Arguably, the most beneficial contributions come from the preparatory work required to create a business and a management plan for your vacation rental long before the deposit is posted or the keys are received.
Creating a workable business plan will help you identify risks before you even invest, which will also help you determine your business's chances of success.
In this free guide, we look at a business plan, some examples and templates to use, and the 12 main elements your vacation rental business plan must include for your private accommodation business to be successful.
1. Vacation rental: the summary
For people outside of Fortune 500 companies, writing an "executive summary" can be a bit daunting. However, it is much simpler than you think!
When you go to a bookstore looking for a new fiction novel or a well-known classic, you'll usually pick up the book and read the text on the back to get a quick and complete idea of its contents. This is exactly what a summary is.
These are just a few short sentences that summarize your vacation rental business and include all the most important information you want to convey to your guests and others. This is so everyone can read the front page of your plan and know at a glance what your business entails. Of course, it might be easier, to begin with, the famous QQOQCP questions: What? Who? When? Where? Why? Where? When? How? Why? It will help you know what's important without having to worry about whether you're missing something.
Ask yourself the following questions:
What do you offer?
- Is this a family vacation home?
- Is this a single bedroom, suitable for business travelers?
- Is this a large beach chalet?
Whose?
- To families?
- To couples?
- To large groups of friends?
Where is my holiday home located?
- Is it by the sea?
- Is it in the heart of town, a ten-minute walk to local tourist attractions
- Is it in the countryside?
When is it best to stay in my rental?
- Is this a summer rental?
- Is it suitable all year round?
- Is it perfect for business people traveling mid-week for meetings in town?
Why do you have this property?
- Is it a free room that you rent for additional funds?
- Is it to supplement your pension when you retire?
- Is this your main source of income?
Of course, you don't need to follow this structure, but it will help you define the information you want to include in your summary, which you can then rewrite to ensure it looks professional and appeals to the reader.
Note: if you're still unsure about the details of your summary, feel free to do so at the end of your business plan, it's a good strategy to save the best for last!
If you need more help, here are some suggestions on writing an abstract on sites like Bplans and WikiHow.
2. Vacation Rental: Business Analysis
In this section, you'll need to explain your new vacation rental business's marketing promise (USP: Unique Selling Points), highlighting the unique features and offerings it will bring to the existing market.
OK, but how?
Performing a brief analysis of your business and finding your promise is much easier than you think. Just ask simple questions to understand how you are different (and better) than other seasonal accommodations. After all, once you're confident in your strengths, your guests will be too!
Here are some examples :
Is it better than others due to location?
- Is it close to the beach?
- Is it close to major public transportation? Is it in a remote place, and does it offer guests the opportunity to escape it completely?
Is the price of your accommodation better?
- Are you the cheapest accommodation in the area?
- Are you the best offer?
- Do you give discounts at certain times of the year?
When compared to other properties, are your interiors of yours better or worse?
Have you put together a beautiful rustic style in your vacation rental?
- Do you have a big fireplace where a family could play board games in the evening?
- Is the design minimalistic, providing business travelers with an elegant and stress-free stay?
3. Vacation Rental Market Research
To succeed in the rental business, you must be strategic and competitive in your business management plan. In this section, you will define the industry landscape you are entering by stating some key facts about current trends and demands.
One way to do this is to do market research. It involves analyzing and evaluating other companies in the industry.
This will help you build a successful business strategy and ensure that you are a dominant owner in this market. After all, knowledge is the key to power!
Here are some sample questions to help you get started with your sector analysis:
How much do nearby vacation rentals charge per night?
- Would you say it's affordable or cheap?
- Is it less than $50 per night? Or is it over $300?
- Think about the numbers you offer in relative terms, comparing with the value of market offers and the price of competitors. This will help you set competitive prices.
Who are their target audience and customer base?
- Are they families?
- Are they couples looking for a quiet romantic getaway?
- Do they cater to students and school groups who need spacious but basic accommodation?
Are they luxury accommodations or more basic rentals?
- Are they professionally decorated high-end rentals in the more expensive areas of your area?
- Or are they simple, modest vacation home rentals that even college students could afford to rent?
- Do rentals tend to be at one end of the price range, leaving a gap in the market?
Are they vacation rentals or bed and breakfasts?
- Are they all just vacation rentals?
- Do they offer continental breakfast?
- Or do they provide a full package, with a better breakfast than many nearby restaurants?
For both bookings and listings, what websites/agencies do they use?
- Do all of your competitors advertise on Airbnb, TripAdvisor, etc.?
- Do they collaborate with local tourist agencies?
- Are they all missing out on a popular and growing classifieds site that you know about but don't?
4. Vacation Rental: Customer Analysis
Your customers, or your guests, will allow you to earn money. This is why it is important to understand and target them correctly. In your plan, create different personas based on the type of guests you want to attract.
It looks like a profile of your ideal customer, from age to income. You should try to include as much information as you can because it will help your business grow in the future.
These buyer personas will be used repeatedly in all aspects of your business to help you get more bookings.
It is often said that the customer is always right, but if you get to know your customers and their needs, you can ensure that you and your business are always right.
A customer analysis is getting to know your customers and what they want and need in terms of vacation rentals.
Here are some key questions you should ask yourself about your ideal guest:
What is their name?
- John? Derrick? Clear?
- It might seem a bit silly to give a name to a fictional person, but this technique brings your customer analysis to life and will help you flesh out aspects of your potential guest persona.
How do they work?
- Are they high-profile bankers?
- Are they healthcare professionals?
- Are they involved with a local school?
How old are they?
- 18-25
- 25-40
- 40+
Do they have a family?
- No, they are single.
- Yes, only one child.
- Yes, several children.
Continue with questions like this until you have built a complete profile of the person, which will help you understand their personal beliefs, values, and spending habits.
Sometimes old sayings can be true: if you fail to prepare, you prepare to die! Through this, you will be able to understand issues such as recurring complaints you may encounter, what they like or dislike about vacation accommodation, and the amenities travelers expect to find in a property.
5. Vacation Rental: Competitive Analysis
In addition to focusing on your own vacation rental business, part of your business plan is to research the competition.
Examine the market to find your direct competitors and analyze them to see how your business can thrive.
Competitor analysis is similar to industry analysis, except that in this case, you will focus on your direct competitors rather than the industry itself.
For example, if your vacation home is a beautiful, quiet cottage on a tourist island, your direct competitors will be other accommodation providers on that same island.
With competitive analysis, you can see who can win a booking for you and use what you find to be the first choice for travelers.
How much do my competitors charge per night?
- Competitor 1 – $100
- Competitor 2 – $150
- Competitor 3 – $200
- Using this information, you can decide to lower your prices below $100 to become the cheapest option among your competitors and increase your booking rate.
What type of accommodation do they offer?
- Are they all standard and basic camping?
- Or are they upscale and luxurious rooms?
- Or are they an in-between, suitable for most travelers?
Do they offer airport transfers/pick-up services?
- No.
- Yes, but at a very high price.
- Yes, and at a reasonable price.
Do they offer a wide range of in-house amenities?
- No, most don't even offer WiFi.
- Yes, some offer basic amenities like a washing machine and TV.
- Yes, they all provide basic amenities, and some even include luxury amenities (like a swimming pool or a gym).
6. Vacation Rental: Operational Plan
The operational plan outlines how you will run your new business daily.
Consider whether you will hire staff, what standards you will set, and how you will track inventory and perform other administrative tasks.
This will be one of the easiest parts of your business plan because you already have everything in your head.
Here are some useful tips and examples in case you get stuck:
Will I hire staff?
- No, because I only rent a room in my house which I can manage myself.
- Yes, I rent several large apartments and have a full-time job separate from this activity.
- No, because my partner and I will do the work together.
Who will clean the guest rentals?
- A cleaning agency?
- You?
- A neighbor?
Should I hire an accountant to help me manage my business finances?
- No, I'm comfortable with all those things.
- Yes! I don't know the first starting point to deal with taxes or business documents.
Who will handle reservations and customer complaints?
- Myself with only one room to rent, it will be easily manageable.
- I'll hire an assistant to help me with this paperwork because I won't have time to do it myself.
- My daughter/my son. Indeed, it will be a good part-time job for them.
- You can also make things easier with software like our Lodgify reservation system and channel manager tool.
7. Vacation Rental: Marketing Plan.
Explain the best strategies to target your main markets to achieve reservations.
Think about both online and offline marketing and any campaigns or promotions you plan to launch externally.
Your marketing plan defines how you're going to market your business to your customers and how you're going to generate bookings. This is when your targeted persona (that you created earlier) becomes useful.
If you know the people you are trying to target, you will know what websites they are using and what marketing will work for them.
Your marketing strategy can be very diverse and varied. For example, you can use several online marketing strategies, such as Google Ads, and list your property on different rental sites (or on your own !). But you can also use offline methods, such as leaving flyers or business cards at local tourist attractions.
What are some questions you should ask yourself before creating a marketing strategy?
What online marketing methods should I use?
- I'll list my reservations on a travel website because that's enough for me.
- I will have my vacation rental website. My site, my rules!
- I have a few places to rent, so I'll put them on more websites to get more people to see them and book them.
- I will pay for Google ads in my area.
What offline marketing methods should I use?
- No, online marketing will suffice for me.
- I will print flyers and leave them at local tourist offices.
- I'll give each guest a business card and ask them to tell their friends and coworkers about me.
- No, I don't want/need it.
- I want one, though. I need to hire someone to make one for me or use a professional website builder.
- Yes, I have one, and I will hire a search engine optimization specialist to help me increase the number of visits.
Do I need business cards?
- No, I do not need it.
- Yes, I have some, but I will not use them.
- I have and will use them as part of my marketing strategy.
8. Vacation Rental: Distribution plan
Websites like Expedia or TripAdvisor are called OTA ( Online Travel Agency ), a fancy industry term for the middleman between you and your guest.
For new hosts to get bookings, they need to be on OTAs and listing sites.
Your distribution plan should consider the channels you will advertise on, how much they will cost, and how you manage them (hint: you may need a channel manager ).
A distribution plan will help you figure out how you will promote your business to generate bookings and help you identify the websites you want to be placed on to help your visitors discover and book a stay with you. Here are some examples of good questions that should help you get started writing a distribution plan:
Which OTAs do I want to list my property on?
- Just one?
- On each OTA available? I need a lot of reservations!
How much will it cost me?
- Is it free?
- Do I have to pay monthly to be listed on these sites?
- Do they take a commission on the bookings I receive on this site?
Are there any tools available to help me manage all of this?
- Yes! A channel manager.
- A channel manager is a tool to ensure that all your reservations, dates, and arrangements stay in one place. So you won't be overwhelmed with managing the calendars of several different ad sites you use.
When I receive a booking, how will I receive payment?
- Paypal account.
- By transfer.
- Via cash/card payment, directly upon arrival.
9. Vacation Rental: Revenue Management Plan
So, that's the numbers part but don't worry; revenue management isn't as scary as it sounds!
In this section, you'll need to include the rates you plan to charge for your vacation rental and any details about any pricing or performance management tools you'll be using.
When running a vacation rental business, you must be updated with your income, expenses, and finances.
For people who feel overwhelmed by this situation, there are many tools and software to help you. To get started, we've written some quick questions about the basics of your revenue management plan to help ensure your accounts and your business stay in the green zone.
How much will I charge per night?
- Fixed price: $100 per night
- I will use smart pricing, increasing the amount during summer periods.
- I am still undecided.
How much tax should I pay to the government?
- 12%?
- 20%?
- I'm unsure and need to educate myself before writing my income management plan.
What will my utility bills be?
- Water costs $20 per month.
- Garbage collection is $30 per month.
- Electricity varies depending on the number of guests I will have.
What will my personnel costs be?
- Zero, I do all the work myself.
- Weak, I pay an allowance to my teenage children to help me with some household chores.
- Top, I will hire a cleaning agency, marketing specialist, website developer, etc.
What is my target monthly income?
- $500?
- $10,000?
- Something above $0 at the start?
Vacation Rental: Sample Financing PlanThink about how you will finance your new business. Of course, you've often asked yourself, "How am I going to afford this rental business?" Will it be self-funded, or do you intend to apply for a loan? Aren't you planning on spending money just because you're renting a spare room?
These questions form your financing plan. After that, it's just a matter of saying, "How am I going to pay for all this?" Money doesn't grow on trees, as we all know. So write down your expense estimates and income projections for the first five years.
As with everything in life, proper budgeting and planning for your finances will prevent stress in the future and mean your business is set to thrive.
So what kind of information constitutes a financial plan?
Should I take out a loan?
- No, I'm just renting out an existing ready-made property.
To fix up this house, I will need a small loan.
- Yes, I will need a big loan to buy the land or property where I will build my rental home.
What will the interest rates be?
- 2.5%?
- 15%?
- Variable?
Do I have savings that I am ready to invest in?
- I don't want to put my savings there.
- Yes, I have a small amount that I will use for decoration.
- Yes, I have a lot of protection for a project like this!
What level of the monthly payment can I manage?
- No, my business has small revenue, so I don't want to apply for a loan.
- $100 for a small loan?
- $750 or more for substantial mortgage repayments?
10. Vacation Rental: Key Milestones and the Future of Business
Write down your plans and goals for your business, as well as the key steps that will help you achieve those goals.
When you start a project, whether going back to college, losing weight, or starting a business, it's very important to track your project and monitor your progress. This section will allow you to refer back and ensure that you are on the right track.
After all, staying where you are is easy if you don't set any goals.
Here are some good steps to take for your rental business:
How much do I want to generate per month?
- $500? $750? $3000?
- This answer will be tied to how you plan to spend your money. So now is a good time to look at what you wrote in point 10.
- How many people should I invite in the first quarter?10?
- 100?
- As much as possible, I know I'm still at the beginning.
What is the growth rate of bookings that I would like to have from one year to the next?
- 1%?
- 100%?
- I will understand this in the second year because I am just starting my activity.
How many returning customers do I need to reach each year?
- At least 10?
- Over 50, I am confident in the level of service I provide.
- As much as possible!
11. Vacation Rental Business Plan: Appendices
Include all source documents in your appendix to keep your vacation rental business plan as neat as possible.
This will ensure that the most crucial information is detailed throughout your plan.
The appendix of your management and business plan can be similar to the drawer you have at home since it is where you put all your miscellaneous and important documents. You know you will need it one day!
So, you should put all of these things in your appendix. Then, the relevant documents and records you have for your business contain the essential information you need to make things work.
For instance:
What is the plumber's number, in case I have plumbing problems?
- That's good, and I don't have one!
- Yes, I have one. It's 123 456 7890.
Where is my tax registration information?
- I'm unsure; I'll have to look them up and add them to the appendix.
- After that, I'm all set to put them in the folder.
Have I kept receipts for all things purchased for my business recently?
- Yes, and I am ready to add them to my tax slips.
- No, I'm going to buy a wallet to keep for future use.
- Yes, on Dropbox and an external hard drive.
- How many people should I invite in the first quarter?
Have I saved my online reservations and calendar somewhere?
- Yes, on Dropbox and an external hard drive.
- Yes, but offline, in my kitchen calendar.
12. Vacation Rental Business Plan: Tips and Tricks
Now that you have a business plan filled with very detailed information, you are ready to start!
But wait!
As the industry becomes more competitive every day, with more websites being created and listing your competitors' rentals, you might be looking for that extra edge.
Here are four of our secrets, tips, and tricks to stay number 1 in this sector!
Appreciate what you do:
- Have you ever heard someone say that you will never work a day if you do what you love? Unfortunately, this is completely true with vacation rentals.
- If you like it and don't let stress get to you and affect your customer service skills, it will trickle down to the guests, and you'll notice them coming back year after year.
You get back what you give:
- Whether it's vacation rentals, or any business or skill, you'll get what you put in.
- Investing time, money, and effort in your business will reap financial and personal rewards.
- There are so many businesses in the tourism sector that we are doing everything we can to make things work.
- To be number one, you must invest more effort and time than your competitors, and you will soon notice that this investment offers very high returns.
Quality over quantity:
- When you buy a pair of shoes, one team is $30, poorly made and likely to fall apart in a week, and the other is $50 but well made and durable. Which will you choose?
- Obviously, like everyone else, you will choose the quality and value of the item over the price.
- This also applies to your vacation rental. Remember earlier we talked about competitor analysis and how much they charge? Remember that most people will choose value over price. So don't compromise for each other.
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