September 2, 2024 | 4 Minute Read
In April 2022, we launched our first Airbnb property here in Birmingham. This move was born out of necessity, as our original offer price and profit projections weren’t being met. Since then, we’ve converted many of our long-term rentals into short-term rentals, expanding to as many as 18 properties.
We’ve sold five and currently manage 13 short-term rental properties (a story for a future issue). Feel free to view our current list of Airbnb properties (shameless plug).
When we first started, our average daily rate (ADR) was over $200. However, it has since dropped to $130. The primary reason for this decrease is increased market saturation; the number of short-term rentals has more than doubled since we began, driving nightly rates down. Additionally, with the busy summer season behind us, lower occupancy rates are expected.
But here’s the good news: with our current strategy, I’m confident that we’ll not only boost our occupancy but also significantly increase profitability as well.
If you’re involved in short-term rentals or considering it, you’ll want to keep reading.
Direct Bookings
Finding a user-friendly platform for direct bookings, bypassing Airbnb or VRBO, proved challenging. Initially, I considered building a custom direct booking website, but the cost and maintenance were daunting. Another option was using a short-term channel manager (CMS) like Guesty or Hospitable, but the high monthly fees, loss of control, and potential issues with software and customer service made this less appealing. The onboarding process is lengthy, and terminating the service can be difficult. Don’t just take my word for it—read their reviews.
Our solution came with Booklee. For a flat monthly fee of $19.97, Booklee offers a straightforward one-page listing for each property.
We can import our property from Airbnb with photos and reviews to include in the listing. Additional functionality includes calendar synchronization (to avoid double bookings), and payment processing via Stripe for a 3.7% fee—much lower than Airbnb’s or VRBO’s 15% service fee. And, we can add unlimited properties too. This allows us to attract guests who want to avoid service fees and lower their costs, while also allowing us to still maintain our average ADR without discounts.
This is an absolute game changer for us. We’ve already seen several direct bookings within days. We’re also placing promotional flyers at each property with QR codes to encourage current guests to book directly on their next trip to Birmingham.
If you’re interested in trying out Booklee, SIGN UP for a free 7-day trial and enter the promo code REISCHOOL10 at checkout to receive a 10% discount on your first three months of any subscription you select. This special offer is only for our subscribers (current discount for all others is just the first month).
Insurance Companies
We collaborate with companies that provide temporary housing for insurance policyholders. These guests stay for two to six months or more, yielding the highest monthly rates of any guest category. This week, we received a $16,134.98 check for a September 15 – December 15 stay. The monthly average is $5,379.99 or $179.33 ADR for this period excluding discounts—pure profit.
This is the second check of a six month stay. The first check we received was for a June 15 – September 14 stay in the amount of $14,416.03.
For this six month stay, my total gross profit is $30,551.01 or an average of $5,091.83 monthly. No discounts. No housekeeping costs. No resupply costs. Just my normal monthly expenses (utilities, Internet, trash, yard, and mortgage payment) totaling $1,041.25. My average monthly net profit is $4,050.58. And, this guest may end up extending again after December.
This on a property I use to Section 8 monthly for $1,192 – $560.96 mortgage = $631.08 net.
Target Mid-Term Tenants
We’re also networking with healthcare companies, hospitals, and medical recruiters to attract traveling nurses, health care workers, and lab technicians seeking furnished accommodations for 28 days or more. With monthly rates ranging from $1,700 to $2,500 excluding utilities, this is a great way to generate steady and reliable income during the slower months from November through February. Longer stays mean less turnover, reducing housekeeping and resupply costs and resulting in decent profit margins even with a lower ADR.
Weekly Discounts
We’re still receiving many bookings through Airbnb and VRBO. By implementing a 20% discount strategy from Sunday to Thursday on Airbnb using a rule set, with no discounts on weekends, we’ve increased our monthly cumulative occupancy from an average of 53% to 72%. The rule set ADR’s are linked to Pricelabs (3rd party dynamic pricing service). These rates are then synced across VRBO.
Most of these guests are state workers, contractors, and business travelers seeking affordable accommodations during the week.
Our weekend guests are usually attending a family affair or a local event. Higher occupancy with lower rates is still more profitable than lower occupancy at higher rates. Do not forget that less turnover also means less housekeeping and resupply costs.
For properties blocked out on the above calendar with an /, those are our guests from insurance companies staying two to six months.
Adapting to the evolving short-term rental market requires creativity and strategic adjustments. Our multiple strategies of direct bookings, insurance company partnerships, weekday discounts, and mid-term tenants has been instrumental in navigating the challenges of market saturation and lower occupancy rates.
Embrace innovation, stay flexible, and continuously seek opportunities to optimize your strategy.
What works today, may not work tomorrow so constantly adjusting these strategies will be instrumental in keeping our short term rentals profitable.