Are short term rentals profitable? – Yes, here’s how to cash in

The big question on every vacation rental owner’s mind with market saturation, economic uncertainties, and new regulations is: Are short term rentals profitable? And if they are, what’s the secret to making your vacation rental business thrive?

John de Roulet, Director of Revenue Management at Wheelhouse, and a key player at RevProf, a groundbreaking non-profit for revenue managers, weighs in on this. He shares his insights on how to increase your profit with a vacation rental home and avoid common budgeting blunders that can eat into your vacation rental profit margin.

The million-dollar question – are short term rentals profitable?

The answer is a resounding yes.

“It’s still a vibrant market for those with an entrepreneurial spirit, and there’s money to be made. But it’s not a ‘get rich quick’ scene anymore. You’ve got to be strategic and proactive, especially with revenue management. If you’re not up to speed with the latest strategies, you could be missing out on maximizing your vacation rental profitability,” explains John.


How many of these 8 vacation rental budgeting mistakes are you making?

  1. Over-Optimistic Spending

A common pitfall John notices is the underestimation of revenue fluctuations.

“It’s simple to spend according to your budget, but if the expected revenue doesn’t come through, you’re looking at a shortfall that could affect the profitability of vacation rentals.”

  1. Not Anticipating Higher Cleaning Bills

Since COVID, cleaning costs have soared. Guests expect more, and sometimes you can’t pass those costs on. John suggests, “Consider damage waivers or a protection plan to cover unexpected cleaning or repairs, ensuring that your vacation rental profit doesn’t take a hit.”

  1. Being Unaware of Tax Hikes

Local regulations can spring up and surprise you with tax increases. Staying informed helps maintain your vacation rental profit and loss balance. Also read our post: How to get around STR restrictions.

  1. Counting Your Chickens Before They Hatch…

Newcomers often count on income too soon. John advises, “Match your budget with actual income to avoid cash flow issues that can affect the profitability of vacation rentals.”

  1. Overpaying Rent

For those buying or lease arbitraging, watch your rent costs. “Get this wrong, and your vacation rental profitability takes a dive,” warns John.

  1. Not Mitigating Minor Damages

Minor damages can add up. Offering guests damage waivers can help protect your profit margins on vacation rentals.

  1. Ignoring Utility Costs

Advise property owners on how to cut down on utility costs. It’s an excellent strategy for both property management and profitability.

  1. Optimizing for ADR, Instead of Occupancy

Aiming for higher Average Daily Rates (ADRs) can lead to vacancies. “Focus on occupancy first to stabilize your vacation rental profit, then tweak your ADR,” recommends John.

In wrapping up, it’s clear that vacation rentals can indeed be profitable. With careful planning, savvy strategies, and avoiding these budgeting faux pas, you can ensure your short-term rental brings in the profits you’re aiming for.

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