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No Vacancy: Maximizing ROI

5 Posts tagged with the goals tag
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Why aren’t you going to the HomeAway Summit this year? 

 

For those who are still undecided or are thinking of not going to the Summit, you are missing out on a great opportunity to improve your ROI.  The information, new ideas, connections and resources you gain at a Summit lead to reduced costs, increased sales and streamlined operations, all positive contributions to the bottom line.

 

We Saved Hundreds!  At last year’s summit we met the guys from Vacation Rent Payment, and after moving our credit card processing over to them we reduced our discount fees by more than 10% in 2012, saving us hundreds of dollars that went straight to our bottom line.  We will continue to realize those savings going forward (as long as we take credit cards) resulting in a direct increase to our bottom line revenue each year with no further action required on our part.  Smells like a winner to me. 

 

Even if that were the only benefit we’ve had from attending a summit we would say it’s worth it, but there have been so many more. 

 

Benefits Of Attending the Summit

 

Networking with other home owners – it’s tremendously valuable to converse with other vacation home owners and the Summit is the best place to do it.  You’ll meet people from all over the world who are eager to share what’s working for them in their business and to hear about what is working for you in yours. 

 

HomeAway gives you insider treatment – attendees are often invited to participate in beta trials for new products that HomeAway and other industry affiliates are creating to help us be more successful.  You get the opportunity to provide feedback and shape the finished product, plus you get access to it sooner and sometimes cheaper than the rest of the world.

 

Meet HomeAway leaders and influencers – The people who are growing our industry every day are all in attendance and highly accessible.  The question & answer sessions are very informative and provide a forum for us to praise, vent, question and learn.

 

5 Ways to Get the Most Out of Your Summit Trip

  1. Go into the summit with the mindset that you are on a treasure hunt for information that will be valuable to you and your business.  This is a great opportunity to set aside time to improve your business, so make the most of it because it may be the only time you do it this year.  
  2. Make a list of the questions and topics you are interested in ahead of time.  If you attend with a purpose you are more likely to get what you want from the Summit.
  3. Along the way find the people in HomeAway shirts and network. These people have great knowledge and can link you with the department heads and project leads that can move your business forward. 
  4. Make it a point to meet and greet everyone you make eye contact with.  “So where is your home?” is the easiest ice breaker there can be.  At minimum, you will learn about a new area of the world, at best you will learn a best practice or two and maybe even work a trade for a stay in a vacation home.  Bonus! Best Practice:  Make it easy to pass your information along.  Take some business cards, even if you have to print them at home.
  5. Take notes.  It worked in school and it will work in business.  Write down those epiphanies that are bound to happen as you attend sessions, talk with people and ponder your business.

 

The Bottom Line:  The HomeAway Summit can only make your vacation home business better.  You will hear great ideas from other home owners, you will get sneak peeks into what HomeAway is doing to drive our businesses, and it gives you the chance to tell someone at HomeAway about your idea (or beef) and actually have a chance to get something done about it, or at least understand why it is the way it is.

 

Between the ideas you will gain to cut costs and drive revenue and the write-off on your taxes (you are your accountant) it will be a great way to increase your ROI over the next year.  It will be time and money well spent. 

 

Here’s to HomeAway for bringing us all together for the good of our businesses!

 

Cheers!

Michael

 

Sign up for HomeAway Summit here: http://www.homeawaysummit.com

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in·vest  v.  To commit money or capital in order to gain a financial return. 

 

“It’s all about the R.O.I: Return On Investment.”

-probably said by every capitalist, ever, according to me.

 

If you are not actively looking for new ways to invest money back into your vacation home business you should be!  Here are just a few reasons why:

  • You can ALWAYS improve.  You can ALWAYS do better.
  • To differentiate your home from competitors.
  • To maximize the profitability of your business.

 

Angela and I embarked upon a new venture in recent months (totally unrelated to vacation homes) and have met with various capitalists (potential investors) along the way.  We’ve noticed that they all have the same approach when evaluating whether or not to make an investment.  They ask:

 

What is my return on the investment?

What are the risks associated with this investment?

 

These are the questions that we, as vacation home owner/operators, should be asking ourselves when considering making an investment back into our vacation home businesses.  Investments in this case mean any money we “spend” on our business with the intention of making us more money in return.  Like:

ROI pic2.bmp

 

To Invest, Or Not To Invest…THAT Is the Question.  Try this:

 

Step 1: Determine whether the expenditure will help you make more money (drive incremental revenue) or keep more of the money you are already making (reduce operating costs).

 

Step 2: Determine what other costs are associated with implementing the investment. Consider:

    • Delivery, installation, additional components needed to complete the investment.
    • Your own time to research, purchase and implement the investment.
    • Ongoing maintenance required to continue making or saving money via this investment.

 

Step 3: Determine the amount of money to be made or saved versus doing nothing, thus saving the investment funds for another opportunity.

 

Step 4:  Evaluate the riskiness of the investment.  How sure are you that you will realize your expected return? 

 

Step 5:  Decide for yourself whether or not the risk is worth the return.  If it is, implement.  If it isn’t, don’t. 

 

 

Some real life examples:

 

A Good Investment We Made:  $450 on a Power Flush Toilet.   After the umpteenth $150 “emergency” call to RotoRooter for a majorly clogged toilet in our guest bathroom we decided to try a Power Flush ToiletActual Return:  We haven’t had to call RotoRooter again for that toilet in the four years we’ve had it, and have since replaced three other clog-prone toilets with power flushers.  PLUS, happy guests who don’t have to endure the awkward conversation with us first and then the plumber about how the toilet got clogged. 

 

A Bad Terrible Investment We Made:  $3,000 on a Full Page Color Newspaper Ad. With a large % of Canadian guests we thought an ad in an Alberta, Canada vacation real estate special edition would generate at least one incremental booking.  Maybe even two bookings? Actual Return:  ZERO! Not even one inquiry that tied back to our special “promo offer” from the ad.  Ouch!  Lesson learned. 

 

Our Most Recent Investments:  $250 on Pool Rafts.  Angela’s idea, I needed convincing.  Anyone with a pool knows that rafts need replacing usually once a season or more.  These $120 pool rafts  supposedly do not tear or puncture; plus they don’t need to be filled with air.  Expected Return:  No more replacing pool rafts ($25-40 each), no more paying our PM’s to fill rafts, check for leaks and purchase replacement rafts.  Perhaps most importantly, our guests won’t be burdened with filling/patching/replacing pool rafts. 

 

$250 on Melamine Outdoor Dinnerware.  A line item in our annual budget is to replace all outdoor dinnerware for eating on the patio because, well, it gets nasty.  The plastic shows knife cuts and wear from dishwashing after only a few uses.  Expected Return:  Melamine is way more durable than plastic so it should last multiples seasons, show less wear and tear and give our guests a more pleasant outdoor dining experience.  Plus, one less thing for our PM’s to manage. 

 

The Bottom Line:  It takes money to make money and the minute a business stops investing money in its future it begins to die.  As vacation home owners we should always be looking for the next great investment for our business.  Once you have one, figure out what it will cost to implement, what it will cost to maintain, and how much extra revenue it can generate.  If the return looks good after considering all of the risks then pull the trigger and maximize your R.O.I.

 

Here’s to many positive returns on our investments! 

 

Cheers!

 

Michael

3


Angela and I have turned away five potential bookings for upcoming open nights in just the past 30 days!  Prom season is upon us and there is a growing trend among frothy high school seniors to convince their parents that a post-prom party at a “rented home” is a great idea.

 

We’d rather be vacant.

NoVacancy.png

We’ve been blessed with more than 500 bookings, this blog is about the dozen or so we would rather have said “Thanks But No Thanks” to.  For us, local social gatherings are one of several types of bookings which we have learned can easily lead to lost revenue due to:


  • Unnecessary damage to our homeMoney.png
  • Interruptions for the subsequent guests
  • Disputes with the offending group
  • Upset neighbors
  • Negative reviews

 

To protect ourselves against money flying out the (broken) window we have established a profile, for our business, of groups that we usually would rather not do business with. 

Copter.png

 

Our profile includes:


  • Bachelor/bachelorette parties, post wedding parties (police helicopter!)
  • Young adults without proper supervision
  • Bookings with pets (READ VR Dilemma: Pet Friendly or Pet Free?)
  • Groups staying less than 3 nights
  • Groups not inclusive of the person who has signed our rental agreement

 

Ultimately the list above equates to LOST revenue.  Broken windows, broken glass in the pool, stolen items, damaged furniture, scratched floors and police helicopters…oh my!  With only four hours between bookings, we don’t have the time to scramble while trying to resolve an unforeseen issue; vacation home owners get enough of those anyway.

 

There are three primary methods we use for screening our potential guests:


  1. Ask Them.  Seems obvious enough, right?  I’m amazed at how many owners I talk with who say they employ little to no screening for their inquiries.  We try to speak live with each person who books with us so we can ask them about their trip.  In addition to finding out why they are renting we often can provide great insight into how they can make the most of their stay.  Recall Delightful Memories?

  2. Google Them.  I spoke with an owner at this years’ HomeAway Summit who runs a criminal background on every guest.  While that may be extreme, the idea of doing a little diligence on the person/group booking your home is a good one.  Google makes it easy, and sometimes you uncover that your guests may have something very interesting in common with you.

  3. Get a Reference.  When considering large groups, like a traveling youth sports team, we will politely ask whether or not they have stayed in    vacation homes before and if they would be able to provide a reference.  If they hesitate, that is a red flag to us.


CASE STUDY -The Hawaiian High School Basketball Team:  Three years ago we received a call from a high school basketball coach looking to rent our home for his group of teenage boys.  Stopping just short of “Thanks but no thanks” we asked for a reference, to which he provided three.  After speaking with two of them, we said we’d only be comfortable with a larger security deposit.  He obliged.

 

We set clear expectations of how our home should be treated while asking if there was anything special they would need for their group.  He asked for a large rice cooker.  We obliged.

 

THE RESULT:  Their stay was fantastic, no trouble whatsoever.  He has rented from us three more times for a total of six weeks and they are model guests.  We no longer require any cash deposit (just the cc# in our agreement) and it’s a giant “Love fest” between us with gifts and thanks flowing freely both ways.

 

So there can be exceptions, but you need a baseline by which to make those exceptions.  The beauty of creating a profile of groups you don’t want is that it gives you a means by which you can also make exceptions. 


The Bottom Line:  Not every booking is good for our business.  And what’s good for our business may not be good for yours, each home is unique.  Develop criteria to identify which bookings are not right for your business and say “Thanks But No Thanks!” to those inquiries unless you can somehow reduce your exposure to the risk those bookings present.

 

Resisting the temptation to book a reservation that doesn’t fit your guest profile will result in a lower average cost for turns, fewer headaches and a higher quality experience for the guests you do want. 

 

Here’s to great guests, risky guests and the discernment to recognize the difference.

 

Cheers!

 

Michael

2

How many of your bookings in 2011 have been from referrals?  Or more to the point, how much of your revenue in 2011 is from referrals? 

 

Are you content with your answer to these questions?  Wouldn’t it be nice to have one or two more referrals each year?  In this blog we’re going to look at five ideas that, when used together effectively, will help to drive incremental bookings through referrals. 

 

  1. Be Worthy of a Remark – The best form of advertising for any business is a customer testimonial via word of mouth.  Give your guests a reason to tell anyone who will listen about their time in your home. Whether it’s your attention to detail, your amazing collection of board games or your 120” home theater screen, give them something to be excited to tell others about.
  2. Get “Real” Business Cards – Invest a little money and have some professional business cards on heavy stock printed up (rather than the cheap looking “print at home” variety). Business cards are often the first impression someone gets when hearing of your business.  Include your HomeAway.com and VRBO.com listing numbers along with a one-liner or a few key words that articulate the reason why someone should consider calling you for their next vacation.   
  3. Implement a Guest Referral Program – Give your guests and others who know about your business a reason to refer people to stay with you.  Money is always a great motivator, it’s what we’ve used for several years now.  We pay $15/night to any person who refers a booking to us, that’s over a hundred bucks for a week long booking.  Cash is a good reminder and incentive for someone to mention your business.
  4. Ask for Referrals – Without being pushy, ask your guests and those acquainted with your business to refer anyone who they think may be interested in staying with you.  With our business we do this a couple different ways.  First, in each of our homes we have placed an 8.5 x 11” acrylic stand with a full color flyer in it that talks up our referral program and encourages our guests to take several cards to hand out when they are back home. The acrylic stand has a built-in business card holder and our property managers make sure they are always full. Second, in both the checkout email and in the handwritten “Thank You” cards (remark worthy) our guests receive we remind them that we have a referral program and point out that if they enjoyed their time in our home the best compliment they can give us is to refer us to a Loved one.
  5. Stick with the Plan - Given the nature of our business, long sales cycles and relatively few annual transactions, referrals can be few and far between.  But, that makes each referral even more valuable to business such as ours.  Angela and I diligently performed the actions above for nearly a year before we actually booked our first referral.  Yes, we frequently discussed whether it was worth the extra effort, but that first referral payment we made for $105 on a 7-night booking that was clearly incremental (and off-peak!) made it all worth it.  You are planting seeds that may or may not bear fruit down the road, but at least you are giving them a chance to bear fruit if you keep planting.  

 

The Bottom Line:  Referrals are one of those areas of business that can seem easier said than done.  But each referral is an incremental booking, which can be the difference between a good month and a great month.  Word of mouth is the most powerful form of advertising for any business.  Giving your guests a reason to tell others about their experience in your home, and making it easy for them to do so, is an effective and inexpensive way to maximize your revenue. If you will give them an experience that is worthy of a remark, and if you make it easy for them to refer you to others, your bottom line will reflect your efforts.

 

Here’s to bigger bottom lines…

 

Cheers!

 

Michael

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KPI 1.bmp

There are many ways to measure the success of a vacation home rental business.  How do you measure yours?  Are you hitting the goals you’ve set for yourself?  Or more importantly, do you even have goals for your vacation rental business beyond “to cover our mortgage” or “make a profit?”

 

In this blog we’re going to look at a few different ways to set goals for your vacation rental business in order to track your success.  Some of them can be tied directly to your profits and losses, while others may not directly impact your bottom line, but are good indicators for success, nonetheless. 

 

To start off, it’s a good idea for any business owner to establish goals.  As a general practice, I like to use the old business adage that every goal should be S.M.A.R.T.  (For more information on S.M.A.R.T. goals visit http://en.wikipedia.org/wiki/SMART_criteria)

 

For example, let’s suppose one of our goals is to increase our revenue from $65,000 to $77,000 the following year.  Here’s how we make it S.M.A.R.T.:

 

  • SSpecific:  Increase revenue by $12,000 to $77,000 in the calendar year 2011.
  • M Measurable:  If our annual revenue reaches $77,000 at year end, we will have been successful.
  • A Ambitious:  The goal represents your very best effort or maximum output
  • RRealistic:  Considering vacancy rates (in this case) a $1,000/month increase in revenue is achievable.
  • TTime Bound:  We are using the 2011 calendar year as our time constraint.

 

Other examples of S.M.A.R.T goals may be that your vacation home does not sit vacant more than 5 nights in any calendar month, or that your non-rental revenue in the year 2012 exceeds $5,000.

 

This may seem like a simple exercise but you’d be surprised how easy it is to set a goal that doesn’t line up with the S.M.A.R.T. principles.  Using this approach to set appropriate goals for your vacation rental business will help ensure your goals are driving your business towards increased profits.

KPI 2.bmp

 

Equally as important as the goals you set are the metrics you employ to track your progress. Many businesses refer to their primary metrics as Key Performance Indicators, or KPI’s.  My wife, Angela, and I established our KPI’s early on in our vacation rental business and have stuck with them ever since. 

 

We set our goals using the following KPI’s:

 

  • Rental Revenue – includes regular nightly revenue and fees for additional guests
  • Non-Rental Revenue – includes cleaning and pool heating fees, underwater camera and video game console rentals, and commissions from attraction ticket sales
  • Booked/Occupied Nights– the total number of nights in a year our home is occupied  including:    
    • Personal Use – nights we stay in the home for our own use
    • Donations – nights we are able to give away with little or no revenue in return
    • iTravex Exchange – nights we’ve taken in trade using iTravex.com 
  • Vacant Nights  – missed opportunities during the year when our home has sat empty

 

We have kept track of these KPI’s by month and by house for more than four years.  The historical data has proven to be invaluable to us in terms of understanding and managing our business while maximizing our ROI. 

 

I spend 30-45 minutes each month putting the KPI information we gather into a simple Microsoft Excel spreadsheet that allows us to monitor the progress of our business over time.  If you have not been tracking this information, I recommend taking the time to go through past bookings to compile whatever data you can to give yourself a benchmark. Then going forward you’d only need to maintain the spreadsheet moving forward.  To me, this is definitely time well spent. 

 

With this information readily available, you can make more informed decisions on:

  • Which reservations to take when check-in and check-out dates conflict
  • Which bookings to discount
  • When to run special offers or featured listings
  • When to take trades
  • Which nights are available for donations

 

Donations have become an increasingly more important KPI for us in our vacation home rental business.  In our next blog we will explore several ways to grow your vacation home business, (and your heart) by donating time in your vacation home. 

 

The Bottom Line:  Proper goal setting and tracking of KPI’s is an integral part of maximizing the ROI of any business.  A business running without goals or established metrics to track the progress towards attaining those goals is analogous to a ship at sea without a rudder or a compass.  The time you spend setting goals and tracking your progress will help you run your business more efficiently and profitably while paying dividends in the long run.

 

If you have success stories related to goals you’ve set for your business please share them in a comment below.  Until then, here’s to knowing where we’re headed and how we’re going to get there! 

 

Cheers!

 

Michael