Every year millions of people make New Year resolutions in a positive effort to impact their health, personal relationships or other facets of daily life. Many also create a set of personal goals to achieve in the new year. With so much time, attention and thought dedicated to personal improvement, we want to shift the focus this New Year to Business Improvement or Business Resolutions for 2016.
We encounter many vacation rental managers who operate their businesses in a lax hospitality state of mind, similar to that of a relaxed, family-run operation. This type operation is generally service-centered, and that may be the only attribute. While providing great service is always key to any successful vacation rental operation, a professional vacation rental management company must be centered on properties, people and process.
Access to third-party listing sites and the ease of setting up distribution channels has allowed numerous entrepreneurs the opportunity to establish vacation rental businesses. However, simply owning and operating a vacation rental business is a far cry from progressively managing a professional vacation rental business. In today’s ever-changing landscape, creating a consistent and meaningful profit for your business is more important than ever. It is also as challenging as ever. Sustainable profits and business operations require professional, prudent decision-making skills, grounded in fact based, data driven metrics and the application of strong financial management. The result is the dividing line between a vacation rental hobby and a progressive vacation rental business.
The following business resolutions are designed to impact profits while creating a professional business operation. As we travel the country working with vacation rental operations of all sizes, we discover that the specific categories found below represent the greatest opportunities for the average vacation rental manager.
Let’s get started.
We will begin with the center point of every vacation rental operation and discuss macro-business operations and strategy, all the while working toward the more granular aspects of the business.
Properties, People and Process – At Weatherby Consulting, we’re huge fans of Marcus Lemonis, star of The Profit, which airs on CNBC. Marcus’ mantra is People, Process and Product. We’ve applied his over-arching strategy to the vacation rental business and developed Properties, People and Process as the macro center point for a professional, progressive vacation rental business.
Does your operation accept any and all properties or only specific segments of the market in which you operate?
The most successful vacation rental companies we work with have a plan surrounding their property mix that leverages their operational structure and the market in which they operate. Having the right property mix ties directly into gross rental revenue and ensures that your business is not weighted in one specific area. It also protects your business from creating an inventory mix not suited to travelers seeking your destination.
Example: An excess of one particular property type such as a two-bedroom/two-bath condominium may work well if your market, like the Gulf Coast, is primarily condominiums, and if the average guest demographic presents a strong demand for condominiums. However, if you’re operating along the coast of the Outer Banks, condominiums are not as attractive to vacationers in that destination. Continual review of properties in your rental management program, or those desiring to join your program, focused on profitability and ease of management will ensure that your company has a balanced portfolio and is not overly weighted in inventory that does not generate a reasonable return.
For too long vacation rental managers believed the number of properties correlated with increased profits. Even today, number of properties remains a primary benchmark in the industry. More often however, it’s not so much the number of properties, rather the right mix of properties, that drives increased profits.
In today’s vacation landscape travelers are more discerning; their expectations are higher. Owners unwilling to properly maintain and upgrade their rental properties become a liability to your business and decrease the return necessary to operate a professional business model. Does your operation have proactive ways of keeping owners engaged in the proper care and upgrades necessary to continually and consistently deliver on the expectations of the guest?
Jim Collins, author of Good to Great, preaches the procurement of the right people for any organization. The vacation rental business is no different. Having intelligent, service-oriented personnel is a must in any vacation rental business. Clearly communicating the company’s goals and objectives is imperative in leading a successful operation and getting not only the most, but the best, out of your personnel. The goals and objectives of your personnel are best managed when clear, measurable results are identified for all parties involved. If you can’t measure it, you can’t manage it! Providing your team clear direction will help ensure that each individual is pulling in the same direction and operating as effectively as possible.
This is where we get a bit granular. Assuming your vacation rental business has good inventory with a clear plan to maintain and grow your properties, and your business has the personnel capable of success, then the devil is indeed in the details. Or in our case, the Process. In any vacation rental business we can draw distinctions between processes relative to Accounting, Operations and Marketing, but to manage a professional vacation rental business progressively, you must leverage the results in each area for combined decision-making and solutions that benefit the overall business.
Financially managing your vacation rental business with sound, generally accepted accounting principles is as critical to the evaluation of everyday operations as marketing initiatives are to the generation of gross revenues.
Does your vacation rental business produce a monthly financial package that succinctly ties revenues and expenses to items such as budgets, bank accounts, trust accounts and cash flows? If so, is the financial package properly reviewed to assist in making short-term and long-term decisions necessary to maximize profits? If the answer to either question is no, you have your first business resolution of 2016.
Operationally, a progressively-managed, professional vacation rental business sets itself apart from others by utilizing work flows, systematic forms and quality rules that create successful and consistent guest and owner experiences through accountability. In addition, having a clearly defined organizational structure as an operational process creates efficiencies in leadership. Setting the proper expectations for personnel and having the processes in place to track results and establish accountability creates an environment in which the employee knows specifically what is expected and has the tools to properly execute his responsibilities.
Examples of these processes include: Inspection forms for inventory, routine maintenance checks with detailed results for owners, proper evaluation of housekeeping fees versus expenses and revenue-orientated goals for reservations employees. Operational work flows and tracking mechanisms can leverage an ever-increasing array of software solutions or may simply require a proven and streamlined checklist.
Understanding the profitability of certain tasks or departments often requires a simple evaluation applying proven formulas utilized throughout the industry. As your second business resolution, make 2016 the year you review, initiate and/or improve your operational work flows and the systematic forms behind each process and evaluate each process for profitability.
Of course, no conversation on progressively managing a vacation rental business is complete without a look at revenue generation and the marketing behind it. As we mentioned earlier, with the wide variety of electronic channels available, almost anyone can “grab” a few units and set up points of distribution. But is this really effective marketing? For most, participating in distribution channels is not an option but a critical part of overall revenue generation. We certainly understand this, but is your business leveraging your tools and processes to determine the best return on your investment? Could marketing dollars be shifted from one initiative to another to increase revenue without increasing expense? Understanding how to evaluate performance of marketing initiatives and implementing the processes to routinely do so, drives top-line revenue while minding the associated expenses.
In addition to distribution channels, how strong is your ability to market directly to your target guests and owners? Having a website that is completely compatible and responsive — one with mobile platforms that provide full online booking capabilities — is critical in today’s technology driven landscape. A cutting edge web presence can also provide some of the most effective marketing initiatives at the lowest price points. For example, a website with excellent content and search engine optimization drives substantial traffic volume directly to your business at minimal cost. Routine email marketing and/or triggered email messaging, to both former and prospective guests, provides a cost effective way to reach a targeted audience.
As with any other process discussed, applying the same structured evaluation and tracking procedures to marketing efforts will create a clear picture of your business’s return on investment and how that contributes to overall profitability. Your third business resolution for 2016? Evaluate your marketing platforms, such as websites, and ensure you have the processes in place to properly track the performance of specific marketing initiatives.
2016 is a New Year
In addition to the typical goals associated with self-improvement, we hope we have inspired you to consider goals and resolutions for your vacation rental business. Carry the mantra of Properties, People and Process into the new year with the intent of leveraging all three aspects to enhance your vacation rental business and increase your profits.
Ben Edwards, Weatherby Consulting provides transaction advisory, consulting and asset management services with proven success in creating opportunities and solutions in the vacation rental industry. They deliver high-impact results, provide partner-level attention and implement tailored solutions to address each of their client’s unique goals and objectives.