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How adding a service layer can help grow your holiday rental business

Guest post by YourWelcome.

The business model for holiday rentals is to drive a higher occupancy rate on your properties at the highest market rate. Good rates of occupancy vary depending on the market you’re operating in, the type of portfolio you manage and general economic conditions of the country and location. The ultimate goal is to sell 100% occupancy; however, what if you could sell even more than that?

There’s no doubt that pre-COVID, the holiday rental industry was booming. The success of OTAs combined with an influx of private equity and venture capital into the market demonstrated how the industry had gone mainstream. However, changes to commercial models of OTAs, alongside the pandemic, has put an end to the occupancy revenue boom… for now.

Responding to the changes

Occupancy revenue is constantly becoming a more expensive business model to follow. Three significant reasons for this include:

1. OTAs taking an increased percentage of bookings

OTAs previously had two types of models; a per cent of booking value or a listing fee. These models have now merged, and typically all now charge a percentage of the booking. In addition, their share has increased (as high as 18%) with onerous clauses introduced, like attribution and price matching.

2. Cost per acquisition per property is increasing

In order to grow your business based on occupancy revenue alone, you need to increase your portfolio. The cost per acquisition (CPA) of properties has risen over the years, mainly due to DIY holiday rental managers via Airbnb and the influx of venture-backed companies entering the market.

3. Your management percentage is dropping

The influx of ‘Airbnb Management’ companies looking to streamline operations, focus only on growth and take a low percentage of the occupancy fee is also affecting the market and squeezing your margins.

The success of adding a service layer

To combat these influxes, holiday rental managers are discovering the power of adding a service layer to their business. Analysis across our network of more than 20,000 properties shows us that:

$1 of service revenue = $1.60 of occupancy revenue

This is because when you acquire guests, you have additional costs to pay for that revenue, such as OTA, cleaning and guest management fees. However, selling a service (i.e. late check-out) is 100% profit for your business. This is the secret to selling more than 365 days of occupancy.

4 examples of services you could sell

  • Early check-in: guests will pay a premium for early check-in. This service converts particularly well if your target market is families.
  • Late check-out: most guests don’t often want to check-out early, especially if they’re staying in urban or beach areas.
  • Mid-stay clean: families are particularly keen on ordering additional cleaning during their stay. This service is definitely worth offering to guests if they’re booked in for more than five days.
  • Equipment rentals: many beach and rural locations offer equipment rentals to holiday rental managers. Investing in items such as beach chairs, bikes, and baby gear is relatively inexpensive, and guests will pay a premium for the ease of having them at the property.

Make it easy for guests to add services

Installing a point of sale (POS), such as YourWelcome, means you can sell services in a contactless way, reducing your costs and improving conversion.

Contactless guest-facing solutions allow your guests to spend more time on what matters - enjoying their holiday rental and making the most of the break from reality. Consider touch-free tech to boost your revenue and enhance their stay; it's a win-win.

About YourWelcome

YourWelcome is a smart tablet that is installed in properties and left out for guests. Out-of-the-box, the tablet comes prepopulated with a range of partnerships such as food delivery and tourist tickets, enabling property managers to earn a passive income from day one. It is the most used guest app globally and is installed in more than 20,000 short term rentals in more than 30 countries.

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