In the ever-evolving real estate and STR regulatory environment, short-term rental real estate investors must remain flexible and well-prepared to survive and thrive in an economic downturn.
The most common headwinds STR investors need to prepare for in all STR markets include:
1) lower occupancy rates,
2) decreasing revenues and ADR, and
3) oversupply of Airbnb listings
Here are some potential STR strategies to consider to help weather the storm and survive and thrive.
Lower Occupancy Rates
- Diversify Your Listing: Don’t put all your eggs in one basket. Consider diversifying your short-term rental portfolio to various types of properties, various peak seasons (that off-set each other), consider small multifamily to blend long, short, mid-term rentals in the same property, or explore unique accommodations like treehouses, container homes, or houseboats. This diversification can help attract different types of travelers, reducing the impact of lower occupancy in one segment.
- Target Long-Term or Mid-Term Stays: During periods of low occupancy, consider shifting your focus to long-term or mid-term furnished rentals. Offering furnished accommodations for extended stays can provide a more stable income stream and reduce the reliance on short-term bookings. It is a strategy that has worked very well for our portfolio over the years.
- Optimize Pricing and Marketing: Use data analytics tools to monitor market trends and adjust your pricing strategy accordingly. Additionally, invest in professional photography and compelling listings to make your property stand out and attract more bookings.
- Optimize your Airbnb Listings: Use the “promotion” (found in the calendar section) feature for Airbnb listings. Adjust your pricing daily. And update your listing description. We have found that this strategy boosts us in the Airbnb algorithm resulting in increased bookings.
Decreasing Revenues:
- Cut Operational Costs: Analyze your property’s operational costs. Each line item. Then look for areas where you can cut expenses without compromising guest experience. This might include renegotiating service contracts with wifi providers, landscapers, pest control, etc.. or finding more cost-effective maintenance providers. Shift away from expensive cable plans to WIFI only.
- Implement Dynamic Pricing: Utilize dynamic pricing tools or services to adjust your rates in real-time based on demand, local events, and competitor pricing. This can help maximize revenue during peak times and maintain competitiveness during slower periods.
- Focus on Repeat Guests & Direct Bookings: Building a base of repeat guests can be a lifeline during revenue downturns. If you have not done this in the past, there is no better time to start capturing every guests email address during their stay for marketing. Offer loyalty programs or discounts to previous guests, encouraging them to return and refer your property to others. Set up a direct booking site if you have not done so already. Hospitable provides a great solution.
Oversupply of Airbnb Listings:
- Differentiate Your Property: Emphasize what makes your property unique. Whether it’s exceptional amenities, a prime location, or a distinctive theme, highlighting these aspects can help your listing stand out in a crowded market. Add to create robust amenities; mini golf, corn hole, foosball, outdoor sanctuary etc..
- Stay Competitive with Pricing: While it’s essential not to engage in price wars, ensure your rates are competitive within your niche. Regularly review and adjust your pricing to stay in line with similar listings in your area. Use a pricing software tool to automate pricing to remain competitive.
- Focus on Reviews and Guest Satisfaction: Excellent reviews and high guest satisfaction scores can help your listing rise above the competition. Deliver exceptional guest experiences, address issues promptly, and encourage guests to leave positive feedback. Automation tools like Guesty or Hospitable are a must to put your management and response on auto-pilot.
The set it forget strategy for STR investors is a thing of the past. If your going to play the game you need to practice daily, go to the play book and rewrite your plays, and execute with focused intent to remain competive in the current market.