Create your own vacation rental business plan template

What is the step-by-step guide for writing a winning vacation rental business plan? What are the startup checklists for rental arbitrage?

According to The Guardian, global tourism contributed over US$1.9 trillion to the global economy in 2019. In 2020, it was US$1.6 trillion. The record as of 2019 (pre-pandemic era) was US$3.5 trillion.

While we want you to imagine the huge amounts of money going into tourism on a yearly basis, we want to also afford you the opportunity to think about why you’re not taking advantage of the opportunities you have to take a sip (or maybe a gulp) from this global cash-cow.

The vacation rental business is a very lucrative business that can make you really rich in the coming years. It starts this year if you already have a property in a good vacation city.

Just like in every other business, diving into the vacation rental business without having a good knowledge of it can be compared to a suicide mission.

So in this article, we will explain to you how to create a successful vacation business plan. This would enable you to understand the details, benefits, and risks in the business. But first, let’s understand what a business plan is and why you need it to run a successful business.

What is a Business Plan and Why Do You Need It?

A business plan is a document that gives deep insight into the nature of a business, the industry in which it operates, the marketing and operational strategies, and the risks and opportunities in it.

In simple terms, it refers to a document that shows the goals of a business, a clear roadmap or plan to attain those goals and the duration it would take to attain them.

A business plan gives you a clear understanding of the vacation rental business and how you can run the company successfully. It gives you a clearer view of the industry you’d be operating in, the obstacles in it and how to overcome them.

A well-prepared vacation rental business plan would boost your chances in seeking funds for the business. Investment organizations love to invest in businesses with a good and measurable ROI (Return on Investment), and the vacation rental business is a typical example.

So all you need to do is to ensure your business plan is rich and well-prepared, and you’d have better chances of securing funds for it.

The purpose of this article is to explain to you the different components of an AirBnB business plan. So, in the coming pages, we will discuss the things that make up a vacation rental business model and how to easily explain to them when writing yours.

ALSO READ:

Components of a Vacation Rental Business Plan

  • Executive Summary
  • Business Description
  • Business Goals
  • Customer Analysis
  • Operational Analysis
  • Management Plan
  • Financial Analysis
  • Marketing Plan
  • Competitive Analysis

Let’s dive right into how to create short-term vacation rental business plans like those of Airbnb, VRBO, HomeAway, FlipKey or Vacasa. 

Executive Summary

How to write an award-winning executive summary for your short-term rental business

The executive summary is one of the most important parts of a business plan. It contains all the vital information in the entire business plan in a summarized way.

To write the executive summary of your business plan, it is advisable you write other parts of the business plan first. This will help you summarize in a page or two what the business is all about.

Here you’re expected to state the goals of your business, the mission and vision statements and possibly the core values you intend to uphold in running the business.

Talking about goals, you should be able to state how many guests or customers you want to host in the first and subsequent years of operation. How much do you plan to make in the first year? How much would be going into operational costs? Briefly answer these questions in your executive summary.

Where will your business be located? What is enticing about the location? Does it have a beautiful seaside view? Is there a tourist center in proximity? Rental businesses in any of these tourist attraction centers in Australia are perfect examples.

These are appealing facts you need to neatly and briefly tuck into the executive summary.

You should also be able to state your target audience. Is your vacation rental property for married people alone? Is it for students on a field trip? Or is it exclusively for business visitations and not romantic outings?

Anybody who lays hands on your executive summary should be able to see the answers to these questions without reading the entire document.

Business Description

This is the part of the business plan where you give a detailed explanation of what your business is all about. It is here that you describe the location of your vacation rental property. How many key tourist centers are close to it? Is there a relaxation center nearby? Is there a gym facility on your property or nearby?

Do you have a team, or do you operate alone? If you have a team, what are their roles and experiences in the industry?

You have to carefully explain what makes your vacation rental property worth staying in. You should also include here your business goals and objectives.

It is also here that you should give an overview of the industry you operate in. Who are your key competitors?

Business Goals

Your business goals can be infused into the business description. But should you want it to be properly elaborated on, you have to make it stand alone.

So, it is in this part of the business plan that you explain the goals you intend to achieve in your vacation rental business. Take a look at this business plan for an eye surgery company and see the similarities.

To set your goals, you can use the SMART formula for setting goals. That means your goals should be:

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Time-based

To put things into perspective, what that means is, that you should set SMART goals like:

  • How many guests do you want in a month?
  • How many guests do you want at the end of the year?
  • The specific amount you want to make at the end of the month and year respectively.
  • How many vacation rental properties you should have at the end of five years of operation
  • The number of direct employees you should have in one year, two years, or three years of business operation.

Clearly stating these goals would help you track the progress of your business at every point in time.

Customer Analysis

How to create your customer analysis in a vacation rental business model

This is the part of the business plan where you describe your ideal customer. To run a successful vacation rental startup, you need a full understanding of your target audience. Having a deep knowledge of your target customer, her needs, fears and expectations would help you build a perfect vacation space for them.

To do this, you just have to imagine what your ideal customer or guest looks like. Is he an old person who is looking to explore the world and enjoy his retirement age? Or a young American or European tourist who wants to travel the world and learn about the different cultures and lifestyles of people?

What is his income like? What is his personality like? Does he like a quiet and serene environment or a bubbling one or both? What is his profession like? Is he a lone traveler, or will he be coming with his spouse?

Knowing these details and including them in your short-term rental business model would help you design your rental property in such a way that it would suit your target customers’ needs. And you know what that means. A satisfied customer brings more customers your way.

ALSO READ:

Operational Analysis

One of the things that determine how long a business would last is how it is run or operated. A business that is poorly run easily goes bankrupt and eventually becomes non-existent.

This is why operational analysis is one key component of a sound business plan. In trying to master how to scale a vacation rental business, a swift and efficient operation of the facility will enable you to satisfy your guests and even have them as returning customers in the future.

There should be a laid down plan to take care of inventory, facility administration, management, and even take care of maintenance costs. A good operations manager leverages the company’s assets to ensure that existing customers visit again.

To ensure a well-run vacation rental facility, there should be personnel available to take care of basic but necessary things like housekeeping, lawn mowing, laundry, equipment repairs and maintenance. There should be tour guides available in case your guests need to visit tourist centers around the city.

Rooms and facility bookings, guest schedules and calendar management, inventory management, customer service, property insurance and licensing, and property marketing are other parts of the operational plans of the vacation rental business that needs to be taken care of.

In creating your vacation rental business plan, you need to take care of these things. Figure out how you can manage them. Whether you can do it yourself or you’d need to hire the services of professional property managers. These are the things you need to clearly discuss in your operational plan.

Management Structure

How the right management can scale your business

Is the management of the business a sole proprietorship, or is it a partnership? This is the section of the business plan where you discuss the ownership structure of your short-term rental business. If it is solely owned and managed by you, you need to state it here.

If it is a partnership or a corporation, this is the part of the business plan where you have to list your partners, their stake in the business and their percentage in the profit-sharing ratio. 

You also need to state their level of participation in the running of the business. Are there dormant partners amongst them? If there are active ones, what are their roles and experiences in property management or management in general?

It is also in this section that you need to highlight the human resources needs of your business. How many employees do you need? How many internal managers do you need to hire to ensure the employees are properly monitored and guided?

Finally, you need to describe how you intend to go about hiring the perfect fits for each role available in your vacation rental business. When incorporating your business, the consultant you are working with will ask you a lot of questions.

Financial Analysis

Knowing the purpose of a financial plan in a business plan will help you a lot. It will help you not to make unnecessary financial assumptions that would be difficult for your business to pull through. To be guided on how to draft out a solid financial plan, one question that keeps ringing in your head as a bell is;

How do I plan to finance the business? What is the vacation rental business checklist? Do you intend to finance it with your personal funds? If there are partners, will their financial contributions be enough to set the business up and running? Or will you opt for loan financing?

If you’re opting for loan financing, what would the interest rate be? What would the monthly payment be? How long does your business need to operate to service the debt and eventually break even?

It is in this section of the business plan that you state all the financial requirements of the business and how to meet them. A vacation rental business plan will serve as a guide so you don’t make any mistakes in your business.

Since you’re dealing with financial plans, it is necessary you make reasonable financial projections. Projections like:

  •  Revenue projection in the first and second years of operation
  •  Cost projections for the first and second years of operation
  •  Cash flow
  •  One-year profit and loss projections
  •  5- year financial growth projection (investors don’t joke with this)

Remember, the ultimate goal is to make money. So it is important you carefully prepare your financial plan. This is to let you know how much profit you should expect at every point in this business. 

Most vacation rental business owners know it should take a couple of months or even a year to break even, so they prepare their minds and not place too many financial expectations on the business. 

To properly assess the costs in the business, it is important you take a look at the financial statements of your competitors. They would give you an insight into the costs inherent in the business and how frequently they occur. Some of them are fixed costs, of course, while others like maintenance and marketing costs may vary from time to time. To give you a head start, these are some costs your vacation rental business can incur:

  •  Construction costs
  •  Mortgage
  •  Maintenance costs
  •  Insurance payments
  • Taxes
  •  Marketing costs
  •  Association costs
  •  Salaries
  • Interior and exterior decorations

Listing out these costs and adding figures to them will help you determine what your rental rate should be. Because you will need to set your rental rates in such a way that it covers your expenses and gives you some profit.

Only a detailed financial plan can help you achieve all these. It will not only give you a guide on the finances of your business, it’d also help convince investors that your business is worth taking a bet on. This is what shows that your business is a profitable investment opportunity.

It is your financial plan that will give potential investors an idea of how you plan to make money from the business, handle unexpected costs and expenses, run the business effectively outside the peak seasons and level up should the business be successful as planned.

Marketing Plan

How to write a marketing plan for your rental business

This is the section where you list the marketing strategies you intend to use to ensure your vacation rental property is always booked up. Remember, expenses will keep piling up whether you have customers or not. And coupled with the fact that you have competitors, you will only need to market your services or stay hidden.

Being able to market your vacation rental business will help you stand out amongst your competitors. It is affordable to advertise on Online Rental Agencies (OTAs) like Airbnb, Expedia, TripAdvisor and Bookings.com. Many vacationers use these vacation rental websites, so it’d be best if you strategically position yourself in one or two of them to earn your first 100 bookings.

Social media is another great platform you shouldn’t take for granted. Create a page on Facebook and Instagram for your business and ensure to always post on them. TikTok marketing is also another creative way to promote your rental business. Make sure to educate your audience about the services you render and thrill them with how you intend to give them an unforgettable vacation experience.

Incorporate customer reviews and ratings on your page, so your customers can rate your services and say how they felt about the entire experience. This will help add more credibility to you and earn a couple of customers in the long run.

Also, explain how you will give your customers an awesome service that they will always return on later dates and even recommend you to more people.

Basically, your marketing strategy should cover how you intend to market your vacation rental services to your target audience, both online and offline. It should also show your prospects how they can make payments to you. If you accept bank transfers or only cash transactions, your prospective customers should be made aware.

To ensure your customers always return to your facility when next they are on vacation, ensure you take their details the first time (especially their emails) so you can keep in touch and build a solid relationship with them. When you add new features to your property (maybe something they’ve suggested in the past), you email them to inform them about it. 

Email marketing is going to be one of your digital marketing strategies for your vacation rental business.

All these and more on how you intend to advertise your services should be included in this section of your vacation rental business plan.

ALSO READ:

Competitive Analysis

Just like in every other business, it is important you conduct thorough research on your competition for your vacation rental business. This is to enable you to know what your competitors are doing differently and how it is working for them.

You need to do in-depth research on their pricing strategy, target audience, services and even household amenities they made available to their customers. You also need to know the vacation rental websites they are listed on and how they positioned themselves on those platforms.

An exhaustive competitive analysis of your vacation rental business plan will help you understand your competition better and give you insights into how you can tailor your services to be better than what they are offering.

Conclusion

Preparing a detailed vacation rental business plan will help you take an objective look at the business and figure out how you can run it to actually make good profits.

You will understand better how to provide the best vacation services to your guests. This will of course result in your guests recommending your business and returning for another awesome service when they have the opportunity.

Finally, the vacation rental business plan will serve as a guide from the moment you start the business till when it would start bringing in awesome revenues. Do not make the mistake of venturing into a business without a solid business plan by your side as a guide.

Azuama Godwin
Godwin Uchenna is a content writer, copywriter and contributor at EntrepreneurBusinessBlog.com. You can connect with him on Facebook for your content writing services - https://www.facebook.com/azuama

    You may also like

    Leave a reply

    Your email address will not be published.