How to Succeed in Temporary Rentals?
By Nathan Guss |9 min|September 2023
Looking to get started and then thrive in the STR market? Get the lowdown on rules, setup, management, and more in this comprehensive guide.
Do you have a property that you’re thinking of listing for short- or medium-term rental? Or perhaps you’re looking to optimize your existing listings? Here’s a basic guide of what you need to know before getting started.
Understand Local Regulations
In Canada, the rules governing short-term rentals (STRs) are primarily set at the municipal level. Before embarking on an STR venture, you should check with your local government about regulations. These can include zoning restrictions, licensing mandates, safety and security requirements, and even outright bans in specific areas.
Consider the recent, much-discussed developments in New York City. The rise of platforms like Airbnb in the metropolis has led to stricter regulations to address housing shortages and maintain neighbourhood dynamics. Non-compliance with these rules now results in hefty fines, legal complications and the removal of listings. This example underscores the importance of understanding and adhering to your city’s rules.
Due to rising concerns about housing costs, the regulatory landscape for STRs in Canada is rapidly evolving. It’s not only essential to be aware of current rules but also to stay informed about potential changes. Your municipality could be in the early stages of drafting new regulations or amending existing ones. By keeping a finger on the pulse, you can gauge the long-term viability of your STR business and make informed decisions that align with both current and anticipated local guidelines.
Research the Local Market
The next step is to research local market dynamics. Canada has witnessed a significant rise in STRs, with their revenue share in the accommodation services subsector doubling from 7.0% in 2017 to 15.2% in 2021. This growth underscores the increasing preference of travellers for unique accommodation experiences.
However, markets vary considerably across regions. For instance, while Prince Edward Island saw STRs accounting for a significant 29.9% of accommodation revenue in 2021, larger metropolitan areas, such as Edmonton had a more modest share at 2.1%. Montreal, on the other hand, stood at 14.5%. Such disparities highlight the importance of understanding regional demand and competition. Some markets are saturated while others still have plenty of potential.
To effectively navigate your market, consider the following:
- Demand analysis: Identify who the typical renters are, peak seasons, and any local events or attractions that might drive demand.
- Supply analysis: Examine the number of similar listings in the area, their occupancy rates and the amenities they offer.
- Pricing: Research the average nightly rate for rentals in your target area and understand how pricing fluctuates based on property type, amenities and season.
- Feedback: Read reviews of other properties in the area to gain insights into guest preferences and potential areas for improvement.
By conducting thorough market research and understanding these key aspects, you can position yourself for success and ensure your rental’s viability in the competitive STR landscape.
Short-Term or Long-Term Rental: Which is Right for You?
Set Up Your Accommodation
Successfully setting up an STR unit goes beyond just furnishing the space; it’s about creating a memorable experience for guests. Start with the interior design and décor. A neutral yet modern design can appeal to a broad audience, but adding touches of local art or your own creative touches gives guests a feel for the place and culture. Strike a balance between style and functionality, ensuring the space remains clutter-free with ample storage for guests to unpack and feel at home.
Amenities play a pivotal role in guest satisfaction. While certain basics—Wi-Fi, clean linens, and toiletries—are a given, consider going the extra mile. How about a coffee machine for the morning caffeine fix? Streaming services for entertainment? Or even a guidebook filled with local recommendations? And make sure visitors are comfortable: investing in quality mattresses, bedding and pillows is non-negotiable. A good night’s sleep significantly influences guests’ overall experience. Additionally, cater to diverse needs by creating distinct areas within your space, be it for relaxation, work or dining.
Lastly, communication is key. Leave clear instructions for your guests, detailing everything from appliance usage to the Wi-Fi password. And always be open to feedback. Your business will thrive on continuous improvement, and there’s no better way to enhance your offering than by listening to those who’ve experienced it firsthand.
Choose a Management Strategy
You face a pivotal decision when you are getting into short-term rentals (STR): should you manage the property yourself or entrust it to a professional management company? Each option has its merits and downsides for your time, effort and finances.
Self-managing an STR can be cost-effective. Without management fees, which can range from 10% to 30% of the rental income, you can maximize your profits. This approach also allows for a personal touch, as direct interactions with guests sometimes lead to better reviews and repeat bookings. That said, hands-on management can be time-consuming. From fielding inquiries and overseeing bookings to maintaining the property and communicating with guests, the responsibilities can quickly become overwhelming. Additionally, without the right experience or tools, you could make mistakes, such as double bookings or poor pricing.
On the other hand, a management company brings the advantage of expertise. These firms, with their industry knowledge, often achieve higher occupancy rates and always set competitive prices. They use advanced tools and software to streamline the rental process, from bookings to guest communications. However, this convenience comes at a cost. As mentioned, management fees can significantly reduce profits, and while the rental process might be smoother, you relinquish a degree of control. The company will probably make decisions about pricing, guest interactions and even property maintenance.
The choice between self-management and hiring professionals hinges on an owner’s priorities, available time and financial goals. It’s a balance between the hands-on, cost-saving approach of self-management and the convenience and expertise offered by professional firms. Whichever path you choose, be sure it fits your vision and circumstances.
Keep Up with the Latest Trends and Regulations
In the ever-changing STR industry, you need to stay abreast of the latest trends and regulations. Here are some resources to stay informed:
- Stay tuned to this blog for updates on the temporary housing, STR and insurance housing industries.
- Airbnb’s Community Center offers a wealth of insights and a place to discuss issues with other hosts.
- Skift is a media giant in the travel and hospitality sector. Its in-depth articles, research, and reports shed light on broader industry shifts, often providing a macro perspective that’s invaluable for hosts looking to understand the bigger picture.
- Local government websites are essential resources, especially given the diverse regulations across Canada’s provinces and municipalities.
- Industry conferences, such as those held by the Vacation Rental Management Association (VRMA), are learning opportunities and chances to network.
- Social media provide hubs for real-time information. Follow industry experts and seasoned hosts for their tips and takes on the latest news.
The temporary housing industry has been rapidly expanding and changing. Be sure you have all the relevant information before you jump in. Every decision related to the areas outlined above benefits from thorough research and a keen awareness of what’s happening in the market. Best of luck with your future rental business!
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