and demand in a vacation rental market, and it relies on a management company or an owners ability to adjust frequently, and quickly, to ensure that market demands are being kept up with. Rate management is an essential part of both the vacation rental industry, as well as the hotel industry. I personally believe that the vacation rental industry still has a lot to learn from the hotel industry regarding rate management, but it's made leaps and bounds of progress over the past 10 years that we've been able to witness it. Being very good at rate management means that you know when travelers will be reserving properties in a particular area, and charging the most that you can for that time frame. It also means that your hitting your target occupancy levels for each property that you manage. We always tell buyers and real estate professionals that occupancy is many times focused too heavily on when evaluating vacation rental revenue performance, because it is. Occupancy percentages are extremely important however when performing rate management, as there should always be a target occupancy percentage to hit. Hitting your target occupancy percentage at a lower ADR (average daily rate) may mean that demand has decreased for a particular community, area, or type of property (Townhouse, condo, or specific number of bedrooms). It's also important to note exceeding your target occupancy is not necessarily a good thing either, and should be balanced as well. Exceeding your target occupancy looks good on a calendar, but probably means that you missed out on higher paying bookings for a particular time period. It's always better to achieve a higher ADR than occupancy, as long as your occupancy is near market averages. Why? Because a higher paying booking for a shorter time period will result in a higher net income to an owner. Less days occupied in a property means lower utility usage, lowering the wear and tear on the AC unit, appliances, and other fixtures/facets of the home.
It's always better to achieve a higher ADR than occupancy, as long as your occupancy is near market averages.
- Marketing Programs and Booking Vendors
The way that bookings are created is actually somewhat of a controversial subject in the vacation rental management industry. There are thousands of travel agents, booking services, tour operators, and booking agents, all willing and able to absorb a management companies available inventory to advertise for rental. Sounds great on the surface, right? "The more bookings the better!" Not always. To learn more about the difference between online travel agencies (OTA's) bookings vs. Tour Operators and Wholesale Booking companies, see this blog.
Marketing programs can vary heavily from management company to management company. If you're evaluating which management company to use, make sure that you understand how they market your property right off the bat, as it can make or break your vacation rental home's success.
- Presentation and Amenities
It's no secret that vacation home renters, even hotel renters, are spending thousands of dollars based off of pictures alone. For that reason alone, it is absolutely paramount for a vacation home owner to make sure that their property looks flawless in pictures. There are a number of things to take into consideration when evaluating a vacation rental homes presentation to potential renters. They are:
Colors and Decor - Modern paint colors, furniture, artwork and decorations, appliances, etc.
Space and Light - Ensure that your space has as much natural light as possible and reduce clutter. Make sure a space can be enjoyed with places for people to converse and relax, but be careful of putting too much furniture into one space.
Amenities also play a huge roll in a vacation rental home's performance. Amenities can include what the home has to offer, as well as what the community has to offer. Common amenities that Orlando travelers look for are items such as private pools, game rooms, large TV's in the bedrooms, heated pools, gaming systems, screened in patio/pool inclosures, etc. Resort communities are the most common option for Orlando vacation rental guests. Communities establish a reputation on their own from travelers trying different communities during their visits. The reputation is created through the cleanliness and efficiency of operations within a community, amenities the community has to offer, and relative distance to attractions. Amenities that a community has to offer often include a community pool (sometimes heated), clubhouse, bar, restaurant, golf course and clubhouse for golf, fitness center, arcade room, movie theater, etc.
Resort communities are the most common option for Orlando vacation rental guests.
- Location Within a Community
Once a traveler has narrowed down the community that they want to stay in, or one that they're familiar with, they then look at where in the community they would like to stay. Some travelers only want a south facing pool, while other travelers are focused on not having rear neighbors and prefer a conservation view. Once travelers that visit Orlando frequently have found the community and location that they've fallen in love with, your golden. They will continue to book the property (as long as they're treated fairly and the property is kept in good condition) for years to come, often times an entire year in advance. Once you've established a base of repeat travelers, your calendar becomes effortlessly full. Lastly travelers are looking at the proximity to the clubhouse in a resort community. Almost all travelers looking to book within a resort community, would rather be closer to the clubhouse than further away. For that reason, properties closer to the clubhouse rent more frequently, and at a higher nightly rate, than those further away.
Reviews play another key role in vacation rental success. It's important for property managers and owners to ask guests for reviews as frequently as possible. We mentioned earlier the reputatiton that communities build, but this is true for each individual property itself. Reviews are a key factor in building this reputation, and guests are looking for not only the highest rated properties, but also the highest number of reviews possible. This is basic consumer behavior, but each property should strive to get more than 10 reviews and average no less than 4 stars out of five. The properties that average 4 stars or higher with 30+ reviews on sites such as Airbnb, VRBO, and Booking.com, receive in incredible amount of inquiries and bookings throughout the year as a result of this booking status.
- Number of Guests Accommodated
Lastly, a vacation rental home should attempt to accommodate as many guests as possible. The main criteria for online travel agencies when narrowing down the millions of options for on their websites for travelers are: where you want to stay, when you want to stay, and how many guests you look to accommodate. If your property can accommodate more guests than what a traveler needs, it is still in the running for places to book. However if it cannot accommodate the number of travelers needed, it's automatically filtered out of the search for a traveler. For this reason, maximizing the number of people that a property sleeps will dramatically change the number of searches that your property is included in. If you pair that with consistent pricing (rate management), quality of the listing (presentation), and reviews, your property quickly stands at the top of the list, thus dramatically increasing your changes of getting bookings from online travel agents.
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Written by Keith Wachter - iTrip Vacations Orlando Business Development Specialist