Your vacation rental may have a lot of reservations, although maybe you're not getting the most out of it. For this reason, and to take a step forward, what can we do to further improve asset returns?

In today's article, we'll tell you some tips so that profitability isn't just a matter of increasing it, but also a matter of making sure it doesn't go down.

The effective management of a vacation rental apartment can make the difference between a successful investment and a non-successful one. In this way, there are some strategies that you can implement as a manager or owner of an apartment to increase the profitability of your vacation rental.

However, before moving on to advice, it is necessary to first understand what we mean by profitability and how we can calculate it.

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‍The profitability of a vacation rental and its calculation‍

It is essential that as a property manager or owner, you know how to calculate the profitability of a vacation rental property and how to improve those calculations. First, you must make a forecast of the stay, that is, you must know how many days per month you will have rented the property.

The second step is to take into account the income generated by rent, operating expenses or operating costs -recurring vs. variable - such as cleaning, maintenance, supplies and public services, as well as the cost of initial investment and financing. The expenses that are borne by the tenant should not appear in the equation, since they are already covered and it is not necessary to calculate them as own expenses.

Calculating profitability allows you to evaluate the financial viability of the investment and make informed decisions on how to optimize it. If the expenses do not exceed the costs in the total calculation, we will be looking at a profitable vacation rental.

In a regular rent, the formula would be: Revenue - Expenses = Profitability

Although in seasonal or vacation rentals, we cannot apply this formula, since we may not have the property occupied every day of the month. In this case, it is best to calculate the price per night. With an example, we can see it more clearly:

If we know that our expenses are 200 euros per month per property and the average price per night of the reservation is 50 euros, we must first multiply the price per night by the days of occupancy. That is, 50x20 nights per month = 1,000 euros. If we subtract from 1,000 euros, the 200 euros of expenses would be 800 euros of return per month. And, if we want to be even more detailed, we will divide the profitability per square meter.

You must be able to identify which properties are profitable and which are not. To do this, it analyses the financial performance of each property, taking into account factors such as location, size, amenities, market demand and associated costs. By separating properties that generate benefits from those that don't, you can make strategic decisions about how to allocate resources and maximize the return on your property portfolio.

Nowadays, thanks to technological platforms, analysing these performances is relatively simple, easy and fast. For example, with Polaroo you can identify the attributable cost of supplies for each of your real estate assets for each period of stay and thus accurately analyse the performance of each period, thanks to the centralization and digitization of invoices.

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‍Strategies for maximizing the benefit of a vacation rental‍

Both in properties with the most benefits and those with the least, it is necessary to invest time and money to improve their operation. The better the user or guest experience, the better the review, the better the score and the more bookings.

Hay 6 strategies (+1) that you can follow as a manager or owner of a vacation or temporary rental to boost the profitability of the property:

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1. Implement an automated system for communicating with guests and managing reservations:

This makes it possible to provide a quick response to guest inquiries instantly, as well as to inform about cancellation policies or other issues that may interest before making a reservation or before arriving at the place of stay. In addition, it is a good strategy to expand the number of reservations thanks to the fact that the automated system allows you to be open 24/7 and resolve doubts or questions quickly and easily.

This speeds up the booking process and associated procedures, and it means that the hiring experience and all the previous steps before enjoying the stay are agile and positive.

Some rigs that can help you with this are Icnea, Avaibook, Avantio or Holidu.

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2. Use dynamic pricing tools to attract more guests without sacrificing profitability:

Before setting prices, research the area's vacation rental market. Analyse what types of properties are popular, what the average prices are and what services are usually offered. Then, set competitive prices that are in line with the local market and the quality of the property in question.

At present there are software programs to manage prices of a vacation rental with dynamic prices: the higher the demand, the higher the price, the lower the demand, the lower the price. Some of these platforms are Beyond Pricing, Pricelab, Listing OK or Turbosuite.

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3. Use vacation rental platforms to expand your audience:

List your property on vacation rental platforms such as Airbnb or Booking.com to reach a wider audience. These platforms usually have many users who are looking for vacation accommodation.

The profile must be optimized, with high-quality photos and a detailed description. It is also recommended to havehave your own website where potential customers can see more information or photos, access to offers, flexible check-in/check-out, and other conditions.

In addition, benefit from other digital channels such as social networks to reach a wider audience. Communication should always be clear and transparent.

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4. Take even more advantage of the online environment to improve the positioning of your business and brand:

Online reviews are crucial to improving the profitability of an apartment for rent, as they influence the trust of potential guests. Positive feedback can attract more bookings and drive up the price per night.

The feedback provided by tenants will help you in turn to correct deficiencies, optimizing the guest experience and generating higher long-term income for your property.

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5. Expand your offer through welcome details:

Without falling into a waste that would increase costs and decrease profitability, it is advisable to leave some details for guests such as some sweets, coffee or tea. Add amenities and additional services can make the property more attractive to guests and allow managers to charge higher rates.

This category also includes services such as high-speed Wi-Fi, smart TVs, streaming services such as Netflix or HBO, luxury toiletries, and others.

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6. Keep the property in good condition and well furnished:

Cleanliness and maintenance are essential to ensure a good experience for your guests and to get positive reviews. Make sure you keep the property clean and in good condition, and resolve any maintenance issues in a timely manner.

An apartment with modern furniture, useful for their needs as travellers, also attracts a lot of attention from tenants. Comfort is a key point in getting the guest to leave you a 5-star review.

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7. Control the invoices that derive from the real estate asset:

How to control the billing of a vacation rental apartment is one of the key strategies to consider if what we want is to make the asset more and better profitable. In this regard, the calculation of the nightly occupancy rate may not be correct if all expenses and utility bills are not taken into account.

With technological tools such as Polaroo, having control of all invoices in a centralized way becomes easier, since you can access all expenses related to a property, and from there improve the calculations to know their profitability. In addition, having such detailed information also helps detect leaks or abnormal electricity or water costs, leading to improved profitability.

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‍Polaroo, your partner for managing vacation rental supply bills‍

Polaroo will be your right hand as an owner or manager of vacation rental apartments. In addition to the software platform, we have a team of experts who manage high and low supplies of all types (water, gas, electricity, telephony, security...) and also carry out changes of ownership. We perform tasks that many homeowners are suspicious of because of the amount of hours they must dedicate and the different papers they must submit.

Polaroo centralizes all invoices, the digitization of all these supply data allows clear control of consumption, expenses and payments. In addition, we carry out savings studies periodically to optimize the entire process (this can be a change in rate, a change in power, depending on what each customer needs and their assets). We also handle claims for invoices with disproportionate costs or for any other reason.

Recurring costs are what Polaroo helps to control. Thanks to the professionalization of the Polaroo team of experts in the sector, even lower prices per volume of properties are achieved, incidents are identified and future approximations and estimates are made to know how much will be spent on a specific asset.

To learn more about the Polaroo service and how to improve the profitability of your vacation rental, learn what some of our customers have already achieved and request a demo.