It’s fair to say that the coronavirus pandemic has had a huge impact on the vacation rental and hospitality markets. While many businesses are cutting costs to the bone, we have seen a number of companies forced to close down. It may seem a bizarre time to look at building a vacation rental/hospitality business but this may be just the time to create strong foundations for the future.
Table of Contents
How to build your own vacation rental business in 2020
One thing which has become clear in light of the coronavirus pandemic is the lack of control for vacation rental businesses with many dependent on third-party websites. For those looking to create a vacation rental website a recent report on the subject cast a very interesting light on consumer preferences. Despite the ongoing obsession with third-party websites such as AirBNB and Booking.com for example, did you know that 65% of guests prefer to book directly with the business?
So, while potential guests are crying out to deal with businesses directly, many vacation rental business owners are pushing them towards third-party websites. Think about it, as these third-party websites become more popular you are just one of a growing crowd, a lone voice in the wind. Then we have the obligatory listing upgrade options, bells and whistles which all come at an extra cost. The benefits of taking control of your own booking system and being proactive through your own website could be a game changer.
Personalization
While relatively small vacation rental businesses will never compete with the big players on marketing budget, they can offer something different, a personalized experience. Focus on the family approach, speak to them in plain English and answer the questions that they want to ask. Even though there needs to be a degree of scheduling, procedure and control, you can still be flexible. Compare this to the larger brands which very often dictate what you do, when you do it and how you do it.
Reduced layers of administration
There is nothing worse than clicking from one website to another, back again, checking something else, only to find out the vacation site you wanted is fully booked. Take control of your booking system and make yourself available, the central point of contact. You may need to speak to a colleague to confirm details but to the customer their enquiry is seamless – and no email ping-pong.
Greater marketing opportunities
Nobody better sells your business than well, you. Your marketing and promotional literature would be on point, accurate and up-to-date. You know exactly what you have to offer, your target market and any additional add-ons they may require. As a lone figure in the huge crowd of a third party marketing website your voice is lost, you don’t stand out and many people might never see you. Pull up your own soapbox and shout loud and proud about what you have to offer….
More flexibility on pricing
Even though third party websites can be a game changer for some vacation rental businesses, this comes at a cost, commission. The fact you are paying commission to a third-party means that you don’t have as much flexibility with your own prices. Taking back control and setting up your own booking system gives you the chance to discount and promote your services, whilst remaining profitable.
Understanding your market
If you’re looking to enter the vacation rental business in 2020 there are challenges, there are issues to overcome but there are also long-term opportunities. To succeed you need to understand your market, your clients and what they want. You need to know what they are thinking before they do, consider any add-ons you can offer and additional income streams. If they trust you, they will trust your recommendation, something far too many vacation rental businesses fail to appreciate.
Automating the backend
Whether you are looking at the help system, booking system, feedback or seamless arrival/departure procedures, you should automate as much of the backend of your business as possible. Reliable automation gives you more time to focus on the front end, the personal service which will play a major role in building your business reputation. Don’t be scared of technology, embrace it, but remember you are a client facing business and you are the face of your business.
How to build your own hospitality business in 2020
While many people see the hospitality industry as hotels and lodgings, it also takes in food and drink, event planning and much more. If you’re looking to build your own hospitality business in 2020 you will need to be innovative, forward-thinking and (for want of a better phrase) “think outside the box”. You need to make yourself stand out, create a brand which is different and offer an experience not just a visit.
Many entrepreneurs make the mistake of building a business from the ground upwards without focusing on the endgame. Surely it is better to see where you want to arrive, in terms of customer experience, and then plot your road map to get there. Building a business from the ground upwards carries the risk that you will move at tangents, lose focus and end up being Jack of all trades but master of none. Simplify each stage, keep your business lean and mean with no fat (bloated costs) then give yourself room to expand in the future.
Research, research and research again
Until you know your local market clientele better than any of your competitors you will be at a disadvantage. So, when looking to set-up your own hospitality business, focus on your competition, see what they do right and see what they do wrong. This research element of your business plan requires a flexible mind and even an ability to put your hand up and say “I got it wrong”. The hospitality industry is littered with entrepreneurs who had tunnel vision and were attempting to give customers what they thought they needed. They never listened to their clientele.
Analyze your data, then do it again
As soon as you open the doors to your new hospitality business you should be encouraging feedback, feedback and more feedback. As a visionary entrepreneur it is very easy to develop tunnel vision, lose touch with your clients and give them what you think they need. Why not ask them?
Over time you will see booking patterns, returning guest numbers, seasonal trends for your business and learn how to react to local events. Data from your clientele and your business experience is priceless but when you mix this with industry data this can create corporate dynamite. This feeds very nicely into our next topic, yield management and maximizing your income.
Focus on yield management
So, what is yield management? As a concept it is fairly straightforward, maximize the income per hotel room and let your business look after itself. Well, it’s not quite that easy. However, yield management is an integral part of any successful hotel business. Knowing your clientele, what moves demand and how to maximize pricing, without becoming uncompetitive, is an art in itself. Having the confidence to follow-through and do it, is the game changer.
For example, if you had a 50 room hotel with a rack rate of $350 per room that equates to maximum potential revenue of $17,500. When looking at yield management, what would you rather do, sell 10 rooms at $350 per night or 20 rooms at $250 per night? This is a perfect example of dynamic pricing and the impact it can have on your yield:-
10 x $350 = $3500
Yield = 20% ($3500/$17500)
20 x $250 = $5000
Yield = 28.5% ($5000/$17500)
Many business owners fail to appreciate that the more people in your hotel the more chance of selling additional products/services and improving overall turnover/profitability. Empty rooms are cash burners.
Build an experience for your customers
Those visiting a hotel will often arrive in holiday mood, looking for something different and memorable. Remember, when building your hospitality business the customer is central to the experience and your decisions. The key to maximizing profitability is to bring in additional income streams and engage with your clientele.
Ask them what they would like to do, offer them alternatives and listen to what they have to say. As we touched on above, you should constantly analyze your data and feedback. There may be other complementary businesses you can recommend, perhaps a retail outlet or a tour company. Put yourself in the mind of your clientele, they are escaping everyday life, what would you like to do?
Keep the dream but be flexible
The vast majority of successful businesses today will have changed direction on numerous occasions. They may have started out as a totally different business and developed into a huge operation. While focus is the key to any business success, you need to add a drop of flexibility and an ability to change your roadmap. You can still live the dream, enjoy the challenge and progress your business, but sometimes the dream changes.
Summary
The key to any successful vacation rental/hospitality business in 2020 will be innovation and personalization. Take back control of your marketing, cut out expensive third parties and re-engage with your customers again. In the aftermath of the coronavirus pandemic we know that staycations are becoming more popular. Personal experiences, cultural adventures and the opportunity to showcase your area and the many attractions it holds. Utilizing the latest technology to streamline your backend, while maintaining the impression of a personalized client facing the front end, is not always easy. Master this and you will have dug some very solid foundations for your business.
About Carson Derrow
