Running a vacation rental is like running any other business. There are strengths, weaknesses, room for improvement and threats. Whether you have just started out or have been hosting for a while, at some point in time, it’s a good idea to analyze your business and determine what is working well and what needs improvement.
The Coronavirus pandemic has turned the housing and vacation rental market upside down, and although these are hard times, we strongly recommend to use this time to run an audit on your business and get your property completely ready for when the market recovers.
In order to do an analysis, we recommend you primarily examine two things: your vacation rental properties and yourself, as a business owner. There are many factors to consider, such as budget, target audience, market, price, etc. If you’re unaware of what your best attributes are, you may not be taking full advantage of them. Similarly, if you don’t know your weaknesses, you may not know what you need to improve on.
So how is your business doing overall? We’ve created 10 questions for you to evaluate your business, as well as a SWOT analysis template to help you along the way.
What is a SWOT analysis?
A SWOT analysis reviews the positive and negative aspects of your vacation rental business, both internally and externally, by identifying your business’s strengths, weaknesses, opportunities and threats.
Although it sounds like a scary marketing process – it’s not. Doing a SWOT for your business is very helpful, especially during these tough times. It forces you to audit your business and think about its future. SWOT stands for:
- S – Strengths
- W – Weaknesses
- O – Opportunities
- T – Threats
You know how your company was doing yesterday, how it’s doing right now but do you know where it will be tomorrow? This analysis is going to help you work things out and — more importantly — plan for it.
Internal SWOT Factors
The first things you should start evaluating when you’re about to run a vacation rental analysis of your business are the internal factors: your strengths and weaknesses. Think about what has happened and what is happening with your business right now.
Start listing down your businesses strengths and weaknesses. They are under your control and you may be able to change them over time.
Strengths refer to the tangible and intangible advantages your vacation rental has at its disposal. Think about everything your company does well and how it stands out from your competitors, like for example:
- Your vacation rental’s location
- Internal resources such as stellar, skilled and knowledgeable staff
- Tangible assets such as intellectual property, technologies, etc.
Weaknesses refer to the factors that keep your short-term rental business from growth or optimal performance. Understanding your internal vulnerabilities requires some important self-assessment. Think about everything your company lacks and what your competitors do better than you, like for example:
- Budget limitations
- Lack of smart-home technology
- Poor online reviews
- Lacking in amenities
- An outdated website
- Unclear unique selling proposition (USP)
External SWOT Factors
Opportunities and threats are generally outside of your control. You can try and plan for them or influence a positive change, but at the end of the day, it’s not entirely up to you.
Opportunities are things you can start doing to increase bookings, improve your online reviews or boost your revenue. Analyze the industry and look into your guest feedback and see if you can open up different sales opportunities or target new audiences. Some examples include:
- Underserved markets for specific travelers
- Few competitors in your area
- Emerging needs for your type of properties or services
- Press/media coverage of your company
Threats are anything that poses a risk to your business. The Coronavirus pandemic is considered a threat. Other examples include:
- Emerging competitors
- Negative customer reviews
- Changing regulatory environment
- Negative press/media coverage
Who should do a SWOT analysis?
Short story short, everyone –whether you’ve been in business for years or you’re looking to get started–should do a SWOT analysis.
If you’ve been in business for years, you should perform a SWOT analysis annually so you’re 100% sure that your business is running smoothly, you can anticipate problems, work on necessary changes or improvements, and make smarter decisions throughout the year. Essentially, an annual SWOT review should prevent you from losing touch with your company, guests, and industry.
While if you’re just getting started with your business or are planning to, a SWOT review is going to give you a strategic edge. Doing so should tell your break-even calculations and offer a more practical view of what to expect. If you need to seek funding, both should be included in your vacation rental business plan.
How to conduct a SWOT analysis
A SWOT analysis isn’t a scientific method of evaluating your company. There’s no quantitative way to calculate how good you do it. It depends on your ability to analyze and remember internal and external elements that could have an effect on your business. It’s not about making correct estimates, it’s about understanding what to prepare for.
Step 1: Get the right people involved in this process
Although significant business decisions normally ought to be taken by founders and senior managers, there is no such thing as “too many cooks in the kitchen” with a SWOT review. Having more input, even from people who don’t fully understand your business, will only make your business stronger.
You will also notice that if you have your employees in the process, you’ll get a stronger buy-in to the policy choices that come out of the analysis. You could even take this opportunity to run a customer survey – they can provide valuable insights!
Step 2: Host a brainstorming session
After letting your team know that you need their feedback, arrange a brainstorming session with them. You can either ask them to prepare lists of your business strengths, weaknesses, opportunities and threats or you can list them together. The idea is to not miss anything so try to write everything down. No matter how it sounds.
Step 3: Fill the gaps
Once you’re done listing down everyone’s ideas in four big lists, think about the ones that need more explanation. This is an opportunity for you and your team to ask questions that will determine how important each item on the list is.
You can also ask your group to choose their top three ideas for each category because you will probably see a pattern that will help you decide what to focus on.
10 Questions to Ask to When Conducting a Vacation Rental Market Analysis
1. Are you receiving as many bookings as anticipated?
What are your main company goals and objectives? Did you have a certain number of bookings you wanted to achieve? Compare your goals with your results and analyze the correlation. If you were anticipating bookings but ended up having a quieter time, find the reason behind it and what you can do to boost bookings. It’s most probably because of the pandemic but be sure there are no other reasons behind it.
Whether you allow instant bookings or inquiries, have a look at the pros and cons of each and decide which one would benefit your business the most. If you don’t allow direct bookings, perhaps you would like to try out this option for a certain time period and see the results.
How has marketing your rental been? Are you using all the available tools, such as social media? Or are you solely relying on listing sites? Have you shifted your strategy and have started targeting other types of travelers? Go above and beyond and advertise your rental, there are many ways to promote it.
2. Are you sticking to your budget?
When you initially started out in this business, you may have developed a business plan in which you calculated all the numbers in running a rental and had a budget reserved. This could include amenities provided, such as towels and bedsheets, coffee capsules, the bills you have to pay, etc.
Did you set funds aside in case anything went south? If you didn’t initially make a budget plan, it’s not too late! Start one now and make sure you write down how much you spend weekly and monthly. Be sure to include all the details.
3. Is the price right?
Many guests consider the price to be decisive when choosing accommodation for their vacation. In an ideal situation, you would like to match their price, but of course, that isn’t always the case. In most cases, it heavily depends on the guests’ budget.
Having too low of a price could mean your turnover profit won’t be as high, and you could also attract troublesome guests. Contrarily, if the price is too high, it may deter guests from booking.
Another scenario could be that guests are disappointed at the end of their stay because the price didn’t correspond to the property or service that they expected.
As part of your analysis, you need to make sure the price correlates in terms of the property structure and market. Have a look at what your competitors are offering by looking at listing sites for properties in your area. Perform a quick Google search to find other vacation rentals nearby. You could also look at online travel agencies to compare the cost per night of staying in a nearby hotel.
Remember that prices vary depending on the peak season and low-season. And in times like these, you need to research as much as you can to get the price just right.
4. Do you offer the right amenities and items?
Which items are essential to your guests? Are you offering all those items in your rental? Put yourself in the shoes of a guest and picture what they need. It may be the little things, such as dish soap and kitchen roll that actually go a long way in uplifting the guest experience. When evaluating your business, think of additional items you can offer, such as the must-have amenities for vacation rental homes. You might be surprised by what you discover on the list!
Of course, there are some things that are an absolute must nowadays, such as WIFI connection. But what happens if you don’t provide a TV? No problem! In this case, you just turn it around in a positive way. On your listing, you could say that your home is a retreat for peace and tranquillity where you can escape. If breakfast isn’t included, cross-promote with local businesses such as a coffee shop and offer your guests a discounted price for deliveries.
You can even think about including a welcome book and even a gift basket, giving your guests a more personal and friendly touch.
5. Have you made any mistakes?
Have you made any mistakes that have impacted your business? Here are a few examples that can be considered as minor slip-ups:
- Did you miss something in the cleaning?
- Did you think you had the right insurance but actually you didn’t?
- Did you not screen your guest beforehand and then they ended up stealing?
- Have you been paying the right taxes?
- Did you decide to do everything yourself when instead you think you should have hired a professional? E.g. photos on the listing site
- Was something missing for your guests?
Don’t worry, everyone makes mistakes, we’re all human after all. The most important thing is to learn from them and prevent them from happening in the future.
6. Have you familiarized yourself in areas you didn’t know?
If you didn’t seek professional advice or go through a property management company, how did everything go? For example, if you didn’t hire a professional photographer to take pictures of your rental, were your own photos successful in terms of receiving bookings?
If you decided to do some DIY, renovate your property or do some interior designing yourself, what was the result?
If you would like to familiarise yourself with the vacation rental industry, read blogs that give you insight into many different aspects. There are also tons of e-books, resources and courses available online which allow you to scale your vacation rental business.
7. Who is your target audience?
Who exactly is your target audience? Are there any similarities in the types of guests? For example, do you tend to receive more couples, solo travelers or groups? Are you marketing to someone in particular or do you have a wide variety of guests?
There are certain aspects in which guests tend to pay more attention when choosing one accommodation. Location is one of the determining factors. Have you done a vacation rental market analysis? Is your property situated where there is a high amount of international travelers and tourists visiting? Another aspect to consider is the type of neighborhood in which the property is located. Is it more suitable for families, senior citizens, or millennials?
Decide how the location of your rental and the property type affects the types of travelers you receive and work your way through that. Take into account how close your property is to the city center, or how far guests will have to walk to get to public transport. Do you have points of interest nearby?
Whilst you cannot improve the location of a fixed property, you can on the other hand market the property to appeal to guests. If your rental is in the mountains, promote it as a quiet getaway or an escape.
8. How has the vacation rental industry been?
Are you aware of the latest laws and restrictions on vacation rentals? Due to COVID19 there are travel bans and restrictions across the globe.
In Los Angeles, California, homeowners can only rent out their primary residence. This means homeowners must be present in the property when renting out for short term stays. In Hawaii, a new law was passed that limits the number of rentals allowed to operate to 1,715 properties in Honolulu.
What about the latest news on the industry? Following a recent shooting in a vacation rental in Orinda, California, the CEO of Airbnb has declared that the platform will ban party houses.
Are you aware of taxes and licenses required to run your business? It’s extremely important to keep up to date with the industry and find out how changes can affect you and your business.
9. What’s your reputation as a host?
Guests prefer to stay in an accommodation in which the owner has received very good reviews from previous travelers. Reviews help increase bookings, build trust, and help your business grow.
The opinions of your guests, in general, are a great way to find out what the strengths and weaknesses of your vacation rental are, and you can always learn from them by thanking them for helping you improve.
If you’ve received a negative review, take this time to analyze and understand why the guest was unhappy. Don’t use this negative review to get you down, but rather, to bring you up. Learn from it and avoid whatever the guest was unhappy about for the next guests.
Utilize guest reviews, especially if you’re lacking reviews, ask guests at the end of their stay to write a review. You can publish it on your social media and your own website.
Another way to build a reputation is by showing you’re an expert and local in your area.
Recommend restaurants where you can enjoy the local cuisine, places that only locals who’ve lived there all their lives know, or points of interest which tourists don’t necessarily know about.
10. How has the experience been overall?
Think about how the experience of running a vacation rental business has been on the whole. Running a business is no walk in the park. There may be ups and downs, it’s like a rollercoaster. Examine how the experience has been so far. Ask yourself questions the following questions:
- Has it been what you expected?
- Do you have any regrets?
- What can you do differently?
It’s a good idea to keep track of your progress by documenting it monthly. Write down your feelings and experiences. Don’t just do the analysis once and forget about it. Have it as one of your goals, complete this evaluation every 3 months or so.
How to use your SWOT analysis effectively
As vacation rental owners or property managers, you have to always prioritize and choose where to allocate your resources. A SWOT analysis will help you decide which areas to focus your energy and resources.
Once you’re done with your four lists and have a final version of your SWOT analysis, start building a plan for each of the items on the final list to leverage the advantages and opportunities and resolve weaknesses and threats. These initial strategies don’t need to be particularly complex or robust, although you may want to expand on them later. For the time being, just build a large action plan.
You can also use your strengths to improve your weaknesses, exploit opportunities to neutralize your threats, leverage your strengths to better take advantage of opportunities and prioritize specific weaknesses to prevent future threats.
Ultimately, it’s all about finding a balance between everything. Running a vacation rental market analysis with SWOT’s on a regular basis will prevent you from losing touch with your company, guests, and industry. More importantly, it will help you stay successful in a turbulent marketplace.
Once you’ve had time to digest and think hard about the most important items on your list, flesh out your action plan and get to work!