Chapter 01

Build your short-term rental business

An introduction to building your short-term rental business

The rise of online booking platforms like Airbnb and Vrbo has made it possible for anyone with an Internet connection and a spare room to become a real estate investor.

With the total consumer market for short-term rentals estimated at above $100 billion, more property owners are recognizing that they already have the keys (literally) to a highly lucrative business opportunity. 

Although COVID-19 and accompanying travel restrictions put a strain on the market, the short-term rental industry is already on the rebound and experts predict the industry to grow at an annual rate of at least 7 percent.

Short-term rentals will continue to be a profitable venture — whether you’re listing a single room in your home or you own several vacation properties, you can turn square footage into cash — but it’s not without risk.

Being a short-term rental host will never be truly “passive” income — providing a great guest experience will always require some effort — but this guide is designed to empower independent property managers.

Independent property managers operate 70 percent of the world’s short-term rental inventory, yet all the resources, guides, investment capital and software solutions currently available are designed for the world’s largest professional property managers.

At Futurestay, we see you and respect you as a property manager, and we’re here to help you navigate the challenges of vacation rentals — from comparing the fees on different platforms to learning how to respond to that nasty review from a spiteful guest. 

We’ve created this roadmap to help you build a successful short-term rental venture, no matter where you are on your journey. Whether you’re just kicking the tires on listing a property or you’re looking to boost revenue from your existing properties, you’ll find an entire set of tools to help you run your business.

Happy hosting!

What is vacation property management?

The concept of vacation rentals is not new, but the booking experience — for guests and hosts alike — has changed drastically in the past decade. Renting a private property offers an attractive alternative to traditional hotel accommodations with more amenities, more privacy and more flexibility. 

Until the past decade or so, travelers relied on rental companies and real estate agents to find the perfect getaway. Reserving a private home was once a process cloaked in secrecy, which made the accommodations more expensive for guests and added a barrier to entry for property owners.

The internet and online booking platforms have changed the way people vacation while also allowing more property owners to get in on the property rental and management business. 

Today, more than 600,000 Americans rent out their homes or private properties to short-term guests. But what does it mean to be a property manager in 2021? 

Short-term rental management, also known as vacation property management, is the business of renting property to guests for a short period of time. While many real estate investors started with long-term rentals, leasing their homes and apartments to tenants for a year or more, short-term stays have been shown to offer a higher return-on-investment when managed well. 

The definition of “property” is loose: It includes the traditional houses, apartments and condos, but also unique spaces like treehouses, RVs, yurts and shipping containers. 

Short-term rentals come fully furnished and can be booked for a few days or weeks. They often offer amenities that make guests feel at home, including lounge areas, a kitchen and separate sleeping quarters.

Hosts are expected to fill the traditional property management role of maintaining the house, finding tenants and following all legal requirements while also offering the concierge and hospitality services of hotels. 

Management methods: DIY, companies and softwares

Although listing platforms including Airbnb, Vrbo, Google Vacation Rentals and booking.com make it easier to manage a short-term rental, the job is still time-consuming and sometimes requires hosts to navigate complicated legal and financial requirements.

Many property owners approach the short-term rental business as a side hustle, keeping their full-time job while renting out their property for extra income. However, many soon become overwhelmed by the work involved in short-term rental management. Renting a property is more than posting a few pictures online and then watching the money deposit in your bank account: Managers must market the property to potential guests, juggle reservations, respond to emergencies and ensure the property is clean and maintained between guests.

There are three common approaches that short-term rental owners take in managing their property: Do everything themselves, hire a company to manage the property or use a management software.

Self-managed properties

When property owners rent their space for the first time, most begin with the self-managed approach. It allows new hosts to test the short-term rental business without investing in a professional property manager or paying service fees.

Many experienced hosts will recommend all short-term rental owners start by self-managing their property, even if they plan to eventually pass the reins to a dedicated management company. Only by handling every aspect of the rental journey will a property owner truly understand the costs and responsibilities involved in management.

Fees associated with self-management: Self-managed properties can maximize profits, as the only fees come from the booking platform commission. (Note: This does not take into account the other costs of short-term rentals, like insurance and taxes — more on that later!)

Self-management is a good option for short-term rental hosts who:

  • Are just starting out in the rental business
  • Only offer a single property for rent
  • Live near the rental property
  • Have a flexible schedule to communicate with guests and respond to any problems that come up

Property management companies

You provide the property, and they’ll do the rest: That’s the pitch that property management companies use to add rentals to their portfolio.

Property management companies offer a done-for-you approach to short-term rentals and take care of marketing the rental, collecting payments, handling maintenance and repair issues and answering to guest complaints and damages.

Working with a property management company will save hosts time and hassle, but it won’t save any money. Property management companies typically charge a percentage of the total value of bookings for their services.

Before signing an agreement with a property management company, try finding recommendations from other local hosts or rental associations and browse online reviews. Interview each company to ensure their business values are in line with your own.

Fees associated with property management companies: Although the costs can vary widely based on the location of the rental and the maintenance required, property management fees start at around 25 percent of the value of bookings but can be as much as 50 percent.

Property management companies are a good option for short-term rental hosts who:

  • Are not interested in learning about hands-on property management
  • Can afford the fees
  • Own several properties or units
  • Don't live near the property

Property management softwares

Online services have been created to fill a gap in the short-term rental market: Small and independent property managers may not want to completely give up management of their property, but they also can’t keep up with the ongoing demands of short-term rentals.

Services like Futurestay OS help property owners build, grow and optimize their rental business through connectivity and automation.

Some softwares focus solely on helping list properties on multiple platforms, while others (including Futurestay) offer an end-to-end rental management solution that seamlessly handles payments, bookings and guest communications. 

Fees associated with property management softwares: Some platforms charge a monthly fee while others collect a percentage of booking revenue in the range of 5-10 percent — still cheaper than a property management company. 

Property management softwares are good for short-term rental hosts who:

  • Like managing properties, but just need a bit of help organizing the tasks
  • Are interested in growing their rental business in a sustainable way
  • Depend on organized communications and calendars for efficiency
  • Want to focus time and energy on providing a top-notch guest experience

What to know before you can start renting

Whether you already have the keys to a great short-term rental or you’re considering investing in a property, it’s wise to take it slow in the beginning to set yourself up for success. Before you even consider creating an account with an online reservation system, make sure you understand the local rental market, the regulations that apply to rental properties and the costs associated with short-term rentals.

1. Check local regulations and ordinances

Before investing in a short-term rental property or preparing to list one you already own, it is essential to understand the local laws surrounding rentals. There may be several levels of compliance you need to navigate, from state taxes to homeowner association rules.

Most short-term rental regulations happen on the city government level and can often be found on an official government website. Look for information for business owners, as well as local zoning, building and tax codes.

Items you will want to pay attention to include:

Business licenses and permits

Many cities require business owners to apply for a license and/or permit before they begin operating. The requirements may depend on how much income you expect to bring in from your short-term rental, or how many nights per year your rental will be occupied.

Zoning requirements

Zoning ordinances are a common way cities and towns regular short-term rentals. These regulations can limit where a property is located, what type of properties are allowed, how many guests can stay in the property and how many cars can be parked nearby — and that’s just getting started. A Google search of “zoning” and your city’s name will likely take you to the appropriate zoning ordinances, but double check that the source is trustworthy.

Taxes

Occupancy taxes (sometimes called a lodging, tourist or hotel tax), are assessed by local governments to ensure visitors to the area help share the costs of public infrastructure. The taxes are common at the state level, but can also be charged by regional, county or city governments. Although the tax is designed to be paid by the guest, it is the responsibility of the host to collect the money and submit it to the government. Many online booking platforms handle occupancy taxes on behalf of hosts and guests, but hosts should always check with their local government to ensure all taxes are being assessed correctly.

Housing or rental agreements

When your property is part of a homeowners association or if you live in a condo, timeshare or apartment community, you may be subject to additional regulations on the community or neighborhood level. Start by reviewing any legal documents you were provided when you took possession of your property, which could include a declaration of covenants, conditions and restrictions for homeowners associations or a lease agreement for an apartment. It may be a good idea to take the extra step to reach out to the homeowners association or your landlord to let them know of your intentions, even if short-term rentals are not restricted.

Building codes

Your short-term rental should be a safe and clean environment for your guest — and that’s not just a suggestion. Many local governments have published guidelines on habitability, health and safety of residential properties. Some may require an inspection before you can host your first guest. Search for building codes on your city’s website or call the building department to verify local requirements.

The rules can be confusing and overwhelming, but they are important. The consequences for ignoring or violating local ordinances can range from small fees to a loss of your property — a gamble that is not worth taking for many property managers.

If you’re unclear about whether short-term rentals are allowed or what kind of steps you need to take to remain in compliance, pick up the phone and talk to someone at city hall. If the regulations in your jurisdiction seem complex or you feel the rules instituted by your homeowners association or condo board are particularly burdensome, consider finding a real estate attorney in your state that is familiar with short-term rental law.

2. Conduct a thorough market analysis

With the demand for short-term rentals continuing to grow, there is still plenty of room for more property owners to claim a piece of the pie. Still, that does not mean a short-term rental will automatically be successful. 

Before investing in a property, consider the demand for rentals in the larger geographic area. Are you looking for property in a city that is popular with tourists or one that attracts a large number of business travelers? That’s a good start, but you will also want to determine if the visitor traffic is seasonal or year-round. Seasonal markets are great for property owners who want to take some time off from management, but vacant properties don’t bring in income.

Next, dive into the short-term rental market on a deeper level. An easy (and entertaining) way to approach this task is to spend time browsing other listings in the neighborhood you’re considering. Look at the pricing (taking into account the associated fees) compared to the size and quality of the properties available. You can also get a sense of demand by looking at the number of recent reviews or clicking through availability calendars on sites like Airbnb and Vrbo (although keep in mind that a calendar may appear fully booked but the property was never listed for those dates).

For those looking for more intelligent insights or additional data, there are several short-term rental data providers that specialize in tracking property demand and pricing in order to help property owners stay competitive. 

3. Secure a short-term rental property

With the demand for short-term rentals continuing to grow, there is still plenty of room for more property owners to claim a piece of the pie. Still, that does not mean a short-term rental will automatically be successful. 

Before investing in a property, consider the demand for rentals in the larger geographic area. Are you looking for property in a city that is popular with tourists or one that attracts a large number of business travelers? That’s a good start, but you will also want to determine if the visitor traffic is seasonal or year-round. Seasonal markets are great for property owners who want to take some time off from management, but vacant properties don’t bring in income.

Next, dive into the short-term rental market on a deeper level. An easy (and entertaining) way to approach this task is to spend time browsing other listings in the neighborhood you’re considering. Look at the pricing (taking into account the associated fees) compared to the size and quality of the properties available. You can also get a sense of demand by looking at the number of recent reviews or clicking through availability calendars on sites like Airbnb and Vrbo (although keep in mind that a calendar may appear fully booked but the property was never listed for those dates).

For those looking for more intelligent insights or additional data, there are several short-term rental data providers that specialize in tracking property demand and pricing in order to help property owners stay competitive. 

4. Understand the expenses

Short-term rentals can bring in significant revenue, but managers must spend money to make money. Before you consider listing and setting your prices, create a thorough budget that outlines all the expenses you expect (and adds some buffer for the unexpected). 

The cost of the property itself — whether you already own it or plan on purchasing a place to use as a short-term rental) — is just the beginning.

A few other costs to be aware of include:

Platform service fees

Host fees can range from 3 percent on Airbnb to 15 percent on booking.com, but it’s not an apple-to-apple comparison (we’ll dig deeper into individual platforms at a later point in this roadmap). Unless you are able to list your property on your own platform — which is becoming easier for property owners with tools from services like Futurestay — service fees are expenses that cannot be avoided.

Property management

As discussed earlier, property management fees can cut into your revenue but may be a worthwhile investment if you’re looking for more passive income.

Furnishing

More short-term rental guests are seeking a unique aesthetic when they search for a property, so it’s important to put thought and care into the furniture and decor. It is best to avoid cutting corners to save money when it comes to furniture — not only will guests appreciate the quality, but cheap pieces will need to be replaced far sooner. (If you are on a tighter budget, you can find bargains at estate sales or secondhand shops.)

Furnishing is one area where many new hosts go over budget, as they plan for the big ticket items like beds and dining room tables but forget to account for the details like shower curtains and lamps.

Guest supplies & toiletries

Short-term rental guests expect to find linens, pillows, towels, toilet paper and other essentials when they arrive. In fact, failing to provide these items is one of the fastest ways to earn a negative review on online booking platforms. If you plan on quick turnovers of your property, you will need a few sets of each so they can be quickly swapped before the new guests check-in.

Ask yourself what level of hospitality you want to provide your guests, and work items into your budget that will win them over. Popular perks that are often mentioned in reviews include coffee pods, bath robes, extra toiletries, a basket of local food and recreational equipment like bikes or kayaks.

A welcome note with a small gift, like a bottle of wine, is usually an appreciated gesture.

Utilities

You may be great at conserving energy, but that does not mean your guests will turn lights off when they leave the room or keep the A/C at an efficient setting. Be generous when budgeting for utilities and consider it a bonus when bills are lower than expected.

Insurance

Spend some time in short-term rental Facebook groups or Google “vacation rental horror stories,” and you’ll likely be ready to purchase the most comprehensive insurance policy you can find to protect yourself and your short-term rental.

It is always best to look into insurance policies before you need to use them. Unfortunately, many new short-term rental hosts assume they are already protected by their homeowners insurance policy or through the online booking platform where the reservation was made — and they’re forced to learn the truth the hard way.

Homeowners insurance rarely covers short-term rental activity, as it is considered a commercial use of the property, and neglecting to disclose your activities can void the policy.

Some online booking platforms automatically provide liability coverage, but property owners should read the terms carefully to decide whether they are comfortable with the policy.. Airbnb and Vrbo both offer $1 million in liability coverage to hosts, which would protect property owners in the case that someone was injured during their stay. Airbnb also offers a “Host Guarantee” which says the company will compensate hosts for any damage caused by guests up to $1 million. However, many hosts have had claims rejected as they could not prove the damage was caused by a particular guest.

Short-term rental insurance is available to fill the gaps between homeowners insurance and the coverage provided by online booking platforms. Adding a short-term rental rider or purchasing an additional policy can run property owners anywhere from a few hundred dollars a year to several thousand dollars, depending on the type of property, location and coverage limits. Rates can increase quickly if there is a pool on the property or if recreational items like golf carts or canoes are offered, but failing to disclose those details can be a costly mistake.

Property owners can request insurance quotes online or contact a local insurance agent to learn about policy options.

In addition to purchasing insurance, hosts can take additional precautions to protect their properties like charging a damage deposit or screening guests before accepting a reservation.

Cleaning

Do you have the time, energy and attention-to-detail required to make your rental shine between guests? For most hosts, the answer is no — and that’s why an entire industry has emerged for short-term rental cleaning services.

Cleaning a short-term rental requires far more than mopping the floor and wiping down the counters. Cleaners are also asked to do laundry, make sure the home is staged properly and restock essentials like toilet paper.

Many guests are accustomed to paying for a cleaning fee when they book a short-term rental, but calculating your costs and setting a price will take some time. Average cleaning fees on Airbnb range from $65 for small spaces to upwards of $200 for large homes with more than six bedrooms.

Start by requesting quotes from cleaning services in your area and decide whether you will mark-up the cleaning fee to account for the time spent booking and managing the service.

Maintenance and repairs

Unfortunately, plumbing emergencies and broken furniture is the cost of doing business in real estate. Between emergency repairs and maintenance on appliances and plumbing or electrical systems, landscaping, pest control, painting touch-ups, and property repair, the costs can sneak up on new hosts. 

Maintenance is hard to accurately estimate, but it is essential to be prepared for unexpected costs. There are a few loose formulas that some short-term rental managers use to estimate their costs. Some calculate by square footage, estimating $1 per square foot for yearly maintenance costs. Others base it on their monthly rental rate, estimating maintenance costs will average 1.5 times the monthly rate. 

Although some online booking platforms offer damage protection, and additional insurance might cover other repairs or emergencies, it’s risky to rely on those pay-outs. It’s often difficult to prove that a particular guest put the scratches on your dining room table or broke the refrigerator, as normal wear-and-tear could also be the cause. (A broken window or a hole in the wall are more likely to be covered, but photo documentation between guests is important.)

Taxes

While the occupancy taxes discussed earlier are meant to be paid by short-term rental guests, property owners are still responsible for their share of taxes. Hosts will owe income tax on any revenue from their short-term rental, but the way the tax is assessed depends on the number of nights the property is used and the level of service provided, among other factors.

If you rent out your property for no more than 14 nights per year and stay there yourself for at least 14 nights, the income does not need to be reported to the IRS — however, if you’re reading this roadmap, you are probably hoping for more than two weeks of rental income.

Short-term rental income is generally considered “passive rental income” and the amount you’ll pay is dependent on your tax bracket. However, if you are found to be providing “substantial services” to your guests, you may be subject to self-employment tax, which is an additional 15.3 percent in taxes that is best avoided. Substantial services would be similar to providing a “bed and breakfast” experience, where you are providing breakfast to your guests each morning or changing their linens daily. As typical rental operations like cleaning between guests or providing essential toiletries do not count as “substantial” in the eyes of the IRS, most short-term rental owners are not subject to self-employment tax.

A meeting with a tax professional can help new hosts avoid tax penalties or unwanted letters from the IRS.

Vacancies

Ambitious short-term rental hosts often create a budget based on a full booking calendar, but it is wise to account for vacancies. Even if your property is not being used, you’ll still be incurring some costs as the owner.

5. Prepare to list your property

Now that you’re familiar with local laws, understand the costs associated with operating a short-term rental and have picked out a property, you’re ready to prepare for listing.

Listing is where the magic happens: With no listings, there will be no guests. Although online booking platforms have made it possible to list a short-term rental with just a few clicks of a button, your short-term rental will perform better if you take the time to map out a strategy and optimize your listing. 

What platforms will you use to list your property? How will you determine your nightly rate and cancellation policy? Is your short-term rental stocked with all the amenities that guests expect? 

The remainder of this roadmap will walk you through the journey of creating a listing that stands out from the competition, establishing your pricing strategy and providing a 5-star hospitality experience to your short-term rental guests.

Where to list vacation rental properties

Without the Internet, vacation rental owners would be forced to rely on classified listings in the local newspaper or traditional travel agencies to find potential guests. Not only do property owners now have the ability to reach millions of travelers with a single listing, but they also have choices when it comes to booking platforms.

Airbnb is the most recognized name in short-term rentals, but it’s not the only player. In fact, depending on the property you are listing and the type of guests you are hoping to attract, other platforms may be more effective for increasing revenue. 

Each of the most popular listing platforms (commonly referred to as online travel agencies or OTAs by the short-term rental community) comes with advantages and disadvantages. It can be overwhelming to decide which platform to start with, but we will walk you through the fees associated with the major OTAs as well as what sets each apart.

Airbnb

Airbnb was founded in 2008 after two broke roommates decided to rent out an air mattress in their San Francisco apartment when a design conference came to town. In addition to offering fellow designers a place to stay, Brain Chesky and Joe Gebbia were selling a travel experience complete with their insider knowledge of the city — and it was a hit.

That air mattress has revolutionized the short-term rental marketplace, with 5.6 million active listings in 100,000 cities and 220 countries. Since Airbnb was founded, 900 million guests have checked in at an Airbnb property and hosts have earned more than $110 billion for sharing their properties.

How to get started on Airbnb

The first step of listing a property on Airbnb is setting up a host account. You may be asked to verify your identity by providing information including your legal name, date of birth or government ID.

Once your account is verified, you can list your first property. Airbnb encourages hosts to make their listing both compelling and truthful. Start with the basics like location, type of property (is it a guest room in your home or a full vacation home?) and how many guests the rental can accommodate. Listings should highlight anything that makes the property unique, like a private pool or an incredible sunset view, as well as the quirks of the property that might be a dealbreaker for potential guests, like a particularly steep staircase or a lack of parking. Listings must also include photos of the space.

Next, hosts will be asked about the logistics of their property including house rules, availability calendar and nightly price. Airbnb offers a Smart Pricing tool for hosts that automatically adjusts the nightly rate based on demand, but guests can also set prices manually.

Listings may take up to 72 hours to appear in search results, but most will be available much sooner. 

Advantages of listing on Airbnb

Homesharing allowed

Airbnb is one of the only major booking platforms that allows hosts to list a single room in their home rather than an entire property. Although host-occupied rentals are less popular than renting an entire apartment, home or guest suite, the ability to rent out a guest room keeps Airbnb true to its roots. Homesharing empowers even more property owners to earn income through short-term rentals.

Guest screening

As long as a guest provides a first name, last name and date of birth, Airbnb runs a background check against public criminal records and sex offender registries. However, the background checks have limitations and do not guarantee a guest will not break laws in the future. Airbnb offers safety resources for hosts to protect themselves and their property.

Challenges of listing on Airbnb

Unruly guests and damages

Airbnb is growing in popularity among older generations, but the platform is still most popular with Millenials and Gen-Zers. Although the majority of guests are respectful, hosts have found that the guests who attempt to throw parties or damage property are most likely to have booked through Airbnb. The platform does offer a Host Guarantee that provides up to $1 million in property damage protection, but claims are not always approved.

Cleaning expectations

All experienced hosts have felt the dread of walking through the door of their short-term rental after a difficult guest checks out, not knowing what condition the property was left in. Sometimes the mess is mild: A few dirty dishes left on the counter or wet towels draped over the back of a chair. Other times, a bigger task awaits the cleaning crew. It’s true that cleaning fees, which are charged by most Airbnb hosts, should cover the basic cleaning necessary to prepare a property for the next guests, like taking out the trash and washing linens. However, some guests view the cleaning fee as permission to leave the rental a disaster. Although other platforms also allow a cleaning fee to be charged, hosts do not report the same problems regarding messy guests when a booking comes through a site like Vrbo.

Costs

Airbnb deducts a service fee from every booking to keep the platform running smoothly.

Most short-term rentals are charged a service fee using a split-fee structure, in which the host and the guest both pay a portion of the Airbnb service fee. In this case, hosts pay a service fee that equals 3 percent of the booking subtotal (nightly rate plus cleaning fee and additional guest fee, but excluding Airbnb fees and taxes), while guests pay no more than 14.2 percent of the booking subtotal. Guests are charged the service fee at checkout, and the host fee is deducted from the final payout.

Some properties (including hotels) are subject to a host-only fee that is 14-16 percent of the booking subtotal. The fee is deducted from the host payout, and no service fee is charged to the guest.

Optimization techniques

The order in which Airbnb listings are displayed is determined by an advanced algorithm that is designed to help guests find the best rental for their trip. More than 100 different factors are considered in the rankings, but there are a few significant ways hosts can help (or hurt) their listing.

Reviews

Good reviews are essential to performing well in searches, but a small number of negative or missing reviews won’t substantially hurt a listing.

Price

Airbnb guests care about pricing, so properties with competitive pricing will be displayed higher in search results. This doesn’t mean you need to be the cheapest rental in the area, but that your prices should be comparable with other listings with similar size, quality and amenities.

Details

Guests want to be able to make informed decisions when booking a rental, so they value listings with detailed descriptions and a good variety of high-quality photos. Accuracy is key here, too: If guests feel the listing is misleading, they are likely to leave negative reviews that will hurt your ranking.

Instant Book

Listings that can be booked instantly, rather than those that are subject to confirmation from a host, appear higher in search rankings as guests value a quick booking experience.

Cancellations and Rejections

When hosts reject booking requests or cancel bookings too often, their listing will be penalized.

Response Time

When hosts respond quickly to questions about their property, the listing is more likely to appear higher in search results.

Vrbo

When advertisements in the back of a ski magazine weren’t bringing enough guests to a Breckenridge ski rental, the owners revolutionized the vacation rental industry. In 1995, David Clouse built a simple website in an attempt to find more renters for his condo. When word spread of the site, named VRBO.com for “Vacation Rental By Owner,” other property owners lined up for their chance to reach renters via the web.

A platform that allowed property owners to connect directly with families looking for a vacation property was a relatively new concept at the time, but the idea was so popular that it has grown into one of the most popular rental platforms in the world with more than 2 million listings available in 190 countries. 

While Vrbo started as a membership model in which homeowners paid a fee to be a part of the network, the platform now offers a pay-per-booking model that encourages more property owners to list on the site.

How to get started on Vrbo

Listing a property on Vrbo is a straightforward process as long as you have the necessary information (including bank account information for payments and plenty of photos) available. The platform allows new hosts to create an account and list their first property simultaneously, providing prompts along the way that help create a detailed description.

You’ll start with the basics, like the number of bedrooms and bathrooms available and the address of the property, and move into the more detailed information like pricing, damage deposits and house rules. 

Because guests can be hesitant to book a brand new listing with no reviews, Vrbo encourages hosts to offer a new listing discount for their first three bookings. No commission will be charged on the discounted listing, and the property will be pinned prominently on the first page of search results. Listings that offered the discount were 30 percent more likely to receive a booking in the first 30 days. 

Advantages of listing on Vrbo

Responsible guests

Although anyone is invited to book a rental on Vrbo, it’s no secret that the platform’s target audience is families. Families currently represent 42 percent of Vrbo travelers, with the company actively trying to grow that segment through advertising campaigns. Hosts who have listed on multiple platforms report that guests from Vrbo tend to be more responsible and more likely to read and respect published house rules.

Higher value bookings

The average booking value on Vrbo is higher than most other short-term rental platforms at $1,505 in 2020 compared to $941 on Airbnb and $695 on Booking.com. The average booking value is driven up by the length of stay, which tends to be higher on Vrbo than other platforms, as well as the willingness of guests to pay more for nicer properties.

Challenges of listing on Vrbo

Higher fees

Considering Vrbo guests are still required to pay their own share of fees, the costs to list on Vrbo are considered steep by many hosts. Hosts typically pay 8 percent in fees on every booking (a 5 percent commission to Vrbo and a 3 percent credit card processing fee), but the commission costs can be minimized by joining the annual subscription program.

Property limitations

Property owners hoping to make some extra cash by renting out their guest room should find a different platform. Because Vrbo focuses on offering private experiences for families, shared spaces are not permitted. While entire homes are the most common type of property found on Vrbo, unique accommodations including yachts, castles and barns can also be booked.

Costs

Short-term rental hosts must pay Vrbo a commission to list their property on the platform, but they can choose between an annual subscription model or a pay-per-booking fee.

Hosts can pay 5 percent in service fees per booking or they can choose to pay an annual $499 service fee. Both fee structures are also subject to a 3 percent credit card processing fee for online payments. If you expect more than $10,000 in bookings on Vrbo in a single year, the annual subscription model is the better choice. 

Vrbo guests are also charged a service fee that ranges from 6 percent to 15 percent of the subtotal.

Optimization techniques

To ensure the online booking process is simple, secure and consistent, Vrbo has published best practices called Marketplace Standards. Listings that meet or exceed these standards benefit from improved listing visibility. 

The Vrbo Marketplace Standards require property owners to:

Process all bookings through the Vrbo platform

Any attempts to direct travelers to visit another URL (like a direct booking website) or reach out via email or phone are not permitted. Vrbo sees external links as a way for hosts to avoid paying commission on bookings.

Accept most booking requests

Guests become frustrated when they submit a reservation request and complete the check-out process only to learn the property isn’t available after all. Owners are given the option to reject bookings for a reason — maybe the host feels uncomfortable with the information provided about the guest or the dates were just reserved through another platform — but turning down too many requests will hurt the listing rank.

Accomodate travelers with service animals

Property owners are given the freedom to set their own pet policies, but all properties in the U.S. are required to accommodate travelers who require the use of a service animal.

Avoid cancellations

Vrbo understands that emergencies happen and cancellations are unavoidable, but they also result in a disappointing experience for travelers. If a host regularly cancels reservations, their listings will be penalized in the rankings.

List all properties

Vrbo does not permit hosts to use a single listing to drive bookings for multiple unlisted properties.

The accuracy and quality of a listing, including the description and photos, as well as guest reviews, also factors into search rankings.

Booking.com

Booking.com started in 1996 as bookings.nl, a small website created to give Amsterdam tourists the opportunity to book a hotel online. Through many mergers and acquisitions, the site has transformed into the world’s largest platform for hotel bookings around the world. While Booking.com originally catered to the traditional hotel, the platform has since added short-term rentals and now includes more than 6.2 million homes, apartments and other unique accommodations in its listings.

How to get started on Booking.com

Hosts can list apartments, houses, hotels and alternative accommodations like campers on Booking.com. It’s free to publish a listing (hosts only pay commission on completed stays), but you’ll need to create an account on the Booking.com Extranet to begin.

Once you confirm your email address for your Booking.com account, you can outline the details of your listing including pricing, availability, photos and a detailed description of the property. 

New listings must be verified by Booking.com before they go live, so don’t expect instant reservations. Once the property is confirmed (other hosts report the process can take anywhere from a few days to weeks), hosts can instantly update photos, pricing and other property information. Because Booking.com does not provide property damage insurance, hosts should choose if they want to charge a damage deposit and make the terms clear in their listing.

Advantages of listing on Booking.com

Reach a large audience

Because Booking.com is popular with boutique hotels and major chains alike, the platform allows short-term rental hosts to reach guests who may not otherwise consider reserving a private home or apartment. The site also offers flight and ground transportation rentals, which attracts travelers who want the experience of a full-service travel agency.

Control search ranking

Appearing higher in search results on Booking.com is as easy as increasing the amount of commission you’re willing to pay on a reservation. Hosts can use this tool to easily adapt to supply and demand, as it is often better to pay more in fees than make no revenue at all during a slow season.

Challenges of listing on Booking.com

Automatic reservations

When a guest requests a reservation via Booking.com, the platform automatically accepts without allowing hosts the chance to screen the user. Booking.com does require guests to provide a valid email address and credit card info, and bans users with a track record of negative reviews. Additionally, hosts are encouraged to communicate with guests ahead of the stay to establish house rules and learn more about the nature of the stay.

Payment processing

Booking.com does not automatically collect payments on behalf of hosts, so that means it is your responsibility to ensure credit card payments are processed or collect payments via cash or bank transfer from guests. The platform introduced Payments by Booking.com, a service in which the platform facilitates all guest payments and issues a payout, but the service is not available for all properties at this time and is also subject to a fee in the ballpark of 2 percent.

Costs

Booking.com hosts are required to pay a commission of at least 15 percent on the value of completed bookings, although hosts can choose to pay higher fees in exchange for more visibility for their listings.

While most other platforms automatically deduct the commission from the host payout, Booking.com issues an invoice for fees owed so that hosts can verify that the commission is being charged correctly in the case of no-shows or discounts.

Guests are not asked to pay a service fee on Booking.com.

Optimization techniques

Booking.com assigns each property on the site a performance score, which determines the order in which properties are displayed to potential guests. By keeping an eye on the six key performance indicators tracked by Booking.com (and improving them where possible), hosts can help their listings appear higher in search results.

Metrics that factor into a property’s performance score are:

Conversion rate

The percentage of guests who book a property after viewing the listing.

Average daily rate

The average revenue per room.

Cancellation rate

The percentage of bookings that have been canceled in the past.

Property page score

An assessment of a listing’s value to guests which considers images, descriptions, amenities and more.

Price quality score

A comparison of the listing’s price on Booking.com versus other listing sites.

Review score

The average review from previous guests.

Booking.com also offers several programs and tools that allow hosts to reach more people with their listings.

The Genius Program

The Genius Program is a marketing opportunity that allows qualified hosts to target high-value guests by offering a discount on their nightly rate. Hosts must offer a minimum 10 percent discount to Genius members (Booking.com guests who travel often and earn good reviews), but are encouraged to offer up to 20 percent off. In exchange for the discount, the listings are highlighted with a special badge and given a ranking boost that moves the listing to the top of results.

According to the platform, hosts that join the Genius Program increase bookings by 29 percent.

To be eligible for the Genius Program, a property must have at least three guest reviews and the average score must be at least 7.5 (although exceptions are made if the average scores of other properties in the area are lower).

The Preferred Partner Program

Listings with performance scores in the top 30 percent are eligible for the Booking.com Preferred Partner Program, which earns greater visibility in search results and a special thumbs-up icon that serves as a Booking.com seal of approval.

Listings that are part of the Preferred Partner Program are subject to a higher commission rate, but hosts can opt-out of the network.

Listings receive 65 percent more page views and 40 percent more bookings when they are part of the Preferred Partner Program.

The Visibility Booster

The Booking.com Visibility Booster allows hosts to pay a higher commission on bookings in order to make their properties appear higher in search results. With the Visibility Booster, you can select certain check-in dates to boost and target travelers from certain countries.

Google Vacation Rentals

Google Vacation Rentals is one of the newest players in the short-term rental game, and it has created some serious buzz among property owners.

Vacation rentals started appearing in travel search results a few years ago, but Google Vacation Rentals now makes it easier for travelers to browse short-term rentals and hotels without leaving the search engine.

When a user searches for a phrase like “places to stay near Miami,” a list of available properties as well as a map and availability calendar will appear. Users can then narrow down properties like they would on a traditional OTA by selecting a date range, budget and specific location.

As many travelers begin their vacation planning by researching destinations online, Google Vacation Rentals allows short-term rental owners to reach guests earlier in the process.

How to get started on Google Vacation Rentals

Because Google Vacation Rentals requires a complex integration in order to accurately display all the details of a short-term rental property in search results, from the general location of the property to the nightly rate, it is not possible to list individual rentals on Google.

Google Vacation Rentals will only consider a custom integration for property managers with more than 5,000 properties, so the only way for independent short-term rental hosts to have their listing displayed in the search engine is to work with an approved connectivity provider.

Futurestay is one of the only trusted short-term rental software solutions that allows small property managers the opportunity to be listed on Google Vacation Rentals.

Advantages of listing on Google Vacation Rentals

Increase visibility

About 40 percent of travelers said they begin their travel research on Google, even if they ultimately book through another platform. When your property is displayed in Google search results, you have the chance to reach the largest possible audience before users split off to different booking sites. 

Maintain control

Although Google displays your vacation rental among search results, the platform does not set any rules on how you run your short-term rental business. Unlike sites like Airbnb and Vrbo, Google will not tell you how you can communicate with your guests or how many booking requests you are able to reject before your listing is removed.

Challenges of listing on Google Vacation Rentals

Users redirected for booking

Google only serves as a search engine, not as a booking engine. Although guests can find your property through Google Vacation Rentals, they’ll need to visit your direct site to complete their reservation. Any time a user is redirected, there is a risk of losing the sale. However, Google Vacation Rentals can link directly to the reservation URL on your listing so guests can quickly complete the process.

Costs

Google does currently not charge a fee or commission for including your listing in search results. Depending on where the listing is hosted, short-term rental owners will still need to pay commissions or payment processing fees when a reservation is made.

Optimization techniques

Making a website appear higher in Google search results can require technical expertise and a lot of patience — search engine optimization is so valuable that an entire industry exists just to help businesses with the practice. Fortunately, short-term rental hosts do not need to worry much about the SEO and should instead focus on ensuring listings are detailed and up-to-date.

The smart search filters on Google Vacation Rentals will show listings to travelers depending on their criteria (including budget, desired dates and amenities), so it is essential to ensure your pricing is accurate, your calendar is synced and you have outlined all amenities offered at your short-term rental — from basics like toilet paper to perks like free WiFi and access to gym equipment.

Direct booking website

Considered the holy grail of the short-term rental industry, direct booking websites allow hosts to connect with their guests directly rather than through a third-party platform that charges fees for the service.

How to get started with a direct booking website

In order to make your website live on the Internet, you will need to choose a website hosting provider. Wix, SquareSpace and WordPress.com are three hosting and content management providers that make website management easy for small businesses. Although some of the hosts come with a free domain name for your website, it is worth the investment of about $12 annually to register your own domain (e.g. myshorttermrental.com).

When starting a direct booking website, there are three tools you’ll need:

Website host and domain

In order to make your website live on the Internet, you will need to choose a website hosting provider. Wix, SquareSpace and WordPress.com are three hosting and content management providers that make website management easy for small businesses. Although some of the hosts come with a free domain name for your website, it is worth the investment of about $12 annually to register your own domain (e.g. myshorttermrental.com).

Booking engine or plugin

Guests like to see rental availability in realtime and appreciate the ability to reserve dates online — in fact, they almost demand those features. You will need a booking engine or plug-in for your direct booking website that syncs your calendar and allows guests to reserve dates instantly. Futurestay offers an app on the Wix marketplace that makes managing direct bookings a breeze.

Payment processor

Although hosts can decide to only accept cash or check for their short-term rental, guests appreciate the ability to pay by credit card and online payments allow you to charge deposits and easily collect on balances owed. Stripe and PayPal are two of the most popular payment processing systems for small business owners. You’ll just need to create a merchant account and connect it with your website’s payment page.

Advantages of using a direct booking website

Commission-free bookings

It can be painful to look at payout reports and see a large chunk of your booking revenue deducted for various service fees, but that can be avoided with a direct booking website. You may not be receiving the exposure or other services offered by OTAs, but you also do not need to share your earnings. Without paying a commission to an OTA, hosts can increase revenue while keeping nightly rates competitive for their guests.

Complete control

With a direct booking website, you aren’t required to play by the rules set by online booking platforms. You can post any number of photos, screen guests before you accept their reservation, establish and enforce house rules as you see fit and handle cancelations and refunds on your own terms. While hosts are encouraged to post reviews on their direct booking websites to build trust, you won’t be threatened by disgruntled guests with negative reviews that cannot be removed or hidden, even if they are clearly misguided.

Establish a brand

When you list a property on a third-party site, your short-term rental will be grouped in with the rest of the properties that are displayed in the search result. Creating a direct booking website allows you to build a brand that visitors will remember. Guests are also more likely to trust vacation rentals that have their own website.

Challenges of using a direct booking website

Technical considerations

Although many hosts like the idea of direct booking websites, few follow through because they aren’t sure where to start. While creating a direct booking website requires more time than simply publishing a listing to existing websites, there are tools that make it easier for short-term rental owners. Futurestay guides users through the process of creating a free branded direct booking website.

Marketing

The biggest advantage of the major online booking platforms is the built-in marketing for every listing. With millions of travelers already browsing sites like Airbnb and Vrbo every day, hosts do not need to put much effort into finding potential guests. Direct booking websites require hosts to invest time (and sometimes money) into marketing efforts, but hosts report the work pays off quickly.

Host protections

Sites like Airbnb and Vrbo absorb some of the risk of short-term rentals, offering basic liability protection to hosts and helping to mediate in the case of a complaint. Hosts using a direct booking website can still protect themselves and their rental by purchasing an insurance policy designed for their specific needs.

Costs

The beauty of accepting reservations directly is the fact that guests and hosts do not pay any commissions or service fees. However, that does not mean there are no costs associated with direct booking websites. 

Hosts must consider the cost of establishing a direct booking website and the associated fees, including web hosting and domain name registration. A custom-built website can cost thousands of dollars, or hosts can create free branded sites through services like Futurestay.
Unless you are willing to handle cash or check payments, which can be difficult to track down from guests and time-consuming to reconcile, direct bookings are also subject to payment processing fees which are typically 2-3 percent. 

Although a 3 percent credit card processing fee seems equivalent to Airbnb’s host service fee, it is important to keep in mind that guests don’t pay a service fee for direct bookings. That means you can increase your nightly rates while still keeping costs down for yourself and your guests.

Optimization techniques

Although your direct booking website won’t receive the same exposure as a listing on one of the main OTAs, property managers can still put their listing in front of the right audience with a bit of strategy.

Ensuring your direct booking site is easy to navigate and optimized for viewing on all devices is important. A potential guest will quickly give up on your listing if they can’t find the reservation button or if the page is glitching on their mobile device.

Direct booking sites should also be optimized for search engines so people can find your site when searching Google. Identify the important keywords for your listing (which could be the city where your rental is located, popular nearby attractions or unique amenities), and be sure those terms are included throughout the text on the website. Travel guides are a perfect way to offer value to potential guests while boosting your search engine rankings.

Tourism bureaus and lifestyle publications in cities across the U.S. publish guides or directories to help visitors find places to stay, so property owners should look into what is available locally and request a link to their property be added. A small fee is sometimes charged to be listed in these resources.

Many hosts also use paid advertising to increase direct bookings, a strategy that can be more cost effective than paying fees to OTAs depending on the advertising budget. Google Display Network and Facebook are popular digital channels for advertising short-term rentals.

The easiest way to secure reservations for your short-term rental through a direct booking website is by reaching out to past guests, especially if you can offer a discount for being a loyal customer. This method requires forethought, as you must work to collect email addresses or other contact information from guests at your property.

Next Up: Grow

Let’s dig into the details of maintaining your short-term rental listing and review some of the tools on the market that can automate the process for owners.

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