Tips to running your holiday let as a small business

The ultimate goal in marketing your holiday rental is to increase its potential for profitability. You place your home on a site like Airbnb to get in front of thousands of interested travelers, and then start making money with lots of bookings – right? Not completely. In order for your listing to work, you have to run your holiday home like a small business owner would run a successful shopfront. Your home and the customer service that accompanies it must provide the things your guests want and need in order for you to reach the highest level of profitability through renting. Here are a few tips to run your vacation rental home. 

Evaluate and Understand Potential Risks

Outlining and covering your potential risks as a holiday home owner is the first step in successfully managing your rental. Small business owners take time to understand possible causes for profit loss, and find practical solutions to cover each. List your concerns first then cover each with a measure of prevention including contract modifications, additional security, or specialty insurance, take time to research your options and find those with the highest potential for reducing risks.

Invest in Security

Ensuring the safety of your customers will be critical. This holds true in every industry, however, it is especially important for consumers within the hospitality industry. Many home owners fail to see the importance of a home security system or inadequate online security measures. Your guests need to feel confident that they will be safe and that their order is guarenteed but it is also your business. Investing in a security system will help you provide the reassurance your guests need to enjoy a comfortable and safe stay. It will also help you protect your profits from break-ins and potentially dishonest guests.

Think of the Consumers’ Needs Before They Do

Successful business owners are constantly thinking of ways they can further improve their product/service to better meet their consumers’ unique needs. Think like your consumer to get a better idea of what they will want and need during their stay at your rental. Think of the things you appreciate having during an out of town stay, and make these available to guests of your rental. Also understand your area and provide information and materials that stand to benefit visitors. Examples of this could include providing bottled water for vacation rentals located in warm climates or offering hot chocolate for winter travelers.

Consider a Third-Party Cleaning Service

A clean environment is essential to the success of any business. As a business owner in the hospitality industry, it is your responsibility to provide a clean home. Unfortunately, you may not have the time or live close enough to clean your home to meet the hospitality industry’s standards after each guest. This is where a third party cleaning service can help. Find a service that works for you, then schedule regular cleaning appointments in between stays to ensure each guest is welcomed with a spotless vacation home. Read more about pit-falls in finding perfect housekeeping in an earlier post.

Listen to Consumer Reviews

An important part of continuously meeting your consumers’ needs is to actually listen to their reviews following a stay. Smart entrepreneurs pay attention to both positive and negative reviews and do their best to understand reviewers’ comments from the consumer’s perspective. If you’d like additional feedback from renters who didn’t leave a review, try sending a quick follow up email or sms after their stay to say thank you for choosing your listing and ask if there were any additional amenities/services they would have found useful during their stay. Also for those who prefer to be analogue rather than digital, leave a quality visitors book and pen for them to leave comments during their stay. You can always upload photos or retype the text to your own website later.

Keep up on Market Trends

An integral part of managing your rental like a successful small business is staying competitive. Small business owners are constantly watching market trends and making improvements to keep up in competitive markets. Look at successful listings in your area to see what they’re offering. Check out their reviews to see what travelers are saying about their stays. Are you currently doing these things? What could you do to generate the same raving reviews? Additionally, you should keep up on what’s trending in the promotion of successful listings.
Keep tabs on what events and offers are available to your guests throughout the year and make sure you publish those on your website or add to personal email messages before they arrive.

Covering the Expenses of your Holiday Home

For many owners, the dream lifestyle of having a primary home as their necessary base and a second home in the sun wouldn’t be possible without the income they earn by renting to holiday makers. Some offset a significant portion of their expenses, making a holiday home an affordable luxury, maybe only a third break even on their properties, still an enviable position to be in. For a minority the profits cover other important living expenses such as their children’s education, or fund a pot for a rainy day.

If you wish to pay all or just some of your expenses, it is important to work out what you’ll need to cover.

The typical costs of running a holiday rental business include:

• Initial investment of renovations and/or refurbishment
• Monthly mortgage payments (including interest, taxes & insurance)
• Insurance (building, contents and liability)
• Complex, or grounds fees (if you own an apartment or complex)
• Utility bills (monthly, quarterly or annually)
• Maintenance, repairs and redecorating
• Housekeeping, or housekeeper’s fees
• Advertising and marketing costs

The cost of your mortgage rate should be fixed, so it’s easy to determine what your annual expenses should be (x12 monthly payments). Only the final three costs are expenses generated by turning your second home into a holiday rental. Maintenance and repairs would still need to be paid whether you rent to travellers or not, but it’s likely you will need to spend more if you have paying guests in mind. The cost of marketing is relatively low, so the main extra expense is housekeeping.

If you use a property manager you will also have to pay:

• Management charges (usually in the form of % commission)
• Agency fees
• Some property management companies might charge other fees

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Switch to Octopus Energy and split £100 with us!

Getting the home ready

Holiday home furnishings need to be practical, comfortable and matching. Lounge suites for example should be covered with an easy-to-clean fabric or better still, real leather. Put yourself in your guest’s shoes: you are on holiday, you're going to want to relax in comfort and put your feet up on the coffee table so furnish the home with furniture that can take a bit of a wear and tear, but that won't break the bank if it needs to be replaced.

Buy the best beds you can afford. Everyone enjoys a good night sleep and this is particularly important when on holiday. Good linen is also a must, so consider buying something that boasts a higher-than-average thread count. Towels too should also provide that added luxurious touch.

Bathrooms especially need to be spotless and mould free and include complimentary soaps,  though not absolutely necessary shampoo will also impress your temporary guests.

The same goes for the kitchen. In addition to being immaculate, owners need to check that everything including the fridge and the stove are in good working order. All the crockery, cutlery as well as the pots and pans should be inspected before a tenant takes occupancy. If you have space for a dishwasher then this is also useful for your cleaner so that it can be running whilst the rest of the home gets attention.

Hang unique artwork, prints or photos on the walls around the property (except the bathroom) rather than picking up the usual prints from your local superstore or furnishing shop. Where possible display artworks created by local artists, this makes a great impression on your guests offering them a flavour of what's available in the area. You could also offer these for sale too.

Air conditioners, if you have them, should be serviced on a regular basis and must be in good working order. Batteries for all alarms, remotes and emergency torch should be checked and replaced where necessary.

Go and stay in the property at least once a year in order to check on the overall condition of the home, regardless of whether you use an agent to manage the property or not. Use this time to fix any snags and to replace broken appliances or fixtures as well as checking the overall condition of the property.

Display all your maintenance and safety certificates so that your guests may see that you are up-to-date and care about their comfort and safety.

Pet friendly, yes or no?

Making your property available to pets as well as people is a great way to increase bookings. If you’re happy to do this, ensure that you have the necessary facilities within the property such as water and food bowls as well as an enclosed garden or courtyard.

One of the fastest-growing sectors of the UK holiday market is in pet-friendly holidays. More and more people want to take their beloved pets away with them - not just because they enjoy the company of their pets, but because leaving them at kennels can be expensive.

Some advise that by not catering to the demand for pet-friendly cottages, you could be missing out on a lot of bookings. About a quarter of holidaymakers take their pets with them on breaks - and by not catering to this demand for pet-friendly cottages, you could be missing out on a lot of bookings. This could be turned on its head, by opening up to that extra 25% you may equally lose out on a similar percentage of people who select property based upon there being a no-pets policy.

From the outset I decided on a no pets policy, since I myself suffer with mild allergies and seasonal asthma. For others this can be quite accute and they have a hard time finding suitable accommodation, especially since 'allergy-free' is something not often posted in accommodation details.

Even if you made a spring clean every week you cannot guarentee to remove all potential allergic reactions.  We have many holidaymakers booking our cottage because they feel secure in the knowledge that we have done our best to create allergy-free accommodation. No pets, no smoking, HEPA filtered fresh air using a heat recovery system, vaccuum cleaner with HEPA filter and no carpets.

The loss of income from not accepting pets is debatable since we would have lost out on a percentage of bookings made by allergy sufferers and would have an increase of extra cleaning and repair costs. After all, pets can cause damage - some are poorly trained and others may become disorientated by new surroundings - and this can leave owners facing substantial cleaning and/or repair costs.

Dog and cat allergy (extracts from allergyuk.org)

Dog and cat allergen is found in the animals' saliva, sweat and urine. Animals frequently groom themselves so the allergens coat the hair and skin cells (dander), which, when shed, spread throughout the home. Once the saliva dries, it becomes airborne very easily.

These allergens can be very persistent in the environment, with detectable levels found in homes where no pets have lived for many years, and dog allergen can be found in schools, having been brought there on the clothing and shoes of pupils and teachers. Cat allergen in particular is very 'sticky' in this way.

Despite popular belief, all dogs possess the allergenic material known to produce allergic reactions in humans, and therefore reported differences of sensitivity to different breeds probably relates more to level of exposure. Even breeds that are described as 'hairless' still have allergens found in dander from skin sources. It is possible that longer hair may harbour other allergens such as dust mite, pollens and moulds, to which an individual may also be sensitive. Other persons may be sensitive to substances found on the dog, such as flea powder or soaps.

Also, many dogs (and cats) have skin problems such as eczema, so because of their dry skin and irritation, spread larger amounts of dander.

Exposure to cats during a child's first year of life is an important factor in the development of sensitisation to this allergen. Some studies have shown that children who grow up in homes with pets have more severe symptoms than those in homes without pets; other studies have shown that there may be a protective effect from growing up with pets. However, for those who have eczema, hay fever or asthma, removing pets is the best advice, even if there is no obvious allergy to them at present.

Asthma (extract from allergyuk.org)

Asthma is a common and long term lung condition that requires ongoing management. In asthmatics the airways are sensitive and become inflamed and narrow on exposure to certain triggers, leading to difficulty in breathing. Asthma commonly starts in childhood but it is possible to develop asthma at any age. The causes of asthma are not fully understood, but what we do know is that both the environment and genetics have a role to play in who develops asthma.

Perfect Housekeeping

You will have no problem finding people willing to be your cleaner, and some willing to take on your property as a caretaker-manager. However, what you will find difficult is sorting through these ads and applications for a person who can really do what they offer, week in, week out, to the standards you set and that they agree upon at the beginning.

If you are not living close by to check on the quality of this service, then it can be fraught with problems if you rush into employing someone and are then unable to run regular quality checks, especially at busy times. If possible take them on for a trial period, if they are as good as they say they will have no issue with that. Extend this trial period through the summer months if you still feel unsure, and if after that you are happy then offer them continuous work. You may prefer to offer this permanent basis on condition that their standards remain. Don't try to go for lowest hourly rate, and don't go over your budget if you feel they are asking too much. We pay a fixed change-over fee, plus any extra one-off cleaning fees, laundry fees and costs of materials and welcome packs.

Make the change-overs yourself

At least at first make the change-over yourself. You will then have an understanding of how long it takes to prepare the home ready for the next guest. Our check-in, check-out times allow a 5 hour turnaround, otherwise called a change-over. It is a two bedroom cottage with one large bathroom so it is possible to make the change-over in 4 hours. This leaves a buffer in case the departing guests leave late or an extra deep clean is required.

During our first months of letting our property, we had fantastic comments and feedback, after all it was effectively brand new, "like a show home". At that time living in another country we had to find someone to manage the change-over days and any maintenance that may need attention. In the middle of the high season we noticed 'suggestions' in our feedback forms. I should have acted immediately and visited to understand why this was so, but I put it down to overly fussy guests. This was my first and biggest mistake.

We did visit at the end of the high season for our own holiday and contacted the manager-cleaner to let him know when we'd be arriving.

Whilst I cannot say the house was filthy, it was far from the high standards we expected and believed we were providing to our guests. It was only then that we read through the cottage suggestions book to read things like "hairs in the bed and fridge" and "freezer solid with ice". I went around the cottage armed with my camera and found 30 issues which needed attention such as a broken glass bedside lamp - how could anyone miss that if they'd just cleaned the room?

What we found astonishing was the fact that he knew we were coming to stay, giving him the opportunity to make the place perfect for our arrival. After discussing this with him it became clear that he had not done the cleaning himself but sub-contracted someone else to do it. He insisted that he had checked it personally, especially on this occasion because he knew we were coming. He was either not telling the truth or has very low standards, you could not have missed the broken lamp. His overall response was quite aggressive, not a nice experience at all. His denial says everything about his attention to detail and customer care. After checking the inventory we found several items missing including more than a full set of bedding and towels, something he also denied knowledge of. There was also no record of any inventory check since he began.

Seek recommendations for your staff

Although he was recommended by an online holiday cottage website, I should have asked for recommendations and perhaps tried to speak with his existing clients. So I tried harder to find a replacement with this fresh in my mind, but again this was rushed through since we were there only a week and had new guests arriving after our departure. I found someone who had two of his own holiday apartments about an hour away from ours, he said he now cleaned his properties himself as he had had similar experiences to us. This time it was better but still we found too many issues during that second year, he too then sub-contracted the cleaning, and his arrogance and reluctance to speak with guests during their stay, unacceptable.

For the third and subsequent years we have been blessed with a fantastic cleaner who also part manages with me, this time recommended by word-of-mouth. She does not wish to have lots of properties to clean as she realizes that her standards might inevitably slip. Her friends joke that she has OCD for cleaning. We repeatedly get comments from guests complimenting her and thanking her for such a clean house and smiling welcome. We know that she does an enormous amount towards our repeat bookings and recommendations.

I take time to listen to her if she has any concerns with bookings or her responsibilities, she also has valuable advice on improving guest experience and cost reductions. She also informs me on each check out if any guests have caused damage or an issue which needs more of her time to resolve. This gives me time to evaluate as to whether any damage deposit should be withheld or absorbed into overheads.

It is worth considering, when interviewing potential cleaner caretakers, to ask if there is anything they would prefer not be responsible for, or anything that concerns them about your property. For example, we used to keep all our spare linen and consumables in dry storage, in the loft space, however not all people are happy with going into attics, some even have a phobia of them.

4 simple improvements

Try leaving some personalised postcards for your guests to send to friends and family

There are many improvements you can make to increase customer satisfaction and gain new and repeat bookings, here are 4 simple ones:

• Remember that cleanliness really is the big issue. Keeping your property spotless and well maintained is vital so if you’re unable to do it yourself, make sure you find someone you can trust. A dirty bathroom or fridge makes for bad reviews, which could deter future customers from booking.

• Consider installing a hot-tub if you have space. Adding one to your holiday home is likely to increase its desirability. We did not have the space however we fitted a large wide bath with a luxury overhead rain shower, it gets most of the glowing comments in our guest book.

• Providing a welcome pack including locally sourced fresh products, a bottle of wine and the local paper (with a 'what's on' guide) is a nice touch. We also leave a few postcards. Since the cottage is in Cornwall, guests also receive a Cornish Cream Tea of scones, clotted cream and jam which helps make guests' arrival more welcoming, easier and creates a lasting impression. If you can accommodate guest dietary preferences in this that will also illustrate your willingness to understand their needs. It's amazing how much thoughtful touches like these can increase the likelihood of your guests re-booking or recommending your property to others.

• Most holiday makers expect the same mod cons they'd use at home, so a washing machine, dishwasher, microwave and free Wi-Fi are pretty essential, and a tumble dryer a bonus. You may also want to consider a coffee machine, sandwich toaster, slow cooker and other technology such as a DVD/Bluray player and Xbox.

I bought a Sony Blu-Ray and DVD player which has been perfect, no complaints from the guests, easy to use and takes up little space. I bought it from Amazon and this link takes you to the newer release of the same model. You may find something here more suitable, I just went for the simpler less expensive model.
We don't provide a sandwich toaster but the toaster makes 4 slices at once, we've had it since 2010 and it's still working fine, looks new, just remember to empty the crumb trays every week.
For coffee, we provide two types of coffee percolators rather than a larger machine with capsules. The most popular which works best on gas or induction hobs is this Giannini caffettiera or this one by Bialletti, if you want to know why, you can read another of my blogs at "So you want to live in Italy".

Be your own property manager

You've already decided that you'd like to turn your property into a holiday home, and you'd know like to begin the process of renting it out to guests in the weeks you don't use it. You do not wish to employ an agent to do this for you, or at least not completely.

There are many reasons perhaps of why you came to these decisions, and these reasons are important in understanding what you need back from your investment so far and for the inevitable investment of setting up to run it as a business.

For myself it was because I was living there less and less due to work contracts taking me to other countries. It was my main home, my only property, and I had tried residential letting for brief periods, but often the income didn't even cover the mortgage and maintenance costs. True, the tenants were responsible for all utilities, Council Tax rates and keeping it in good condition but so often not all tenants will respect that.

I discovered, after the last tenant vacated, a lot of damage and neglect but more importantly, rising damp which she had lived with without telling me, in fact had actually tried to hide it believing it was her fault. By this time I needed to make major repairs and decided to completely renovate, adding a second bedroom. After this huge expense and investment I decided that holiday letting would better provide regular checks on the property, any repairs could be done immediately, provide an income which would potentially cover all overheads and provide a little profit to put back into the property as and when needed. It also meant that I could stay there during the weeks it wasn't booked.

Pros and Cons

I started by listing all the pros and cons of running this as a small business and the more I researched the more it became a no-brainer to make it a holiday let. There are some things that I considered when coming to my decision to becoming a holiday home owner including:

• What will be the start up costs?
• What will the weekly, monthly or annual overheads be, including mortgage repayments?
• What is the minimum annual income I require to run the business without a loss. In other words what is my break-even point?
• How many years do I expect it to take to meet that break-even point. Was I prepared to make a loss for this time, could I carry that?
• Is my property in a desirable location? Why? Does it have enough of the right qualities and amenities? What are the benefits?
• What is the competition like? Are they close by and how do they compare to mine?

Ask for advice from holiday letting agencies

Before I could fully answer these questions I needed to make more research and approached a local holiday agent (as against a national one) to ask their advice. They were Cornish Cottage Holidays and even though the property was still looking more like a building site they were happy to visit and discuss my plans as they they did not have many properties in that local area and were keen to expand.

Once the cottage reconstruction was complete and furnished, they visited again and seemed genuinely impressed as they entered the property for the first time. This is one of the most important aspects of having a holiday home, the welcome the guests feel when first setting foot inside after an often long journey to get there. Cornish Cottage Holidays were keen that I signed up with them and I liked what I heard from them regarding their attention to detail and support. However, I was concerned about the 20% fee they would take from each booking, I knew that without them it would be slow going to get established and they had 40 years of experience in the region which would be invaluable to me.

I had also sought the same advice from one of their competitors, however the response I had from them was more distant and they were reluctant to visit the cottage first. To clinch the deal Cornish Cottage Holidays offered to waive the registration fee and drop their commission to 15% for the first year.

So my original aim of me managing the property totally by myself had now been watered down a little, by taking away the initial pressure of marketing and leaving that to Cornish Cottage Holidays along with getting bookings. I would begin my own marketing in parallel during this first year with the aim of reducing my reliance on another company.

If you do take the same route and sign up with someone for similar services, make sure that you are not tied to them for an unrealistic period of time and that it is not for exclusivity. With Cornish Cottage Holidays any owner's bookings were limited to five weeks in the high season and anything above that would still attract their commission fee (+Vat). One downside to using an existing online marketing solution is that they will want to protect their own client list and maybe reluctant to pass on your guests email to you, although you will most certainly receive the guests' phone numbers. This is slowly changing and you will now find that most will have a way for you to contact your clients by email even after they have finished their stay.

Similarly when you make a booking of your own and you relay it to the marketing company, don't feel that you need to give them any guest contact details unless you have an agreement that they will deal with any issues arising with your guests during their stay.

I will deal more specifically with that in another post.