Are you thinking about investing in a short-term rental but the idea of making sure it’s profitable feels a bit daunting?
If so, this episode was created just for you!
Today, I discuss the 3 magic levers you can pull to make sure your vacation rental is as profitable as possible.
You don’t have to get into analysis paralysis with your property – these 3 numbers are the 80/20 (or even 90/10) of your profitability roadmap.
Here’s one site I referenced today: optimizemybnb.com
And if you’re ready to finally launch your short-term rental but don’t know exactly where to start, I created a program just for you to help you cut through the noise and just focus on the things that matter most in bringing a profitable vacation rental to market!
Grab your copy today at ginnytownsend.com/rental
Thanks for joining me and until next time, continue to be up and to the right.
And if you’re curious about how much you could potentially earn with an Airbnb in your area, I can send you a free and pretty powerful tool to help you estimate…
Visit GinnyTownsend.com/estimate to claim access to this powerful free tool!
Thanks for joining me, and until next time, continue to be up and to the right.
What’s up Podcast Nation! Ginny Townsend here. Thanks for joining me today. So we are going to talk about the three most important numbers in your short-term rental business as you grow and optimize and even scale. Now. This can be I mean, I’m sure as you’re really launching any business, it can be a little daunting to feel like okay, what are the numbers that I need to keep a close eye on to make sure I’m going on the right track moving in the right direction right? Because
There is a famous quote by Peter Drucker who says, “If you can’t measure it, you can’t improve it.” So the inverse of it is if you can measure it, you can improve it right. So that’s why it is so important to have a few key numbers to watch and to measure to make sure you’re going in the right direction and these three numbers. I think of them as levers there three levers, you can pull some of them, you know, you kind of you’ll ever up with one to kind of help you.
Angle in and improve the other and then once you’re growing and moving in the right direction, you kind of just play them off each other to continue to optimize. All right, let’s see what those three levers actually are one is the nightly rate to is the occupancy. So the percentage of occupancy and then three is your rating out of five stars your properties rating out of five stars. And so like I said, they play off of each other and you can Leverage
One or two of them to help you with a third now when you’re first getting started the most important number to pay attention to is your rating so your reviews but out of five star your rating when you get started you have a nightly rate and you will have an occupancy rate but people love paying for known quantities. They don’t they’ve used something especially on Air B&B where there are so many properties that already have
reviews people view booking a place that doesn’t have reviews as a bit risky. It’s a known it’s unvalidated. It’s unverified. So as a result of that people can’t really charge a premium on a property that doesn’t have any reviews and did you know that if you have one or two reviews on your property, it won’t show up on the air B&B search engines until you have that third row.
You so that is the magic number where you’re the star shows up right next to your property and then your rating out of five stars shows up as well on that search results page. So what I need to do when I’m figuring this out for new properties is I use the two levers of nightly rate and occupancy to bolster my reviews because at the beginning that’s the most important number to focus on here is how we can play with the lever of nightly rates.
Cause you don’t have the reviews to kind of back up your charging of a premium rate. I think it’s important to give a slight discount. So there is a little bit of an incentive for a guest to stay at your place versus one that is tried and true has great reviews and all of that that’s been on the market for a while so you can play with a nightly rate bring it down just a little bit. I wouldn’t bring it down to be the least expensive option in your area.
Because I have found that the lowest nightly rates typically go to people who are you know, there’s there’s always good people. This is a generalization. So I almost hesitate to say it on a podcast or can be taken out of context, but I don’t want parties on my properties right eye and I’m sure you don’t either and if you have some people come in and then they have a party on your property. They’re probably not going to give you a five star review. Alright, that’s there probably.
I’m going to review you. And so I don’t see the advantage of being the least expensive property in any Market on Airbnb and in some other businesses. That is a strategic Advantage but I don’t see the Strategic advantage on Air B&B of having the least expensive property, but you can always do a little bit lower than average. So if you have a pretty comparable like you you see a listing in your area that’s pretty dang close for maybe the size or the number of bedrooms or the
The style or need the location like if someone had it narrowed down between you and that other property just make sure you’re a little bit more priced advantageous than that one. Okay, and then so that’s the nightly rate lever that you can pull. I’m occupancy beside. You know, I’m sure you’re like how there is no occupancy rate yet. How can you play with that? Exactly, but you can there’s always a way what I like to do is icap the maximum amount of nights.
It’s can stay early on in my listing. And so I first heard about this idea. I was on a Blog called optimize my B&B.com. The guy’s name is Danny. I’m blanking on his last name, but just to shout out to him. But the idea is you cap a stay at let’s say three or five nights for that first month or so so you don’t have people booking for like two weeks or maybe even a month.
Month something like that because you need to get to three reviews as fast as possible. So capping the amount of night. Someone can stay were and we’re slightly lower than average on our price. The hope is that you’ll get a good number of guests that first month to kind of break you through that barrier of getting three reviews to be able to be the known quality on Airbnb in your area. Yeah. Okay. So that is the most important number at
Your rating but then once you have that rating and then it’s just a matter of maintaining great communication with your guests and making sure it’s clean and all of that. Those are inputs that will then reflect the output of the rating, right? Okay, so I kind of you that in its own bucket. Now this is management of it to make sure you maintain a high rating, but now let’s move to profitability because once you’re a known quantity, we can start increasing.
Teasing the nightly rate. So the two levers we have to work with now are the nightly rate and the occupancy because you already have your ratings working for you as long as you maintain them as high as possible or do everything you can to maintain a high rating that lever is already working for you. Then you just need to really work it worry about the other to make sense. So going forward it is playing between increasing your
Nightly rate and potentially sacrificing a little bit of occupancy, or do you decrease your nightly rate to increase the occupancy so finding that sweet spot for your property in your area? And yes, there will be a little bit of seasonality to this. So keeping good notes on what you find the different seasons of the year. Then you’ll know the next time around the sun which lever is the strongest one to pull in each season. Okay, let me
Give you an example of what I mean by how we can compare the different levers. All right, let’s say we want to explode our occupancy. We want to get that occupancy as high as possible. And so we lower the nightly rate. Let’s say the nightly rate was $75 a night. I’m just going for simple kind of roundish numbers here. So I know that probably sounds low and it is low, but that’s the example so we lower we want the really high occupancy rate. So that’s the level we want.
Up. So the lever that we pulled down is the nightly rate. So let’s say we were reduce it to $50 and night now $50 a night would get us an occupancy rate in this example of 95% So nearly a hundred percent occupancy. Okay, that would bring in 1420 five dollars a month. So we achieved pretty dang amazing occupancy, but at the sacrifice of pulling down the lever again to $50 a night and again that total 1000
$425 now, let’s say we want to increase the lever of the nightly rate and we’re willing to sacrifice the occupancy pull down that lever to see how much money we can make how profitable we can be playing between these two levers, right? So going up from the the base rate we had before of $75 right in the previous example, we went down to 50. So let’s go up to $100 a night in this example now at
Dollars a night our occupancy rate went down 20% Which might give if any other business went down 20 percent that would be spine-chilling but the occupancy went from 95 percent down to 75 percent and so add $100 a night. We bumped up that lever we were okay sacrificing the lever of occupancy and that scenario would bring us in two thousand two hundred and fifty dollars so weird.
Are looking at between seven and eight hundred dollars difference. So by increasing the nightly rate we were able to be more profitable by almost eight hundred dollars month over month, but that’s not you know, always going to be the case in slower Seasons. It will make sense to lower the nightly rate to get as many people booked as possible. Right? Because time is a commodity in any real estate business, right? It can be, you know, if you lose a month’s rent on
Long-term rental, like that’s zero percent occupancy, which you just really have one chance to hit. It’s like you either have someone that month or you don’t it’s either a hundred percent occupied or a zero percent occupied but with short-term rentals you play around there in the middle and rarely is something zero percent occupied like you can take something off of availability or it can be if you’re in a very very seasonal place that may be possible.
But most scenarios your existing somewhere between zero and a hundred percent occupancy with short-term rentals. So what another reason why I love short-term rentals so much is it’s not all or nothing you can play around with the percentages in the middle. You can play around with your nightly rates to make sure that you are being as profitable as possible. So once you have your Air B&B live, it really is all about and also
You have your reviews once you have at least three reviews, so you have your out of 5 stars showing in the search results. You really play around with just two numbers the nightly rate and the occupancy isn’t that amazing? So I hope you found this helpful. I hope that if you’re considering what is it like to manage a property? What if I go through the process of getting one live? What does it look like? How do I
Continue to optimize it really is just those two numbers right once you have the reviews because like I said before the reviews once you have great reviews, they do the work for you that is just another kind of slightly form of passivity, right you no longer even have to mess with that lever because it’s working for you and I love that. I think that is so unique among so many different kinds of business models. So I hope you found this encouraging and inspiring and
Hope you take action based on what I’ve shared with you today. So if you’ve been on the fence and you’re like, you know, what Jenny I do want to hear more about how I can bring a short-term rental into my income portfolio. Will you know what? I’ve got you covered. I’ve got you covered. If you’re looking how to figure out the area where you you know, you want to have your short term rental or you just want to validate that the area you’re considering is a good one as well as being able to find the actual property. And so whether that’s buying or renting
Ting or leasing or whatever being able to gain control of a property to list it on Airbnb and then do the things like I mentioned in a previous episode The 25 x lever, by the way, which is Furnishing the most valuable part of this process is that that’s the thing that adds incredible value is Furnishing. If you want to learn how to do that in a business savvy way in a way that will be eye-catching and will totally attract your ideal guests.
And then if you want to make sure that you have a killer listing that catches the eye that stops the scroll is how I phrase it of potential guests in your area all of that and so much more is available for you in the six-figure vacation rental roadmap. So it is ready for you. I’m so excited to have you come on in and explore and and see how this is actually so much more of a possibility than you may have considered before that.
This is so much more attainable than I think many other businesses and then even many other forms of real estate investing. I love everything about this business model. I hope you can see that so if you are interested in gaining access to all of this training and to be able to put all of the the training into action pop over to Jenny townsend.com to rental and let’s get that short term rental on the market for you, huh? So you can optimize with
These two levers once you have incredible five star reviews, you can play around with the rates the nightly rates and the occupancy and just it actually is a whole lot of fun. So again hop over to Jenny townsend.com to rental and secure your version your copy of the six-figure vacation rental roadmap today. Thanks again for joining me and until next time continue to be up into the