Rising inflation and labour shortages feel like a scary prospect for short term rental businesses. In the US, average prices have risen by 8.5% in the past year, whilst energy prices specifically have jumped up by 32%. We see a similar story in the UK, with average prices 7% higher than they were this time last year.
This inflation is occurring against a backdrop of UK and US labour shortages, with 11.5 million unfilled job openings in the US. As is often the case, it’s small businesses which these labour shortages have hit hardest. So, how do holiday rental owners and managers respond to the double conundrum of higher operating costs and fewer qualified staff available to carry out those operations?
Here come the experts
We’ve got some good news for you! Andy, our CEO, recently participated in Rental Scale-Up’s conference: “Overcoming Inflation and Labor Shortages”. He sat down with some short term rental industry pros:
We’re going to summarise the conversation in this article. So, if you’re a vacation rental owner or manager looking to understand how you can cushion yourself against rising costs, this one’s for you!
Streamline your operational processes
Each of our experts agreed that the most effective way to bolster your financial stability was to develop efficient operations.
In practice, this means identifying the manual processes that take up time each day and, where possible, replacing them with an automatic process. For example, Matt asked conference attendees how they manage their cleaning processes. Does your cleaning team receive an automatic notification when a new guest books? When they’ve finished, is your inspection team notified immediately?
If you can automate the nitty-gritty aspects of managing a short term rental property, you free up resources to focus on the more important things. Andy stressed that a simple but effective way to free up your time and headspace is to make your guest communications more efficient.
Communicating better to guests is one of those things that will have a massive impact on the mental bandwidth that you have to try and manage. You know what it’s like when you’re busy busy busy, and then you get questions from guests throughout your day. It’s really hard to adjust and put your mind into question-answering mode.
Field fewer guest questions with a digital guest welcome book
A Touch Stay digital guidebook turns your information into communications. Simply deposit all of your practical and inspirational info – from access codes to recommendations for the top local breakfast spots – into one accessible hub, and wave goodbye to repetitive guest questions.
With Memo 1.0 – our guest notification system – you don’t even have to remember to share your guidebook. Simply select from our customisable message templates, schedule as many notifications as you need, and watch as your communication flow runs itself. Your guests will receive all the details they need, exactly when they need them.
This is just one example of how automated processes save time for holiday rental property owners and deliver an improved experience for guests. An enhanced guest experience means better reviews, which means more bookings. So, whilst streamlining operational processes is an investment (of both time and money), the long-term pay-off is a more stable foundation for your vacation rental business.
When faced with rising costs, our instinct can be to try to increase our revenues by offering added extras. And whilst upselling can be a great tactic for increasing revenues whilst enhancing the guest experience, it’s often less effective when done purely to increase revenues. You might end up offering add-ons that your guests don’t really want, and which you then have to invest in to deliver on.
I’ve yet to come across a customer of ours who has successfully implemented significantly increased revenues from upselling
One exception, highlighted by Matt Barr, is revenue-increasing efforts that focus on making established processes more efficient, rather than charging guests more. For example, what do you do if you find yourself with a pesky gap night that you know won’t be filled by a new reservation? Matt suggests automating a message that offers guests staying either side of that date an extra night at a discounted price – they get an extended trip, and you earn revenue on an extra night.
Invest in your short term rental business
In the same way that our experts warned against impulsively adding on extra costs for guests in an attempt to increase revenues, they also discouraged short term rental managers from panicking and cutting costs unnecessarily.
Back in 2014, when booking an Airbnb, you didn’t expect the same service that a hotel would give you. But over the years, with prices increasing, expectations are now very high. Guests expect their check-in to go as seamlessly as it would in a hotel. Wherever hotels are still doing better, that’s an area worth investing in. Cutting costs here, there, and everywhere isn’t the solution.
Instead, Andy suggested that continuing to invest in your short term rental business will put it in a stronger position in the medium- to long-term. The short term rental industry as a whole has seen incredible growth in recent years, and if you’ve benefited from that it makes more sense to reinvest your revenues than it does to reduce your spending.
Of course, if you’re in a tight spot, it’s sometimes necessary to cut back. However, if your primary concern is the short term inflation and labour shortages that we’ve seen over a relatively recent period, you’ll see greater financial stability if you continue investing in your product.
It’s a bad idea to make very quick, knee-jerk reactions. I’ve seen this before: people see something bad coming, so they cut and cut and cut, and then it takes much longer to come out of that slump afterwards. If you’ve had a bumper year and you’re seeing nice returns, put that money back in
READ: Brittany Blackman’s account of how investing in digital guest book technology helped her take her property management business to the next level
Value your people: your employees are your greatest asset
Right, so you’ve streamlined your operational processes and saved time for your employees in other areas. Instead of typing out the same email over and over again, or waiting to greet guests whose flight was delayed, they’re now free to help your business grow.
But in an increasingly competitive environment for employers, how do you make sure your employees want to stay with you?
Andy and Florian both noted that it might ultimately come down to increasing people’s wages. If your competitors are paying significantly more, you’ll find it difficult to retain skilled professionals.
All our experts, however, agreed that employee loyalty extends beyond the paycheck. Workers want to feel:
Part of a community
How do you make them feel this way? You build a relationship with them:
Show them that you trust them to have input into your decisions and processes
Clearly communicate what you need from them, and how they can achieve it
Introduce incentive programmes which recognise and reward good work
These changes might require some time and money but, again, it’s an investment. It’s far more efficient to develop your current employees than it is to be constantly rehiring.
Know where your money is
On some level, of course, this applies to all of us! But in this context the panellists were specifically talking to property managers.
Property managers have to deal with a lot of moving pieces, and it’s easy to start responding to situations on the fly without noting down all your processes and expenses. Being able to document every task – what it was, how long it took, how much it cost, the exact supplies that were bought – avoids you losing revenue because you can’t accurately bill homeowners.
Plus, keeping a note of everything you do to each of your properties helps to show owners how much value you’re adding. Matt noted that homeowners are typically only aware of around 20% of the work that’s being done on their property. Being able to exemplify exactly what you’ve done and why you’ve done it is part of your proof that you’re worth every penny of your short term rental management fee.
Profit & Loss: the boring (but important!) bit
Andy emphasised how important it is to know what your profit margin is. This is what will help you determine if it’s time to cut your short term rental expenses, or if you’re better off continuing to invest. For example, things might feel tight right now, but if your profit margins are at 10%, where they were at 5% a year ago, now isn’t the time to be scrimping!
According to Andy, if you’re a property manager with a 10+% profit margin, you’re doing pretty well. He’d push you to reconsider cutting any costs, and instead encourage you to reinvest those profits back into your holiday rental business.
Top tip: as your profits grow, try to ensure that your software subscriptions are based on fixed prices, rather than percentages of your revenues. So long as they’re a percentage of your revenue, your short term rental costs grow with your earnings.
Build an efficient vacation rental business with effective guest communications
The surest way of weathering high inflation and labour shortages is to have a robust, stable short term rental business. This means continuing to invest in your product, building a strong team, and streamlining your operational processes where possible.
One process that takes up a disproportionate amount of vacation rental owners’ and managers’ time is guest communications. And that’s where we can help! 86% of Touch Stay users halve the time they spend managing their guests. Just imagine what you could achieve with all that extra time.
With a digital guidebook, your guests will have all the info they need at their fingertips. Gone are the days of late-night phone calls and never-ending email chains. You and your guests will be cool, calm, and collected, and you’ll free up time to invest in strengthening your vacation rental business.
Plus, guests love Touch Stay. With local recommendations and practical details on their phone, they’re empowered to take control of their own holiday. No need to wait for a harangued property manager to pick up or respond to a text. It’s all there waiting for them. Just check out some of these reviews!
I was amazed at how professional your app is! It’s so well organized and has so much information in there. I was able to feel your hospitality throughout. I was so impressed by the photos and detailed contents. Guests know exactly what they need to bring – this information is so helpful.
– Guests of Donna Martinez, Sea Ranch Abalone Bay
The Touch Stay Guest App was a fantastic way of enjoying all that the experience, and region has to offer. Well done!
– Guests of Hazel Parker, Mulberry Lodge
So, what are you waiting for? Invest in the stability of your short term rental business today.