There are essentially five or six ways in which you can dramatically reduce your costs and increase your short-term income.
Watch Your Costs To Maximize Your income
Firstly, and some of this might sound obvious but in order to maximize your income you need to watch your costs very carefully.
What do I mean by this?
Essentially you need to have a very clear vision of what is most important to your guests in your property.
Some people are of the opinion that having an ultra-new kitchen, modern gadgets, and a lavish welcome basket are essential costs. I would disagree with this.
What guests essentially want is enough space, a clean space and a good location. That’s it. If you can provide them with these basic amenities to a very high standard your guests will be happy.
Let me put this a different way if you had a brand-new kitchen and lots of home gadgets like Amazon Alexa and an excessively large television yet your property wasn’t deep cleaned would they be happy? No I don’t think so.
The biggest takeaway therefore is not to spend money on unnecessary things but instead establish a meticulous cleaning and renovating regime where you keep your property in top condition without spending huge amounts of money on unnecessary items.
Maximixe Direct Booking Income
Secondly of course as opposed to watching costs we want to be maximizing occupation and direct income in order to extract the most profit from our business.
There is a number of different ways that we can do this let’s assume you have two Airbnb properties.
First of all, ask yourself the question: is the occupancy always high? If the occupancy is not high I would recommend listing on as many different channels as possible to gain extra bookings.
Remember in addition to Airbnb, the booking.com Expedia and its mini affiliate networks VRBO, etc etc. Use a channel manager to synchronize your bookings so that you are essentially constantly booked.
The second piece of this is what type of bookings you’ll get it. The types of bookings that you want to get are not one or two-night bookings.
Lots of one to two-night bookings equals lots of administrative stress with cleaning changeovers deposits and meet and greets. You want to have as many longer stay guests as you possibly can.
How to get guests staying as long as possible?
In order to get guests to stay as long as possible there are a few things you can do:
1. Use a Channel Manager to coordinate your pricing levels.
Use a channel manager (or whichever channels you use have different pricing for different lengths of stay).
Now this sounds easy, but will require some coordination so that your prices are the same on different channels (otherwise this causes problems with your visibility on his channel).
I would price one to two night stays at approximately double to 3 times the cost of a one night stay. Remember that if you end up with spaces between long stays you can at any time reduce your prices to extract a bit of extra revenue and fill gaps with last-minute bookers.
2. Overbook to extract more income (let me explain).
You want to consider overbooking your property.
How can you do this? The best way of doing this is by making use of a channel manager and effectively opening up an extra room or units on your property.
This is especially important if you get lots of one-two-night bookings. Let me explain further:
If your diary is full of two-night bookings which will have an obvious increased cost of cleaning and changeovers, yet it’s not available to book for that whole tweo-month period and someone wants to book it for two months and is unable to, you’ve lost out in a very lucrative booking and a lot more stress.
You have to remember here that you are running a business and many people will cancel on you, so there’s no reason why you shouldn’t operate this overbooking model. Of course, this means occasionally we will have to cancel guests, which is unfortunate but think of it like this: do airlines overbook their seats? Yes, they do all the time. Do hotels overbook their rooms? Yes, they do all the time. So why shouldn’t you?
Service department bookings.
This is something that at the beginning of the pandemic I was not aware of but has essentially seen me through the entire coronavirus pandemic being completely booked for the entire time.
Register with the many companies who sell service department bookings. (For example: corporate clients, insurance clients, etc.)
Why is this good?
Well, firstly the service department bookings generally are much much longer than traditional short-term letting bookings (I’m talking seriously long like 6 to 12 months).
They will pay the same rates as your nightly rates and this is largely because someone else is paying – usually a company.
If your accommodation is at a suitable standard to accommodate high-end business people, for example, then companies will easily spend $45,000 plus per month where they have to accommodate one of their business people for a period of time; or for example where an insurance company has had to move a person or a family out of their commendation because of flood damage or some other problem (this is particularly lucrative if you live in an area with lots of New Build House soon as they’re often problems with this).
Invest in your own website
The next thing you can do to reduce your costs and increase your profit for your short-term rental is as follows:
Invest in your own website for taking bookings. Having your own website for taking bookings immediately reduces the 15 to 20% commission that the online travel agencies will take from you, and you have much more control of the bookings.
It is not complicated to design a website and take bookings on that website, especially if you’re linked to a channel manager.
How do I get traffic to my website?
There are a number of different ways you can do this.
2. Write short blog posts every day or a couple of times a week about your property this can include subjects like news, reviews, events going on in your local area, really anything which is relevant to accommodation in the city or region in which your properties exist.
It won’t be too long before you will see an increase in traffic to your website. You can use Google analytics too see how many people have visited your site, and you will see direct bookings come through your system without any commission.
3. Register your business on Google Maps (and Apple maps) this substantially helps your SEO for your website meaning that there is a little flag on the map show your property, and you can post updated pictures, and of course collect reviews for your property from people using Google Maps.
I know that when I search for Serviced Apartments in the cities I operate in because I have a Google Maps listing very often my property comes in at number one.
Google is also very clever because they concatenate and combine reviews of your property from third parties like Booking.com Expedia and TripAdvisor. So if you have good reviews they will be seen in one place.
How to save money and earn more with a better financial structure.
Of course, this will vary from country to country but, for example, in the USA you may benefit from setting up an LLC or in the UK a limited company (and in other jurisdictions) which may enable you to pay less tax and pay yourself in dividends.
Of course, it goes without saying that you should see proper legal advice on the best way to do this and you should never illegally avoid paying tax. That being said, contrary to popular belief there is an ancient legal precedent in the UK that says a person has rights enshrined in law to pay as little tits as possible. So you’re not being unethical by doing this, you are simply being a savvy business person.
This topic comes up constantly on the Facebook groups, particularly in reference to Airbnb.
People asked the question very anxiously “my guest wants to move his booking or my guess once I to cancel their booking”. If this is a refundable booking then okay you need to let the guests move the booking as per your booking conditions.
However, if your booking is nonrefundable, there is absolutely no reason at all to refund your guest. For me, this is for two reasons. One. We are not running charities, we are running businesses, and businesses rely on both parties acting according to the contract set out in the first place. If a guest books your accommodation based on a non-refundable rate, then why unearth should they expect to be refunded. This is a constant struggle for people new to business in general and to short-term rental operations.
However, there is actually a second reason why in this particular business, it’s very important not to refund canceled bookings that are non-refundable:
Hotels usually have at least 50 rooms. Many hotels have 200 or more rooms. So if someone cancels a non-refundable booking or wants to move a nonrefundable booking, it’s very easy for the hotel to do this because they have so many rooms without losing revenue.
If you’re running a short-term rental operation, even if you have 5 to 10 units, the chances of you reselling those rooms are relatively low. So that’s a very pragmatic reason not to refund guests.
The third reason (for not refunding cancellation) is that you can actually make quite a substantially greater amount of money because the reservation will be rebooked, and therefore you make twice the income for the same period of time.
Personally, this doesn’t bother me I am running a business and I will adhere to the booking conditions. However, there are some exceptions. I will refund in the case of a family tragedy. And also I will often offer guests who need to cancel a particularly long stay a partial refund (note carefully partial not full) if we resell the nights, and for this, the customers are usually grateful.
Please note on Airbnb in particular people expect quite outrageous requests. I’ve screenshot are some examples of this. But usually, they’re utterly ridiculous in normal business practice.