The rise of short-term rentals
Why short-term rentals are becoming more sought after than ever before
I spent 18 years managing all types of properties, from office strip centers, grocery-anchored spaces, various types of offices, power centers and most recently a regional mall in Utah. I had the opportunity to strike out on my own by purchasing a franchise from iTrip Vacations, a short-term rental management company based in Nashville, Tenn., with over 80 franchises and over 3,000 properties managed across the U.S. and Canada.
You might be thinking that short-term rental management is more closely related to the hospitality industry, and why would an article on short-term rentals be included in JPM? I would make the argument that all property management is part of the hospitality industry, given that the definition of hospitality is “the quality or disposition of receiving and treating guests and strangers in a warm, friendly and generous way.”
In every company I’ve worked for, customer service has been the top priority for property management. To create an environment where shoppers, employees and guests of tenants walk onto the property and feel welcome, safe, comfortable and eager to return time and again is crucial to having a successful business.
And just look at some of the amenities now being offered in office buildings—everything from workout and game rooms to restaurants and bike storage. Those sound a lot more like things you find at a resort, yet they’re becoming more desirable and more available in commercial properties.
Shopping centers and retail stores are now all about creating an experience, offering valet parking, free Wi-Fi, comfortable resting areas, free events and much more. The goal? To welcome shoppers in the warm, friendly and generous way that defines hospitality.
Evolution propelled by the internet
A short-term or vacation rental is anything rented for less than 30 days. Short-term rentals, whether a cabin, beach house or something else, have been around for many years. In fact, the very first vacation rental dates back to the 1600s, when Louis VIII used the Palace of Versailles as
a hunting lodge. But urban listings have exploded with the advent of websites such as VRBO (the first online listing site, created in 1995), Airbnb (not on the scene until 2008), Homeaway, Tripadvisor, Booking.com and many others.
Many hosts, as those offering properties for short-term stays are called, are do-it-yourself types who manage their own properties. But professional management companies such as iTrip Vacations have grown more commonplace with professional investors. These investors are becoming more interested in this asset class, which often produces returns that typically surpass those of long-term rentals. What advantage does a professional property management company like iTrip Vacations bring to the table versus a DIYer? Digital marketing campaigns, SEO strength, artificial intelligence and turn-key automated processes, pricing strategies, and adaptation of technology to increase bookings and revenue are just a few of the advantages.
Short-term rental management is not all that different from managing larger assets. The skill and knowledge bases are very similar, encompassing contract negotiation, vendor management, customer service and communicating with tenants. But one significant difference is that you don’t have to worry about collections. Also, if the tenant is undesirable, you only have to tolerate them for a short time, or you can legally remove them from the premises without the hassle of eviction if they do not obey house rules.
One more major difference is the amount of time spent on rate management. This is where the link to the hospitality industry is strongest. Setting your nightly rate and forgetting about it is not an effective rate-management strategy. Knowing what your competition is doing and how you are priced is critical, as is knowing what the occupancy of the area is at all times during the year. Keeping track of the high occupancy times to take advantage of supply and demand and adjusting your rate accordingly will increase your revenue.
For example, in September, Salt Lake City is host to a large convention for a direct sales company that fills up hotels. Rates for short-term rentals are typically more than three times higher during the convention than the normal nightly rate for the year.
Not without obstacles
The biggest challenges facing the short-term rental market appear to be in establishing city regulations and ordinances, as well as HOA rules, which serve groups with opposing viewpoints. The pull between property rights and city and neighborhood planning is quite evident. And while many people enjoy traveling and using online rental services, there is a strong component of people who do not want it in their backyards. But the business model isn’t going away anytime soon. As it develops, its inclusion and effect on the property management landscape will continue to develop.