Investing in Vacation Rentals – Quality Over Quantity for Bigger Profits

When it comes to investing in vacation rentals, Ben Early, Co-founder and CEO of the multi-national hospitality brand, Holt, applies the same principles he used when he built profitable portfolios for clients in his previous life as a hedge fund manager.

In this post, the seasoned investor who created a successful portfolio of upscale vacation properties across the US, Mexico, and Romania, shares some of his most valuable vacation rental investment advice. You will learn how to create or grow an upscale portfolio and why investing in fewer, higher-quality rentals is better than managing a larger number of average ones.

Ben previously worked for JP Morgan and also built an e-commerce brand, before starting in vacation rentals. At the time, he had no idea this hobby would lead to his future career.

Set the right goals for your vacation rental investment strategy

Investing in upscale short-term rentals is a vacation rental strategy that not only attracts a high-end clientele but also ensures sustained revenue growth, says Ben. This focus on quality over quantity enables investors to command higher average daily rates and achieve better overall occupancy, especially in sought-after locations.

Demand higher rates for higher-quality vacation rentals

Investing in upscale vacation rentals involves assessing financial metrics that go beyond simple profitability. Ben points out the importance of targeting properties that can command a high nominal price.

He says: “It is much, much easier for someone else to pay you a very high nominal rate rather than hundreds of people to pay you a low nominal rate to create that business.” This approach significantly enhances the cash-on-cash returns, making it a compelling reason for investors to consider upscale properties.

Simplify operations when investing in vacation home rentals

Managing fewer properties but of higher quality also simplifies operations, from maintenance to guest management, and allows for a more focused approach to customer service and branding. “You have more flexibility in advertising spend, you have more flexibility in what you’re able to pay for to create that sale,” says Ben.

Such operational efficiencies can lead to stronger brand recognition and customer loyalty, which are crucial for sustained success in the vacation rental market.

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Position yourself as a premium brand is the best vacation rental strategy

Investing in high-quality vacation rentals isn’t just about the immediate returns. It’s about setting up a business that thrives on exclusivity and premium offerings.

“I’ve always targeted upscale, and I’ve always targeted a high nominal price point. And that is, from previous experiences in e-comm and other businesses, watching friends with very successful businesses, but low price point products struggle to create traction.”

This strategic positioning helps in cultivating a brand that is synonymous with exclusivity, attracting guests who are willing to pay a premium for unparalleled experiences.

Approach vacation rental portfolio growth in a focused way

Investing in upscale vacation rentals not only focuses on the properties currently held but also strategically plans for future acquisitions. Ben’s approach emphasizes the importance of carefully selecting each addition to the portfolio, aiming to balance the operational demands with potential revenue.

“When assessing the suitability of a short-term rental deal, my first consideration is price per night. What am I going to make from this property? And because we already have an idea of fixed and variable expenses, it’s much easier to base those expenses on something that’ll create a higher nominal nightly rate than not. If you don’t, then you’re constantly having to push the envelope on occupancy. We judge each market looking at what occupancy we have to achieve versus price per night.”

What sets Holt apart from other vacation rentals, is that they develop the properties they manage. “We develop our properties. We renovate, we furnish, and prepare the properties ourselves for us to manage, which is rare in our space.”

Use technology to manage your vacation rental portfolio

Technology plays a crucial role in efficiently managing upscale vacation rentals. From automated booking systems to customer relationship management (CRM) tools, technology enhances guest experiences and streamlines operations. Ben’s integration of tech solutions helps maintain his properties’ high standards and operational efficiency, ensuring each guest’s experience aligns with the brand’s upscale reputation.

“Through our partnership with Superhog, we communicate to guests early on in the process that the rental is not a place to play around. Collecting IDs, taking selfies, the things involved in the Know Your Guest process for Superhog, along with strict communication about expectations are important to make guests understand the seriousness of the relationship. They are renting an incredibly expensive asset and should not expect a one-click transaction .”

So, is a vacation rental a good investment?

Investing in upscale vacation rentals offers a promising avenue for those looking to diversify their real estate portfolios with high-return properties. As Ben Early’s experience illustrates, focusing on quality over quantity not only enhances operational efficiency but also positions the brand in a niche market segment that appreciates luxury and exclusivity. For potential investors, the upscale vacation rental market demands attention to detail, commitment to quality, and strategic planning, but the rewards can be substantially higher compared to traditional rental investments.

By adopting a focused approach as demonstrated by industry experts like Ben, investors can achieve significant success and establish a strong presence in the competitive vacation rental market. The key takeaway is clear: upscale vacation rentals are not just a good investment; they are a strategic choice for long-term financial growth and brand development.

Ben’s strategies and insights provide a roadmap for anyone interested in investing in vacation rentals, particularly those aiming for the high-end market.

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