How to Not Fail in Short-term Rental Investing

Kate Stoermer Author

Five Reasons Small Businesses Fail - and How to Avoid Them in Your Short-term Rental Business

Short-term rentals are not Airbnb’s - much like facial tissue isn’t Kleenex. Short-term rentals ARE a business - not just an “Airbnb”, and 82% of small businesses fail due to lack of cash flow; with a little bit of forethought, the issues leading to lack of cash flow are preventable! Here are the top 5 reasons small businesses fail - and how to avoid them in your short-term rental business.

Ineffective leadership. Its a popular narrative - buy a property, toss it up on Airbnb, and mint money. Until finding out its not legal in that neighborhood, or that customers aren’t interested in that location, or the cleaning crew keeps not showing up, or the property isn’t showing up in the search results - whatever the reason, the profit isn’t rolling in. When starting a small business it begins with understanding the industry, making a plan, and executing - knowledge is power, and staying in the Chief Executive Officer seat means always learning, assessing, and planning ahead.

Ignoring the customer. A short-term rental is not just an investment - it's a business. And whether you are outsourcing the day to day operations or handling it yourself, your customer is your number one priority. It starts with understanding your ideal guest profile and setting up your rental to meet their needs. Family oriented? Then have kid-friendly dishware, baby gates, and entertainment. Romantic getaway for two? Wine glasses, champagne flutes and referrals to in-house massage therapists may be part of your business. Watch reviews - address issues proactively, and have systems and processes in place to routinely assess and respond to changing customer tastes/needs.

The team isn’t right. Last year, the cleaner at one of my properties looked to take on more homes and hired some young gals just out of high school to help with the workload. It was a mess - dish towels stashed with bath towels, sheets balled up and shoved into closets, beds that looked remade instead of washed. Needless to say, a new cleaner was required in a hurry. But this isn’t just cleaner - working with property management? Are they optimizing your revenue? Is your lawncare team cognizant of not mowing at 7am? The team that is guest-centric is going to support your successful business. Even if its going well - check in with them on a regular cadence; ask them what could be done to improve your business. A business that is going well requires a light hand on the tiller - but it does require checking in and checking on your team.

Outcompeted. There are over a million short-term rentals and over nine million hotel rooms in the US (2022 figures). Some popular resort markets have staggering numbers of options for short-term lodging. For example, the greater Orlando area has over 126,000 hotel rooms and over 32,000 short-term rentals. Success with short-term rentals means understanding the market - and your micromarket. What differentiates your business from the competition? What drives price in your market? What are the trends in supply and demand? Is supply increasing or decreasing? What amenities will increase your market share? Understanding your market - not just the aggregate market, but your micromarket - what will drive people to book your place and how to price it competitively based on that understanding, will help you buy correctly and have a successful short-term rental business. Evaluating the market routinely as part of your CEO duties assures that you are planning ahead and adjusting to ensure your business remains competitive.

Inadequate planning. Nothing sinks a ship faster than lack of preparation. Having a business plan and an operations plan for your short-term rental business - and a cadence for evaluating and course-correcting where needed, are keys to long-term success in small business. Changes in regulations, changes in team members, increases in competition, and failing to plan for capital improvements and emergency repairs can find a business in negative cash flow quickly. Planning, and contingency planning, with regular reviews and updating with current information are key contributors to long-term success in your business.

One of the parts I love about my business is helping others get started on their short-term rental investing journey - and leveraging my extensive business background and education to support success through time-tested, business strategies.  We just released our 30 page workbook, The Short-Term Investing Roadmap that does just that - it takes you through all the elements of a traditional business plan - in the context of the vacation rental/short-term rental business. So if you aren't sure where to start - start HERE!

No business owner starts a business knowing everything; but you can have a successful short-term rental business by taking some time upfront to understand what makes a profitable short-term rental in the market of choice, evaluating risks to success and addressing those risks proactively. And if you need some help - connect with me at The CEO Host and lets talk, or check out The Short-Term Rental Road Map Workbook and get started today!

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Hey Boss!  I'm Kate, owner/founder of The CEO Host.  If you are interested in taking a leap into short-term rentals - or struggling with your existing business, my goal - passion, and new career, is to help YOU succeed.  I've coached hundreds of folks getting started, analyzed more deals (and duds) than I could count, completed thousands of hours of education and training, attended conferences... So don't be shy.  A good CEO knows to bring in expert help - and that's what I'm here for! 

If you are just hanging out for the learning, or to check out all my typo's, sign up to get emails from me so you don't miss out. (I hate email spam, and too much email - so I'm not about to hit you with 10 emails tomorrow. Or next week. Maybe not even all year, honestly.) 

Cheers!