Property Management Fees for Vacation Rentals Explained: Considerations for Setting Fair Rates

Jul 22nd, 2024

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When setting a commission or property management fee for a vacation rental property, it’s crucial to recognize that the U.S. industry average ranges from 20% to 30% of the rent charged to tenants. However, these fees can vary widely, ranging anywhere from 10% to 50% depending on location, property type, and the specific services and fee structure offered by the management company.

All of this serves as an important benchmark to help you set your rates with clients. What factors do you need to consider when setting fair property management rates with owners?

This guide will walk you through the average property management fees for vacation rentals and help you think about the small details that make a big difference in your bottom line.

Fee Structures

The first step is to decide how to structure your fees. You offer a professional service to owners and deserve to be fairly compensated, but there aren’t any cookie-cutter answers about how to charge for the value you provide. Instead, there are two main paths to choose from: commission-based fees and guaranteed income.

Commission-Based Fees

Commission-based fees are the most common way of collecting payment for your services. This payment model allows you to take a percentage of the income. Owners tend to prefer this model because you only make money when they do, but this means that you might not make anything if your business is inefficient at collecting bookings.

It also means that the homeowner is on the hook for the bills if no bookings come in. They rely on property managers to bring in guests, which could strengthen or damage your relationship with them depending on the results of your efforts.

Guaranteed Income

On the other hand, some property managers prefer to be paid a flat fee regardless of how many nights are booked in a given location. This can increase the risk for the owner if the property isn’t in high demand during certain seasons of the year (like beach rentals in the winter).

Homeowners can make out better this way if they have lots of bookings via their property management company, but it can be highly stressful for you to feel like you’re “earning your keep.”

What’s Included in the Fee?

Compared to long-term rentals, short-term rentals have a lot of extra work involved – which is part of why you can charge a higher fee than the LTR industry average of 8% to 12%. Think about the higher guest turnover, marketing, and support required to manage a short-term rental.

Make sure you consider all the extra work and expenses before you set a fee. Some of these services will be included in your property management fee, while others you can charge as an additional fee to the owner.

In exchange for the commission on the booking fee that you receive as a property manager, some of the most common services included are:

Listing the marketing and promoting it to potential guests
Handling the details of securing bookings
Poviding guest support during their stay
Developing a revenue strategy

All these are commissionable revenue, meaning you’re usually expected to take action in these areas in exchange for that fee. However, there are opportunities for non-commissionable revenue as well. These are services that you provide in addition to base compensation.

Some of these services can include:

Setup fees
Cleaning or laundry services
Maintenance of the property
Payment processing

When you provide a comprehensive service, you benefit financially with a larger window of opportunity to make money.

What Else Can Affect the Vacation Rental Fee?

In addition to the factors we’ve already covered, there are a few other things to keep in mind while deciding what you can charge as a property manager.

First, you have to consider location. Generally speaking, East Coast commissions tend to be less than West Coast commissions. Prime vacation getaways score higher rental rates and additional fees that set your property management company up for success. Before setting any fees, market research should be your first step to ensure you’re not leaving money on the table.

Another factor that can affect your fee is the type of property you will be renting, such as urban, mountain, or beach homes. Even short-term vacation rentals versus corporate housing rentals can affect your rate.

Maybe you have a beachfront home in a tropical locale that sees beachgoers all summer long. Homes on the beach and homes in the mountains tend to earn more (and also require more upkeep). Meanwhile, urban rentals tend to be priced lower on commission rates but also require less work.

Tips for Keeping More of Your Property Management Fee

The goal of any business is to put more money in the bank so that you can sustain your operation for the long haul. The more cost-efficient you are, the more of that vacation rental property management fee you get to keep as profit to grow and expand your services for a larger market share.

Here are a few ways you can cut your expenses:

Find a flexible, cost-effective payment processor: There are lots of payment processors on the market, but well-known options like Stripe often have flat fee pricing models that cut into profitability. With Stripe, you also won’t be the Merchant of Record, meaning you’ll have limited control over your finances. Look for a payment processor like Ascent that offers competitive Interchange Plus rates, compliant surcharging, and rental industry-specific expertise.
Offset payment processing fees: Rather than eat processing costs yourself, you can implement a surcharge option that passes that cost to guests while giving them the option to avoid it entirely. Alternatively, you could charge a convenience fee or offer a cash discount for guests who prefer to pay without plastic.
Negotiate your contracts: Negotiate contracts with high-quality vendors (such as cleaning, landscaping, and maintenance companies) upfront to secure fair, consistent prices with contacts you can trust. This will help you set expectations with owners and provide quality customer service to guests.

For more tips, check out our full article about ways to reduce vacation rental expenses.

Optimize Savings and Profits with Ascent

Ascent was tailor-made to help property management companies reduce their out-of-pocket spending on payment processing fees. We offer powerful, industry-leading benefits that enable you to keep more money in your pocket or pass those savings along to owners, increasing their loyalty to your brand.

Reimbursement for your processing fees on refunds and credits with Net Billing
Transparent reporting and interchange optimization with Interchange Plus Pricing
Compliant surcharging to pass along most credit card fees to your guest

Ready to see how your property management business could benefit from a better payment processing solution? Reach out to us today!