Wealth Strategies – Why Real Estate Owners Are Turning To Vacation Rentals

Wealth Strategies - Why Real Estate Owners Are Turning To Vacation Rentals

There has been quite a stir in the real estate market in cities and tourist areas as property prices appear to be on the rise. One of the key reasons for this rise in value is because the vacation rental property market is on fire at the moment. Property management businesses and holiday home owners have been cashing in on what is not a new market as such, but a market that has seen a sudden and astronomical spike in business.

The vacation rental property business has hit the World Wide Web hard giving hotels a run for their money and entrepreneurs the chance to make a business out of properties in tourists hot spots. Airbnb, HomeAway, FlipKey, Lodgify, Expedia, Booking.com, and several other travel accommodation booking websites are the reason behind this industry boom. 

Listing Properties For Daily Rent Is Extremely Profitable

Profit margins when renting properties out to tourists or business travellers far exceed the rates that can be pulled in via traditional rental contracts. 

With a traditional rental contract, the tenant signs a long lease pays a deposit and pays monthly. With a vacation rental property, the property is only leased for a few short days or weeks to holidaymakers or business travellers. Those renting their properties to tourists are able to slightly undercut the rate being charged by local hotels but considerably increase the rate well above the amount that would be paid on a monthly basis by a long term tenant. 

A property that would have a monthly rental rate of $1,000 a month using the traditional yearly contract can be filled for just 25 days a month on the vacation rental market for $100 a day. Thatโ€™s $2,500 thus the owner of the property makes more than double the amount of a traditional rental contract.

Vacation Rental Websites For Real Estate Owners

Agoda used to be one of the most visited online travel websites for hotel bookings. However, with the emergence of Airbnb, Agoda and similar websites to Agoda suddenly had a new challenger on the market. 

Once Airbnb proved itself to be a success, a brand new crop of travel accommodation booking websites emerged. These holiday home websites allow real estate owners to make their property available to people looking to book a private house or apartment for short term vacation or business purposes. 

Real estate owners do not need to undergo much marketing activities at all. Airbnb and the websites that followed all have their own marketing strategies in place to bring online traffic to their sites. All the property owner needs to do is make sure their place stands out above the rest in order to get a booking. 

Whatโ€™s more, is that the marketing strategies are so well executed property owners are able to list their available real estate on multiple websites. With properties listed on several websites, exposure is increased capturing a wider audience, and all these listings are placed on the vacation rental websites free of charge. The only time the property owner pays is when a booking is made in which the website takes a percentage. For example. Airbnb will take 20% of the total booking amount. 

Vacation Rental Automation For Property Owners

This trend has seen a rise in tech companies taking advantage of the market in order to help real estate owners and property management businesses automate their vacation rental businesses. Vacation rental software platforms, such as this one from Lodgify.com have been created so real estate owners in this market sector are able to manage multiple properties on multiple websites from one central location. 

Gaining Repeat Business and Brand Reputation

The software platforms by companies such as Lodgify are also ideal for direct bookings and eliminate the 20% fees charged by the free listing websites. Once the booking has been made via one of the vacation rental websites, the property owner can make the guests aware that there is a branded vacation rental website they can find out more information about the local area on. 

These websites also include a booking engine and descriptions of all the properties the real estate owner has available. In the future, the guest can book again via the property ownerโ€™s branded website in which there is no 20% fee. This allows the host to give a 10% discount while making 10% more from each booking. Guests that spread the word by word of mouth to friends and family direct people to the branded website and soon enough the website is taking bookings directly. 

Peak Season Profits

In places such as Japan, peak seasons include Cherry Blossom, Christmas, New Year, and of course the summer months. Traditionally hotels have charged up to 10 times their normal room rates during these peak periods. Vacation rental properties have been able to do exactly the same by treating their holiday home in the same way as a hotel would treat one of their vacant rooms. 

How Have Property Prices Been Affected?

At the moment the vacation rental market is still red hot and on the rise, plus shows no sign of plateauing at this time. Savvy business investors have seen this rising market trend within the travel industry as an opportunity to invest in a property that is sure to increase in price and make a healthy profit from the daily rental rates. 

The result of this has been an increase in property sales in many popular tourist areas in Europe, Asia, Oceana and northern America in particular. Some area of South America and Africa are also seeing properties being snapped up for the purpose of vacation rentals.  

According to an article in Marketatch.com Airbnb has driven up home prices and rents. Research suggests that a 10% increase in listings on Airbnb has resulted in property value increases of up to 0.64% and rental rate increases of roughly 0.39%. These are just statistics from metro areas in the USA. The vacation rental market is global and will be affecting property prices and rental rates worldwide.

This is exactly why investing in a market that not only allows property owners to make huge monthly profits way above the local market rate in comparison to traditional contracts but also the property as an asset increase in price. The investment is a no brainer to most real estate gurus, and as such a rising number of people in the property market are turning to the vacation rentals market in search of a successful business venture.


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