The No-Nonsense Guide to Creating a Vacation Rental Business Plan

Sep 29th, 2023

Starting a vacation rental business can be an enticing venture, especially with the rise of platforms like Airbnb and VRBO. And while it’s not uncommon for homeowners to rent out a room or two as part, that level of simplicity is just a side hustle – not a full-fledged business.

A truly successful vacation rental business plan is far more involved. Managing dozens of properties – potentially across multiple states – requires adequate research, organization, and planning. From understanding the nitty-gritty of local regulations, choosing your payment processing solution, and fine-tuning your guest experience, there's a lot to consider if you want to expand your business (and your profits!).

This guide will lead you through creating a robust vacation rental business plan that lays the foundation for a thriving, profitable vacation rental empire.

Understand the Local Laws and Regulations

Before you can even begin thinking about bedspreads and kitchen appliances, you need to ask a fundamental question: are you legally allowed to rent out your properties? Take the time to investigate all necessary requirements for short-term rentals in the state (or states) where you plan to rent.

To start, do you have all necessary licenses? Some states or local municipalities require a business license, while others might not. You may also be required to be a licensed real estate agent or property manager, depending on your state and how many properties you manage.

On the financial front, do you need an escrow account? What taxes need to be charged by jurisdiction?

Beyond your own qualifications and business logistics, you also need to consider the property and its location. In some counties and towns, short-term rentals might be heavily regulated or outright banned. It’s crucial to not only understand current restrictions but also the direction these regulations are headed. For instance, if there have been recent town meetings aiming to regulate rentals more strictly, you might find yourself locked out of that area soon.

Finally, ensure your space is a legally permitted living unit. Accessory Dwelling Units (ADUs) you’re hoping to rent out as cozy, private vacation cabins might sound enticing, but if it's not zoned correctly or if insurance doesn't cover it, you might be in for a nasty surprise.

Investigate Your Competitors

Understanding your competition is pivotal in any business venture, and the vacation rental market is no different. Begin by conducting a comprehensive market analysis of other rental properties in your targeted area.

Rates & Amenities: A primary factor to consider is your competitors’ pricing strategies. What rates are they charging for similar properties? Are there seasonal fluctuations in their prices? Next, look into the amenities they offer – from WiFi, pools, to in-house entertainment systems. Which of these amenities are standard across most competitors, and which ones are unique that might be drawing customers in?
Reviews & Feedback: Dive deep into customer reviews on platforms like Airbnb, VRBO, and TripAdvisor. These can offer invaluable insights into what guests loved or found lacking. Pay attention to repeated praises or criticisms – they often hint at a market trend.
Marketing Strategies: How are your competitors attracting their guests? Are they using professional photos, virtual tours, or perhaps leveraging local attractions in their listings? Understanding their marketing techniques can offer insights into areas they might be neglecting, which you can capitalize on.
Booking & Cancellation Policies: What kind of flexibility do they offer their guests in terms of booking and cancellations? A more lenient policy might attract more guests but could also increase last-minute cancellations.

By gathering this data, you can spot gaps in services, potential market demands, or even identify underserved niches. This competitive intelligence is your foundation to carve a unique space for your rental property in the market.

Identify Your Target Customer

Identifying and understanding your target customer is the cornerstone of tailoring your vacation rental to meet market demands effectively. When working on this section of your short term rental business plan, here's how to zone in on your potential guest:

Demographics: Start by creating a profile of your ideal guest. Are they young couples, families with kids, solo travelers, or business professionals? Each group has its unique needs and preferences. While families might prioritize safety and kid-friendly amenities, business travelers could be after a workspace, high-speed internet, and proximity to the convention center where their conference will be held.
Travel Motivations: Why do people visit your area? Is it a famous tourist attraction, a business hub, or perhaps known for its events and festivals? Recognizing the primary motivations can help you cater your offerings accordingly.
Duration of Stay: Is your area popular for weekend getaways or long-term vacations? The duration can influence the kind of services and amenities you need to provide.
Feedback & Surveys: Consider gathering feedback from potential customers or surveying visitors to the region. Direct insights can often lead to understanding hidden needs or emerging trends.
Amenities ROI: With your target customer in mind, evaluate which amenities will offer the best return on investment. For instance, if you're targeting families, properties with a pool might be more enticing to them. On the other hand, business travelers might value a robust workspace over recreational amenities.

By understanding your target customer, you not only tailor your property to meet their needs but also direct your marketing strategies effectively. After all, knowing who to talk to is half the battle in effective communication.

Get an Operational Plan in Place

After the research phase, the next part of your vacation rental business plan involves putting what you’ve learned into action and organizing the logistics.

If you don’t already own a few vacation properties to rent out, now is the time to scout your options. Make a precise list of what your target customer will look for in a rental, then purchase properties accordingly. For example, say you’ve identified that your target customers are families looking to visit the nearby amusement park. They might only consider properties in close proximity to the amusement park with 3+ rooms to fit the kids.

Next, delve into the services you'll need. This likely includes cleaning, maintenance, pest control, and landscaping for every property. If you're not up for the daily hustle or if you plan to quickly scale to dozens of properties, consider hiring a property manager.

On the technology front, think about your payment processing – especially if you're considering direct bookings or platforms like VRBO. Property management software features like channel management, scheduling assistance, virtual employees, accounting, and reporting can save you time and headache while also providing a better guest experience. Ascent works with over twenty outstanding property management software solutions that can help you efficiently manage your properties, whether it’s only a few or several thousand.

Enhancing guest experience is another cornerstone. Simple additions, such as electronic locks, can drastically simplify transitions between guests while bolstering security. And never underestimate the power of basic amenities – towels, coffee, or toiletries can offer an above and beyond experience that most other vacation rentals don’t include.

Estimate all of these vacation rental expenses and work them into your budget.

Create a Marketing and Distribution Plan

In the digital age, establishing a robust marketing and distribution strategy is essential for any short term rental business plan.

Start by determining which platforms and online travel agencies (OTAs) align best with your familiarity with vacation rentals, your properties, and your target audience.

For many newcomers to the rental arena, platforms like Airbnb provide a solid launching point due to their widespread recognition and trustworthiness. Airbnb also handles some of the more technical details on your behalf, which can be a good fit for business owners who are just starting out. That said, Airbnb payment options can be restricting and eat into your profits.

As you gain experience and confidence, consider expanding to other OTAs and pushing for direct bookings. Direct bookings offer you far more control and profitability for your vacation rental business, so you should aim to capture as much business there as possible. You will just have to create a dedicated website and integrate a guest-friendly payment processing solution. To kickstart your research, take a look at our partner page to find some solutions that fit your needs.

While promoting your properties, invest in high-quality photographs and maybe even virtual tours, which help potential guests envision themselves in your space. Craft compelling property descriptions that list the amenities while selling an experience. You can also leverage the power of local attractions and events in your marketing material, emphasizing the unique aspects of your location.

Engaging in social media marketing, email campaigns, and even collaborating with local businesses can further boost your property's visibility. Keep local trends and your target market in mind during your promotional efforts.

Expand Your Budding Vacation Rental Business

As part of building your vacation rental business plan, it’s crucial to team up with the right partners. With decades of experience offering payment processing solutions for vacation rental businesses, Ascent Payment Solutions offers the individualized care, seamless software integration, and a suite of offerings you need to grow your budding business.

Our payment products offer the best possible service, security, and savings to fit your needs while protecting your margins – including no-risk “book now pay later” finance flexibility, cryptocurrency payments, and 100% compliant surcharging.

Let us manage the payment processing technology while you focus on delivering memorable experiences for your guests. Contact us today to learn more!