Vacation Rental Management FAQs
What is vacation rental management?
Vacation rental management companies (“VRMs”) handle all the logistics and marketing activities required to operate a property as a short-term rental.
Homeowners hire VRMs to set prices, optimize online listings, screen guests, manage bookings, and oversee laundry, cleaning and maintenance – often through subcontractors.
In other words, if you own a second home and want to make money off it through Airbnb or Vrbo but don’t want to do any of the legwork required to make that happen, using a vacation rental management company could be a compelling option.
Vacation rental managers fundamentally differ from “regular” property managers of long-term rentals because:
The frequency of guest turnover for vacation rentals amplifies complexity and makes the manager’s expertise in pricing and online customer acquisition critical to optimizing revenue for owners.
Many VRM customers are only “part-time” landlords. They bought a second home primarily to enjoy it themselves; monetizing it as a short-term rental is a secondary objective intended to offset mortgage costs. As a result, they often place a high value on convenience and peace of mind.
These factors help explain why VRMs charge significantly higher take rates than generic property management firms, leading to a natural question:
What do vacation rental management companies charge?
Including the fees charged to guests, 35-45% of the gross billings of a home may ultimately be paid to the VRM company (in some cases, more).
Exact pricing can vary based on the service level and specifics off a market, but that 35-45% range is a solid rule of thumb for ~80% of VRMs.
However, if you call a typical vacation rental management company and ask “what do you charge?” few of them will quote a number between 35-45%. Many of them will only cite the commission they charge to owners directly, which is often ~20%. But the total cost includes a number of components:
Commission paid by owners
In most cases, fees are also paid by guests. These might be an additional percentage on total bookings or as a flat “cleaning” fee
Mark-ups for overseeing maintenance or other third-party providers like lawncare
Vacasa, the largest vacation rental management company in the US, disclosed instructive data in marketing materials provided to potential investors that illustrates how these fees can stack up:
As you can see, Vacasa targets a 45% effective take rate on gross bookings and 52% of that fee revenue converts into gross profit for them (gross profit = revenue after direct costs to service that revenue are subtracted).
These fees may seem like a lot – and for second homeowners with time to spare, they may opt to self-manage their property. But there are a number of valid reasons that rationale second homeowners partner with a VRM…
What's the benefit of working with a VRM?
They allow second homeowners to earn truly passive sources of income.
You can almost literally hand over the keys to a full-service VRM and never get involved in the running of your short-term rental again, other than cashing checks.
While it may be possible to generate more profits if you performed every task yourself, the effective hourly rate of your time for those earnings may not be satisfactory.
Plus, most second homeowners have already accumulated some degree of wealth—it’s how they afforded that second home—and thus have more money than time.
A good VRM can generate more revenue on your property than you can.
Savvy VRMs utilize real-time dynamic pricing software to set the highest daily rate possible with sacrificing utilization. They write persuasive copy. They aggressively pursue 5-star reviews. They know how to market your home because they do it professionally.
The right VRM with strengths in these areas (an important caveat) can generate incremental revenue on your home that more than offsets the added cost.
For example, Vacasa says it increases net revenue per home by 21% within 12 months of taking it over, with an additional 10% increase in year 2.
They keep your home in good operating condition – which is particularly valuable since most second homeowners don’t live in the same city as their second property.
Finding reliable service providers for your cabin in the mountains of North Carolina – and then making sure the providers do good work – is a tremendous pain if you live hundreds of miles away in Miami, FL.
Good VRMs know who the best local service providers are and can provide on-the-ground oversight to ensure accountability.
Because VRMs manage multiple properties in a given market, they also have strong bargaining power with these local providers. These local providers want to keep VRMs happy by taking good care of properties under their management since the VRMs control so much potential spend.
How do I select a vacation rental management company?
There is an astonishingly high number of vacation rental companies in the US—by some accounts over 20,000.
So how do you choose the right VRM from this see of options?
Here are 10 questions an owner should ask to evaluate VRMs:
How many properties does the VRM manage?
There are a handful of VRMs that manage thousands of homes, several hundred that manage 200-700 homes, and thousands of smaller VRMs that manage a few dozen.
There are benefits to working with the largest and the smallest providers, but many owners find the optimal sized partner is big enough to have professional staff and meaningful technology investments but small enough to still deliver a personal touch.
What are the fees and contract terms?
Insist on a detailed breakdown of all fees including fees charged to guests, for cleaning and any mark-ups.
Ask what the commitment is and how much notice is required to cancel (market standard is 12-month contract with 30-day out).
What is the scope of services provided? Ask specifically about all of the following:
Pricing, advertising, guest screening, guest communication, laundry/guest turnover, cleaning, lawncare services, general house maintenance oversight
How much revenue does the VRM expect to generate per year and what would the owner take of that be?
What is the target occupancy rate?
This is important because some VRMs generate high revenue by maximizing occupancy rate, even if it means approving guests with low reviews or cutting prices.
Higher occupancy rates means more wear-and-tear on your home, so all else equal it’s preferrable to generate more revenue from higher Average Daily Rates (ADRs) rather than by driving more foot traffic.
How and when will the owner receive payments?
Who specifically will be the point of contact?
What services are provided by in-house staff members and what are provided by contractors?
What sort of software and home automation does the VRM utilize?
Are there any limitations on how many days the owner can use their own property?