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No Vacancy: Maximizing ROI

11 Posts tagged with the roi tag
2

"A Rising Tide Lifts All Boats" – John F. Kennedy

 

YearConventional Wisdom at Given Point In TimeCorrected Wisdom Beyond Said Point In TimeYear
1960We can’t walk on the moon, more than 10ft of space dust covers it and a man would “sink!”One small step proves minor amounts of dust, nothing a 6-iron couldn’t handle (see photo).1969
1999Older computers are going to crash, causing major global havoc and Lord knows what else!!Turns out a couple people had to reset the timers on their VCR’s, that’s about it.2000
100’s -1543Ptolomy had the whole world believing the sun and planets revolved around the earth.Copernicus, Galileo & others proved that 1500+ years of globally accepted FACT were wrong.1543
August
2013
An increasing number of vacation homes in my area is hurting my vacation home business!Keep reading, the Corrected Wisdom won’t fit inside this box, so we’ll have to get out of it…September
2013

 

 

Now That We’re Outside The Box


I’m going to challenge you to stay outside the box for the rest of this blog.  Like 1,500 years of people before us who thought the universe revolved around them, we’ll need to change our thinking to realize the profitability of your vacation home doesn’t revolve around your area.

 

When we started renting our first vacation home in Anaheim in 2007, our house was the 13th listing on VRBO in our area.  When I started writing this blog post last Thursday, there were 198 listings on VRBO.  By the time I finished it, there were 201.  No doubt some of you out there have seen the same rapid growth, maybe even more so.

 

 

Here Are 3 Reasons Why We Should ALL Be Happy About Increased Competition:


1. Competition Makes Us Better – The idea that someone is trying to take food off our table compels us to get better.  What are you doing to constantly improve?  Reading this blog for one.  Not everyone in your area is, so you’re already gaining on them!

            *Best Practice: After you’ve read through all the No Vacancy Blog Posts, try reading

             my competitor’s, I mean my friend Joel’s blog on VR Success

 

2. Competition Validates Us – If there are homes popping up all around you then you must be in the right place and doing something right, right?  Give such good service that the number of repeat guests outruns the vacation home growth and ride the wave.

 

3. Competition Creates Loyalty – Now that you’ve read all the No Vacancy blogs you know that we’re trying to create Customers for Life (CFL’s) because they are great for ROI.  By allowing #1 above to drive us, we create a gap that future CFL’s will recognize, appreciate and award you their ongoing business for doing so.  And when your CFL’s friends travel to your area and say “there are so many homes to choose from,” your CFL will adamantly say “don’t even bother calling anywhere else, stay where we stay.”  Smells like a Referral’s cookin’.   

 

 

Here Are 3 More Things You Can Do To Leverage The Rising Tide:


1. Get In Cahoots – What local businesses other than vacation homes are also benefitting from the rising tide?  Eateries, entertainment venues, touristy places?  What are you doing to partner with them? 

 

2. Partner With Other Homes – Find a home similar to yours in your area, establish a relationship with the owner/manager and fill each other’s vacancies.  We’ve all turned business away when two inquiries for the same dates go out. Lob one over to your new friend in anticipation that they will do the same.  Don’t forget to pay/collect that referral bonus!

 

2. Keep Your Sights Set On the Horizon – It’s easy to become narrow-minded and short-sighted when we are about to eat vacant nights, but remember we’re running an endurance race, not a sprint.  Keep doing all the Little Things right and the business will be there.

 

Moon photo.jpg

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

But was JFK right about ALL boats rising with the tide?  Let’s ask Dwight from "The Office."


Dwight photo.jpg

 

Here we have to concede a point to Dwight.  Sunken boats are indeed unaffected by tides.  Don’t be a sunken boat.

 

 

 

Here Are 3 Ways to Not Be Sunk In A Rising Tide:

 

1. Don’t Cry About It – If you are committed to your business, always look for the upside.  Whining is terrible for ROI. 

 

2. Don’t Immediately Slash Your Rates – Continue to sell the value of your home to inquiries, and do it over the phone, not email.

 

3. Don’t Be Like Everybody Else – If you haven’t figured out your market niche, what is it?  Value? Luxury?  Family?  Location?

 

 

The Bottom Line: 

 

All boats rise with the tide, unless they are already sunk.  As the number of vacation homes in your area increases, so does the number of vacation home guests.  Every time one of your guests (or theirs) has a great experience in a vacation home an incremental potential CFL for you has been created.  Do what you can to leverage the rising tide.  The formula we are working from is: 

 

More Vacation Homes = More Vacation Home Guests = More Potential CFL’s For You = Higher ROI

 

Here’s to high tides and higher profits.

 

Cheers!

Michael

0

The Dad Factor, as I define it, is what adds up to make all Dads 100% awesome. Each Dad’s factor is comprised of varying levels of ego, competency, age, # of children, stubbornness and many other elements. 

 

However, within the factor there are some basic certainties that apply universally to Dads, certainties that might be considered when looking at Dad’s experience in your vacation home.

 

First, what do we know about Dad’s role while in your vacation home?

  • He is usually the one to unclog the toilet (who clogged it notwithstanding).
  • He is usually the one to change a light bulb.
  • He is usually the one to fix “it” when it breaks.
  • He is usually the one to figure out how to use the TV and remote.
  • He is usually the one to fire up the grill.

 

Considering the above, there are things that we, as vacation home owners, can do to increase the likelihood that Dad will Love his stay in our home and ideally become a CFL (customer for life).

 

Here are some ideas (please share yours in a comment below):

                                                                                             

Help him be useful if he wants to be (he does), so give him the right tool for the job. 

Make sure that Dad will have no problem finding the plunger when his 4 year old princess uses half the roll of toilet paper.  Better yet, upgrade your plunger to the type intended for big clogs.  You know, the ones for heavy doodie use? 

 

While at the hardware store, it’s not a bad idea to pick up a twenty dollar basic home tool kit when you are buying that HD plunger.  Having basic tool kits in our houses has had a positive ROI by helping Dads resolve an unexpected situation for us, preventing a call to the handyman.  After all, every Dad is somewhere on the handyman spectrum.

 

Help him be the problem solver. 

Make sure there is a flashlight with good batteries so he can investigate that noise outside.

 

Let Dad replace the light bulb your property manager hasn’t noticed is out yet.  Put a few of each type of light bulb somewhere accessible but out of the way, such as an upper cabinet shelf.  Dads usually are the ones asked to reach it off the upper shelf anyway. 

 

Help him prevent meltdowns by providing basic step by step TV/DVD/Satellite instructions with the remote control so Dad can get the Disney channel on before the little one loses it.  It’s her vacation too! 

 

Provide long wooden matches or a long BBQ grill lighter somewhere in the kitchen or near the grill so if the igniter isn’t working (as they often aren’t) the burgers and dogs won’t be delayed.  BEST PRACTICE:  Give the grill a good cleaning every checkout, Dads always appreciate a clean grill.  And provide proper tools (stainless steel grilling instruments) for the job! 

 

Help him make great memories.

Help Dad easily make some lasting memories with his family while enjoying your house. Family board games or video games, pool toys, game tables like foosball or shuffleboard, or a basketball hoop can do the trick. 

 

What’s unique to your area?  Maybe you have a big lawn.  When was the last time anyone played croquette?  I have great family memories playing croquette with my grandparents, uncles, cousins and my Dad.  Those are the kind of Delightful Memories we want to provide.

 

Another delightful memory maker we’ve had success with is providing a waterproof digital video camera for our guests to use in the pool and around the house. Guests who want it willingly pay an additional $5/day for their stay and thank us specifically for it upon checkout.

 

The Bottom Line:  Dads are awesome, every single one of us.  Our experience in a vacation home should be at least as awesome as we are.  Vacation home owners can consider Dad’s experience and do a couple things to help Dad stay awesome while on vacation.  Do things to win Dad’s vote to stay at your house next time they come to town.  Help him be useful if he chooses to be, and help him keep his family’s trip from any hiccups related to the house.  Most of all, help him make some delightful memories that will further his family legend of awesome for years to come. 

 

Here’s to Dads, and to the rest of you who put up with us…Happy Father’s Day! 

 

Cheers!

 

Michael

0

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

1

“The shortest period of time lies between the minute you put some money away for a rainy day and the unexpected arrival of rain.”  Jane Bryant Quinn

 

I see saving up for a rainy day, or establishing a Reserve Fund, kind of like how my kids see their vegetables.  We both know what needs to be done and we both know why it should be done…

 

“But if broccoli smells this bad, won’t it taste even worse?”  - Me My Kid

 

The idea of putting additional money (we can’t spare) aside for some unknown thing that may or may not happen just smells bad.  Then after that first month where you reduced your owner draw by 20% to start the Reserve Fund, the originally smelly idea ends up tasting just as bad as it smelt.  Or is it smelled? 

 

I am here to tell you that I am now a believer who LOVES broccoli. 

 

Termites? Not so much…  Pesky little termites gave us our first opportunity to dip into our Reserve Fund, which we reluctantly and nearly did not set up a year ago as we started renting the third house. 

 

I never thought paying thousands of dollars to eradicate tiny little house-biting bugs could feel so good. 

 

The first time a band of termites set out to eat one of our houses it caught us completely by surprise and $3,600 later we were left thoroughly bummed out.  We had the money in our account but we were headed into our off-peak season when cash is tighter, and it made for an uncomfortably long winter and some dismal owners draws.

 

Here’s How The Rainy Day Fund Works (adjust according to your house’s specific circumstances.)
*I’ll assume that you are in some way tracking your revenue and expenses.  If you are not, yet, then be sure to read the next blog.

 

Step 1: Determine a target amount to have in reserve (as cash, and accessible).  Let’s say $10,000.

Step 2: Figure out how much you can pull from your monthly owner draw, enough that you will feel it but it won’t disrupt your ability to cover monthly expenses.  Let’s say 20% of monthly net income.

Step 3: Set this money aside and use your first month’s reserve to open a new savings account.  *Not a must-do, but we’ve found it to be convenient for book keeping.

Step 4: Don’t cheat the fund.  You’ve got to be consistent and build your monthly P&L to account for this money being set aside.  Now watch it grow! 

 

Here’s Why I Wanted to Tell All of You About It

 

Consistent Cash Flow is the first reason our reserve fund worked great.  We took a $3,000 expense hit in stride and still received 100% of the owner draw that month.  We had enough money in the reserve account to cover the extraordinary and unforeseen expense.

 

Consistent Level of Service is perhaps a more valuable reason to establish a Reserve Fund.  We did not have to scramble for the money, wait for more bookings or put it on the dreaded profit-munching credit card in order to take care of the problem.  The repairs were completed over our first three day opening because we had the cash on-hand to do so.   We did not have to inconvenience guests with our problem, and even if we had to put them in other accommodations we had the money on-hand to do so without worrying.

 

Peace of Mind is what the first two benefits above add up to.  But there’s more.  Our Reserve Fund is more than 60% to our goal even after the termites, Lord willing it will hit the goal in 2013.  Once that happens we can look forward to a 20% Increase In Owner Draw, a welcome pay raise.

 

The Bottom Line: Saving up for a rainy day is a good idea that is worth the short-term pain to get there.  Having a Reserve Fund will stabilize your monthly cash flow and provide a nice sustainable boost in owner draw once your fund is met.  The peace of mind in knowing you have that cushion will pay dividends every day, and the immediate access to cash in the event that something major happens will help you make the repair sooner, accommodate the inconvenienced guests and ultimately provide that WOW moment in the face a potentially bad situation.  Those are the moments that create a customer for life, and we could all use more of those. 

 

Here’s to the month after our Rainy Day Funds spill over.

 

Cheers!

 

Michael

1

Given that we now have four, yes FOUR (see sidebar) kids under 7 years old we have realized that we don’t want to, or should we say we are not able to, travel with strollers, highchairs, pack ‘n plays, Bumbos and a separate suitcase for toys and dress-up clothes.

Guess what?  Our (potential) guests don’t want to travel with all of that kid stuff either!

It turns out that giving thought and attention to the needs of the kids is great for business too because it allows us to tap into the three R’s that we all Love so much: Referrals, Repeats and Reviews.

 

Kids blog.png

Just a few reasons we have found that kids can increase ROI:

  • Kids often heavily influence their parents’ decision on which house to rent or return to.
  • Kids are fairly easy to please if you put a little effort into DELIGHTING them.
  • When we win over the kids we automatically win over their parents at guest review time and when they are sharing their vacation stories.

 

The majority of our guests are families with kids and usually one or more of the kids are under 10 years old.  There is no quicker path to a parent’s heart than through their kids. For that reason we make an effort during each inquiry to find out whatever we can about the kids in the group.

 

With the knowledge of the ages of the kids who may be staying with us we help parents and grandparents (potential guests) understand why our homes are ideally suited for grownups and kids alike.

 

Some of the kid-friendly features we have included in our homes:

 

  • Multiple strollers, two pack ‘n plays, a high-chair and a Bumbo.
  • Fully stocked game cabinet and toy closet. Best Practice – add a monthly organizational clean-out of games and toys to your PM Checklist!
  • Individually packaged kid snacks in the welcome basket.
  • Kid-friendly movies and video games for various age levels.
  • Automatic walk-on safety covers over the swimming pools.
  • Electrical outlet covers and cabinet latches where appropriate.

 

Detailing some of the features like the ones above sends a message to parents (potential guests) that “your kiddos will have fun in our home.”

 

Occasionally we’ll raid the clearance racks in the toy and clothing aisles to stock up on inexpensive treats for our little guests.  Five or ten bucks can go a long way toward the three R’s and net a pretty good ROI.  At check-in kids have found pajamas with their favorite Disney character on them, Disneyland signature books, activity/coloring books and inexpensive packaged toys just to name a few.

 

Do you have any kid-friendly features in your home?  Do you leverage them effectively during the inquiry process? How can you improve in this area?

 

The Bottom Line:  Kids are profitable!  Wait, that didn’t come out quite right.  I meant to say, kids are GREAT!  Plus, kids are great for business too.  Building Kid-Friendly features into the vacation home experience you offer will endear your business to your guests.  That means they are more likely to give you REFERRAL business, Repeat business and great guest Reviews.  We all know those three R’s add up to Maximum ROI!

 

So raise a glass of chocolate milk to the little guests and give them memories that will leave them longing for their “other” home.

 

What have any of you guys done to make your homes more kid-friendly? Please share your best practices and comments below.

 

 

Cheers!

 

Michael

 

P.S. Please forgive the shameless plug for our other newest baby, Pipsqueak®.  Remember a while back I mentioned we were working on a project? Well, Angela invented the first Bluetooth phone just for kids!  Like proud parents we’re just so excited that we want to tell the whole world about it. Thank you for your readership and please learn more and support our Kickstarter!

2

Sorry for the delay everyone, I’ve been “off.”  This is the time of year that Angela, the kids and I make the 1,350 mile drive to California for a getaway.  This time we invited another family along with us to really see things from our guests’ perspective.   

 

If you aren’t spending time “off”, as a guest, in the home you own or manage, you should be.

 

In this post I’ll share some of the things that we’ve uncovered during this trip.  We hope that you will:

 

  1. ) Benefit from some of our learnings, and
  2. ) Realize the value you can create by making it a priority to spend time as a guest in your home.Disney kids.bmp

 

We try to “get away” to our homes at least once a year.  Often we even block peak calendar time for ourselves because it always proves to be a great return on our investment (not to mention the write-off that the expenses from the “business trip” can provide).


I’m not talking about staying at your home for regular maintenance or while you remodel the bathroom.  Although maintenance and remodels are important, this time in your home is different.  This time “off” is meant to allow you to experience first-hand the joys and frustrations that your guests feel when they stay at your place.     


I’ll readily admit that it’s very difficult for us to stay in a guest’s frame of mind when there are so many things to be done as the owner.  But each time we’ve stayed it’s gotten a little easier to get away for partial and full days at the home and the insight has proven valuable. 

 

3 Useful Tips We’ve Learned:


  1. It’s easier to switch from owner-mode to guest-mode when you have Loved ones with you. 
  2. While at the home, only “work” on tasks that you personally add value to and try to plan your stay with a dedicated day or two for projects then the rest for making memories with Loved ones.  If something can be handled after you checkout or by someone else in the coming weeks, just make note of it and resist the temptation to knock it out during your stay.
  3. On your last day, sit in a comfy spot and ask yourself from a guest’s perspective, “What does this place really need to give me an experience to tell others about?”  (Read Creating Delightful Memories)

 

The Fruits from Our Stay:


  • Backyard sound system – In theory the surround sound in the family room was intended to easily provide sound in the backyard, but in practice we found that we really needed a dedicated music source outside.
  • Broken water guns are a bummer – After a two-day drive we all hopped in the pool.  A water gun fight quickly ensued only to find out that three of the four super soakers were completely non-functioning.  Went ahead and took care of this one myself…for the kids of course.
  • Fan made a slight knocking noise – This isn’t bothersome until you are trying to fall asleep under a clicking fan. I cringe at the thought that this has kept our guests awake like it did me.
  • Alarm clocks are clumsy and behind the curve – I wanted to play music from my Android but our alarm clocks were not equipped.  Most hotels offer this now; we probably should have them for $20 each.
  • Gate to the backyard was stuck – This only matters to whoever takes out the trash, but it’s an unnecessary nuisance that will be easy (for someone else!) to fix now that we know about it.
  • Half bath needs a “noisy vent fan” – Noises from a half bath downstairs make all who are within earshot uncomfortable.
  • Window glare on TV from setting sun – For about 45 minutes per day the big screen has a giant glare across it from a high window.  We found residual tape from one of our guest’s attempts to correct the same issue.
  • Additional finds:  
    • Needs more towel/closet hooks
    • Keys need a keychain/lanyard
    • Linen closet needs labels
    • Nail in the floor popped up – Ouch!
    • Toilet seats are loose
    • Several doors squeak
    • iPod cord is “lost”
    • Pack n Play is clumsy

 

The Bottom Line:  By becoming your own guest for a few days you will see your business from your guests’ perspective.  That perspective will help you make informed decisions about your business + smart investments into your business.  The output should lead to increased guest satisfaction = increased occupancy = increased revenues = increased ROI. 

 

Now quit “working” and go enjoy some time “off” in your favorite vacation home! 

 

Cheers!

 

Michael

1

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

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

0

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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.

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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

7

One of the most uncomfortable questions a vacation home business can face is the dreaded “do you offer any discounts?”

 

It’s a perfectly legitimate question. Who of us, as consumers, doesn’t gain pleasure from garnering a great deal?  Consumers Love (again, with a capital L) a deal, travelers included. This fact was further echoed by other owners at the HomeAway Summit this past weekend.

 

On the flip-side, as business owners, discounts lower our nightly revenue and ultimately cost us money, don’t they?  I can vouch for that, discounts cost our business more than $15,000 in lost revenue in 2009 just on one house.  BUT, it’s not why you think. 

 

In our case, the average nightly revenue of this particular house climbed $29 from ’07 to ’08, then another $26 from ’08 to ’09. A fifty-five dollar per night increase over a two-year period?  Great results…right? 

 

Wrong.

 

 

Although our average nightly revenue had gone up by $55 per night in 24 months, our total revenue was down $15,659 because we booked 29 fewer nights in ’09 than in ‘08.  Increasing our nightly revenue earned us a $15,000 per year pay cut.  Arriving at that realization stung a little. 

 

In January, 2010 with our 2009 results in front of us, Angela (my wife) and I had a business meeting (time we have set aside each month to improve our business).  By then we were several years into our ongoing debate about our nightly rates.  I usually think the rates could be higher, she usually doesn’t. 

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The revenue decrease caused us to agree that we ought to begin “discounting” this house.  However, we also agreed not to lower our top-of-market advertised rates.  Maintaining our rates would still allow us the opportunity to get full price when possible for the value we provide.

 

We had already begun returning all inquiries via phone, the new idea we implemented for those inquirers still hesitant to “book now” was to simply ask what type of discount they were seeking.  Some have a firm budget they are working with.  Others simply want to feel like they are getting a deal. 

 

Here are the questions we ask ourselves when considering discounts:

 

•    Based on our history, will we for sure book these nights if we pass on this “discounted” inquiry?

•    Does it seem likely this inquiry won’t book if we do not offer something? 

•    What is the minimum we can offer to get this inquiry to book with us right now?

 

For those looking for a deal, we decided we would be more than willing to make them one now!  We established some “deals” we could offer.  Some that continue to be most popular with our deal-seeking guests are:

 

•    25-50% off the black holes (nights that will not book)this new reservation leaves before or after. (LOVE this one!)

•    Complimentary rental of our gaming system package or complimentary pool heating.

•    Early check-in or late check-out when available at no additional fee to the guest.

 

These “deals” cost us zero out of pocket and give our guests a reason to book with us right now, filling vacancies on our calendar.  Plus, they give our guests the satisfaction of getting that deal they are seeking. 

 

For inquirers with a firm budget, we are usually facing a take it or leave it scenario because they either have the money or they don’t.  With these, also consider the size of the group (your costs), nature of their visit (can they be repeat guests,) and whether the booking butts up to another or creates black holes.

 

The Bottom Line:  Offering discounts and being more flexible with our rates increased our occupancy and our annual revenue.  With the new “discounting” practices in place for this home we booked 40 additional nights in 2010 with great results.  Although our average nightly revenue dropped $47, our revenue for the year increased $16,817.

 

Now….everybody can Love discounts!

6

You are reading this blog for one of two reasons:  You either own or operate a vacation home and are interested in learning how to get more enjoyment and profit from it, or you are one of the friends I personally invited to read this, my first blog on HomeAway®.  Either way, I’m glad you’re here.   

 

Hello – I am Michael and I LOVE vacation homes!  When I say I Love (yes, with a capital L) vacation homes, I am not just talking about staying in them or making money from them.  When I say I Love vacation homes, I mean I really Love vacation homes, everything about them.  In my big bald head, thoughts about vacation homes are interwoven throughout my day, each day, every day.  I can’t help it. 

 

It was four years ago this month that my wife Angela and I relocated to Texas and turned our family home (http://www.vrbo.com/126904) into a vacation home.  Our goal was to keep our home a few years or more, at least long enough to make some money on it.  We had just refinanced nearly $100,000 worth of equity from the home to remodel the backyard and by early 2007 the real estate boom in Orange County was starting to correct. Angela and Michael Smith - Headshot.jpg

 

My professional background is in the wireless communications industry, I currently serve as a consultant of sorts to independent wireless retail store owners.  My Lovely wife Angela and I are partnered in our vacation home business together (but she does most of the work,) her prior experience is in the hospitality and pharmaceutical sales industries. 

 

In April, 2007 with little confidence and no idea what we were doing, we threw together a rental agreement and got the house ready for rent.  We listed it on VRBO.com and HomeAway.com for $250 a night and prayed we would book 10-12 nights per month to cover our mortgage.   Our “plan,” if you could call it that, was to cover 50 percent of our costs in the first 12 months, then hopefully be covering 100 percent of our costs from then on.   Making a profit didn’t occur to us as a true reality at that time, although we knew that if everything went well the potential was out there.  That was four years ago.

 

Now, I am going to share this because I still can’t believe it, and I think it’s illustrative of how awesome the vacation home business is.  As humbly as possible I want to drop your jaw a little bit with the real potential of a home based vacation home business.  This month our little vacation home business will have served our 3,800th guest and will have booked our one-millionth dollar of revenue.  Doesn’t that just sound ridiculous? 

 

Business is good; we just closed escrow on our third vacation home (lots of good topics coming up) and should have it ready to rent this June.  The success we’ve found stems from a mentality of constant improvement, one idea at a time.  Not all of our ideas have worked, but a lot of them have.  Those that worked are the ones I’d like to share with you throughout the year on this blog.   

 

 

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If you own or operate a vacation home and are looking for ideas on the following topics, then I think you will get something from reading this blog every couple of weeks.

  • Maximizing your revenue, adjusting rates and discounting (our first topic)
  • Analyzing your business metrics year over year, long-term planning and goal setting
  • Building a repeat customer base that generates referrals
  • Giving guests an experience they will gladly pay for
  • Expanding your already established vacation home business

 

If there is ever a specific topic or question you would like to discuss, you can reach me by posting a comment on my blog or starting a thread within the Community and letting me know. 

 

Cheers!
Michael