During Part One of our conversation with Heather Nicely, we talked about the pros and cons of adding short term rental (STR) properties to an established portfolio of long term rentals.
Today, we’re getting more into the state of the STR market and how you can set yourself apart and serve owners better.
Market Saturation and the Rush to Short Term Rentals
There has been a rush towards short term rentals because investors wanted to capitalize on the rise in travel. Then, a single tweet set off alarm bells about many markets being over-saturated. Articles came out about people who lost money on short term properties, especially during the Super Bowl in Arizona. They were expecting to make more money.
The (incorrect) data in that tweet induced a bit of a panic. The snapshot they showed of a few key markets alleged that there was a drop in revenue of 47 to 49 percent. Everyone thought this meant the Airbnb industry was collapsing.
If you drill into this, it’s not true at all.
You have to know your own numbers to accurately know how the market is performing. Heather says that property managers have a duty to know how the market is actually performing so they can be honest with owners and tell them what’s a good idea and what’s a bad idea.
Grabbing onto every hot take on Twitter is never a good idea.
Panic posts are set off by people who are not even in the industry. It’s very easy to get more accurate data on your own. Even better – study your own data and know your own market.
Heather says you have to give your owners that reassurance. Increasing revenues on their own properties is really all they’ll care about. It’s important to encourage owners to stay focused on their own properties and not latch onto viral tweets.
In Arizona, there was a bit of an exodus after the Super Bowl. People thought they’d be able to pay off their entire mortgage after one good rental season. Now, the gold rush has passed and people who should not have been in the industry have left the industry. That’s not such a bad thing.
Heather works daily with investors, and she knows that her market isn’t the best market for everyone. There are still deals to find in and around Phoenix, but you have to know your numbers and you have to know that costs are higher now. Interest rates are at an all-time high. Insurance costs have risen. There are a lot of economic factors influencing the market that have nothing to do with whether it’s saturated with short term rental properties.
Short term rentals, like long term rentals, are not a get-rich-quick scheme.
Shifting Investment Mindsets
Recently, the behavior of the market has caused a mindset shift with investors.
They’re especially viewing mortgages differently. More capital is going into properties than before. That’s good news to Heather, who often has to have difficult conversations with the investor who only has $30,000 to put down on a short term rental. They have to talk about whether that’s possible with the interest rates so high. They’ll need money to furnish that rental and prepare it for bookings. Will they make it through a month when bookings are down? Short term rentals are seasonal, remember.
Conversations have changed over the years. Rates are higher, and getting approved for more money is often necessary. So, more capital is needed. Heather doesn’t feel bad when she has to talk someone out of a STR investment. She doesn’t want to have to sell that house in a year because they couldn’t afford the property.
As a property manager and real estate professional, it’s often your reputation on the line when an investor wants to make a bad decision. Make sure there’s a back-up plan. For example, if the property doesn’t seem to work as a short term rental, will it work as a mid-term rental for 30 or 60 days? Is it close to a hospital, where visiting nurses may rent it? Or, could it make an ideal long term rental?
The benefit, if you’re already a long term property manager, is that you already have the information to evaluate a property. You can talk about all the options.
Unraveling the investor who is determined to make a bad decision usually involves encouraging that investor to work with someone else. Heather says there’s never an “I told you so” moment. She’s still serving the industry.
Hospitality and Short Term Rentals
Heather is looking forward to what artificial intelligence (AI) can do for the industry even while stressing that hospitality is absolutely critical. The personal presence will always be necessary, especially since a live person is required to clean between tenants and wash linens and solve problems.
The influx of new technology makes it look easy. But, the hospitality comes first, and the tech supports the hospitality.
According to Heather, individual hosts, even if they don’t know much about property management, do a better job at providing hospitality than rental managers. They’re more hands-on. Property managers will be more interested and more prepared to leverage technology to increase efficiency and revenue per door.
Short term rentals are a hospitality business. This is another big difference between your STR portfolio and your long term properties. You cannot replace the personal touch.
Syndicating Vacation Rentals: RentMyVR
In addition to everything else we’ve learned that Heather does, she’s also the co-founder of a new platform called RentMyVr. We asked her to tell us more about this venture.
She said that most hosts rely on Airbnb and Vrbo to drive bookings, but there wasn’t a single spot where a traveler could search all properties on all platforms at once. No one had brought them together yet, so Heather decided it was time. She thought it would be easy.
It has not been easy.
The process was to create a search engine for short term rentals. It gathers all of the homes available, regardless of the site they’re on. Users can see a list of links that can be used to book. Every platform is different, and the cost might be different, too, depending on the insurance that’s required or the fees that are charged.
RentMyVR provides a page where it clearly shows every link where you can find the property. Maybe it has a YouTube video or a direct booking offer. All of the data about that property comes together in one place. This allows guests to make more informed decision.
There’s also a management company directory. The platform launched seven months after Heather first had the idea.
There are no plans to be a booking platform. Instead, the goal is to drive traffic to wherever a host’s booking platform is. Heather is also hoping to change the way reviews work. If you get bad reviews on some platforms, they just deactivate your listing. If you’re a crappy host with a crappy property, you simply set up a new listing. That’s hiding a problem. Most people want to see the bad reviews.
Heather welcomes feedback and says they’re in the sponge stage of development, where they’re absorbing everything they can. They’re also providing a platform to smaller sites such as LodgeLovers, which has become one of their preferred partners.
The marketing piece is necessary. You can be the best property management company in your market, but if you’re not showing up online when people search, you won’t get the business.
All property managers can appreciate that RentMyVR is being built by someone who is already in the property management space. A lot of tech solutions, it seems, are built by people who know tech but they don’t know the industry.
Not many people do know this because they’re not marketing themselves. It’s not a user-friendly experience, and that could be why Google isn’t pushing its platform too hard. People still want to go to a website and scroll through properties.
Heather has been extremely helpful in talking about the short term rental space and whether it might work for your property management company. Go to RentMyVR.com and check out the search function. If you have any questions at all, please contact us at Fourandhalf.