Hiring a Vacation Rental Management Company

By: , Contributor

Published on: Jan 07, 2020

With hundreds of companies vying to look after your vacation rental property, here's how to find the one that will care for and monetize it the way you want.

As anyone who's ever worked in hospitality can tell you, looking after other people's holiday is no picnic. Do you want to be held responsible for everything from the showerhead's resting angle to arranging early check-in for guests with midday arrival times? Are you ready to provide email responses within a one-hour window? If you're not -- but you still want to earn short-term rental (STR) income from your properties -- then you need a vacation rental management company.

According to iPropertyManagement's most recent roundup of vacation rental industry statistics, 2019 started off with more than 23,00 vacation rental management companies doing business domestically. Of that number, only 10% manage more than 100 units, and 20% manage 20 to 99 units. Most vacation rental management companies service under 20 units each.

So, finding the right property manager to take your vacation rental business to the next level isn't just for owners with a big portfolio. There are many companies willing to take on owners with just a couple of properties. Finding the right one is a matter of knowing what you need, what you're willing to pay, and how to look.

What does a vacation rental property management company do?

Many of the functions that these companies perform are the same as what regular property management companies do. On the operations side, they coordinate on-the-ground services and vendors as well as guest experience during the stay. On the customer relationship management (CRM) side, they oversee the work of getting "heads in beds." A typical breakdown of services looks like this:

CRM services

  • Marketing/promotions
  • Handling customer inquiries online/by phone
  • Booking guests
  • Collecting payment and deposits
  • Utilizing software such as dynamic pricing tools to maximize profit and online presence.
  • Staying up to date on and ensuring compliance with local legislation and community bylaws

Operations services

  • Managing cleaning service/housekeeping
  • Scheduling maintenance, landscaping, pool cleaning, and other vendors
  • Security oversight
  • Customer experience, from check-in/key handover to answering emergency inquiries to arranging special services, such as a stocked kitchen
  • Inspections, pre- and post-stay

How do vacation rental management companies charge?

There are two broad ways to structure fees in this industry: flat fees and percentage of rent collected. Either way, the fees are structured around how many units are under management and how many services are provided.

A general rule is, the fees for STR management are a much higher percentage than for long-term rentals.

Fees

Fees for managing short-term rentals, i.e., vacation rentals, can fall anywhere in the 20% to 40% range, with the industry average ranging between 25% and 30% of rents collected.

Fees for managing long-term rentals are substantially lower, at between 8% and 12% of rents collected, according to industry sources like iPropertyManagement. This is because the much lower turnover means much less effort to upkeep and market the unit(s). Be aware that even if the company you're working with offers long-term property management, if you ask them to rent your property out for periods shorter than 90 days, they'll bump you up to the STR rental fee structure.

Management companies with a range of services that include CRM and operations may offer a combination where they get paid a flat minimum plus commission on bookings they secure.

Contracts

Many management companies require that an agreement/contract to be in place engaging the management company for a one-year period, with a clause to terminate within 30 days if services are not satisfactorily performed.

These contracts are important for the management company but also for owners, since they should outline every service included in the rate, as well as additional costs that can be passed along to the owner. This itemization lets owners add in services that they foresee may be important (such as emergency on-the-ground response outside of business hours) for a lower monthly fee and negotiate to remove services that they may not want (like redecorating or staging the property).

Owners should also request clarification of service deliverables that are not adequately explained in the original agreement. For example, if a fee includes "marketing on major booking sites," ask how many sites and which ones are included in that fee.

Having a contract and understanding the terms before signing is important. The contract provides owners an "out" if the management company isn't adequately performing the contracted services, and it allows owners to see a breakdown of what they're paying for, including commissions on bookings and how those are calculated.

It also prevents owners from being charged exorbitant one-time fees for services that fall outside of contract but are deemed necessary in the moment. Emergency on-the-ground services outside business hours are a big one here.

For example, if guests accidentally lock their keys in the house and need someone to let them in on Saturday at 9 p.m., a company that is contracted to do off-hours emergency response should have a person on call to meet the guests and let them in for no additional charge. If this is outside the company's service contract, they may simply provide the number of a locksmith and pass the cost to the owner. Or they might charge $200 for an off-hours visit.

Choosing a vacation rental management company

Because there are many competing companies in this field, and national companies compete with local, the online marketing is intense and can be overwhelming. Most blogs you'll read about vacation rental property management are actually written by property management companies, and they all boil down to the same two points:

  1. You need a company to handle all aspects of renting your property.
  2. It should be their company.

The first point is not true across the board, and the second is quite questionable.

So, if Professor Google can't lead you to your ideal vacation rental management company, what other steps can you take?

  • Ask your local tourism office or chamber of commerce.
  • Ask other landlords you're friendly with for the name of a company they like and trust.
  • Ask your homeowners association (HOA) or neighborhood business networking groups for recommendations of companies doing business right in the community. This is a bold way to find out, since HOAs and STR businesses clash frequently. But if anyone's keeping an eye on the vacation rental action in their neighborhood, it's these two volunteer contingents.
  • If you work with a real estate agent, ask them -- but be aware that most real estate agents either want to perform these services themselves or are actively trying to partner with a company that will refer business to them and vice versa. So their opinion likely needs to be taken with a grain of salt.

Once you're speaking with companies, you'll need to screen them:

  • Ask for references from existing clients.
  • Ask for specifics of their marketing strategy -- going back to the point about which online travel agencies (OTAs) and platforms they advertise on, and whether they have a professional shooting photos and writing listings.
  • Look at the listings of other properties in their portfolio.
  • Ask about their dynamic pricing strategy.
  • Understand very clearly what their definition of and deliverables for "regular maintenance" are.
  • Query them about their standard packages and pricing structure. Understand what is included and what is deemed an add-on.
  • Review standard contracts to see what you'll be locked into if you engage a company.

Can software and industry sites take the place of a vacation rental management company?

On the CRM side, if you're savvy with digital marketing and quick to respond to incoming inquiries, then yes, you might be able to fill this role. Just be aware that it entails much more than listing your property on VRBO and Airbnb. Proactive marketing entails listing and promoting properties on anywhere from three to 20 listing sites and OTAs. You'll probably need a mix of international-facing platforms like FlipKey and local ones. Social media and digital marketing including search engine marketing (SEM) will also be important.

On the operations side, software probably can't take the place of manpower. There are certainly software tools that help streamline and automate certain aspects. For example, many property managers are testing out smartphone-powered "virtual keys" and remote check-in tools. Smart security such as video doorbells and remote gate openers are also a boon to vacation rental property owners.

But for property inspections, maintenance management, and weather/emergency response, you need a team on the ground. Not just any team, but one that meets all your needs and can be trusted to take care of your properties as diligently as you would. And the screening guidelines found here should help you do exactly that.

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