Have invested in a vacation rental property and now would like to see how much rental income you can make? Or maybe you are still in the process of buying your first vacation rental. Anyway, you would like to optimise the profits from your (future) investment by renting out. There are 2 paths to follow: either you do everything yourself or you get some help from a Vacation Rental Company, BUT…..´How much do vacation rental companies charge?´
Vacation rental companies charge around 25% to 30% of the rental sum. It depends on the amount of work you want them to do. From the tasks they can perform for you ´Marketing and Advertising´ and ´Guest Services´ are the most expensive to outsource for the vacation rental owner.
Other companies work for a flat fee or can even offer you a guarantee. With a guarantee the company says: ´No matter how many nights I rent out from (date) till (date), I will pay you (amount). Of course the amount tends to be a lot lower than the price of all the nights together as the company is assuming the risk.
I own several vacation rental properties myself and have a vacation rental company myself, so please allow me to share you with the best possible answer.
Who Will Do What?
Vacation rentals are a fun business to be in, but you cannot really see having a vacation rental as a passive source of income. There is serious work involved. These are the main categories for activities concerning renting out your vacation rental:
- Prepare the property for rental
- Make stunning pictures and video (learn more here)
- Write a super converting description (find the best tips here)
- Marketing and advertising the vacation rental (here is how it is done)
- Managing your prices (read these essential tips we learned)
- Communicate with the Guests
- Prepare the property for the guests
- Welcoming the guests and being available for help 24/7
- Arranging for cleaning and checking the property after the stay of the guests
- Garden and Pool maintenance
- General maintenance
- Keeping the administration in order
Obviously, the more you do yourself, the less you will pay in commission. A good vacation rental agency can take care of all of these things for you, but they will probably also offer the services separately.
As a general rule, Marketing and Advertising is one of the costlier services that a vacation rental company will offer you. Preparing the property, taking pictures ands writing a description is normally part of the package of working together with a vacation rental company, but there are still some that charge you separately for that service.
Marketing And Advertising Your Vacation Rental
Even if the vacation rental company has its own channel (website) with a strong brand that will generate their own bookings (and it should to have significant additional value to you), probably they will list your property on one or several of the bigger vacation rental platforms (the OTAs, The Online Travel Agencies).
And these guys are not cheap, charging on average 15% (calculating the costs to the owner and the traveller together) commission on your rent, and in some cases even on the additional costs like cleaning and bedlinen.
If the vacation rental company you want to work with has a strong brand and generates direct bookings, they can likely book your property for less commission than the mentioned 15%. so it is essential that they have this. Otherwise they will just defer these costs to you directly, possibly with a surplus because they need to make money as well. And that is just for marketing!
The advantage is that most vacation rental businesses have the access to software with which you can connect to several OTAs like Airbnb, Booking.com and Homeaway at the same time. So that will save you a lot of time.
However, the Big 5 do make it easier for you to list and advertise the property yourself, but it will not be cheap: You will still pay 15% on average. And do not be fooled by Airbnb or other that claim only a 3% fee, because they charge the guest as well. So your price will be increased, lowering your competitive advantage.
There are listing sites that are free, but the quality and the amount of leads will not really help you propel your property income into the Stratosphere.
Most guests have a lot of questions before arriving and the trend is that they ask more and more. Questions like:
- Where is the nearest subway station from your property?
- What happens when I cancel
- Can there be 10 people in your 6 person apartment?
- Can I get a discount?
- Is your property available for 1 night?
- Can I see the property before renting, I live nearby
And these questions need to be answered. And the sooner you answer them, the bigger the chance that they will book with you. It also improves your ranking on most vacation rental websites.
At our company (Club Villamar) we work together with a call center that answers questions like these and others 13 hours a day, every day of the week in 5 languages via email, telephone and chat. It is needed (We do rent out over 3500 villas in Spain however).
And then there is the actual arrival and stay of the guests, which is quite labor intensive. On average the vacation rental companies charge 10% for this service.
If we a re talking about periodic maintenance (ie changing the roof, painting the outside of your property) this will likely be done on a seperate contract.
However you can negotiate Pool and Garden maintenance to be included in the service package. The Rental business will either outsource these activities and make a small commission percentage or they will have their own staff to handle that.
You can also negotiate a better price on additional cleaning of the property and the cleaning of the bedlinen and towels. These costs can really add up when not paid separately by the guests and are possibly cheaper when the fixed costs of the management company are paid for.
Conclusion: The Costs of Vacation Rental Companies
There are many things that you can do yourself to rent out your propertry and look after the guests, but do you have time available to do all this? Compared to the work the rental agency can take out of your hands (and the rising costs of marketing), a commission fee of 25 to 30% is not too bad.
Of course you can also make specific arrangements for your property, where you do some of the work and the agency does the rest.
Be sure to document all the responsibilities and work that is expected to be done, to prevent future misunderstandings.
How to run a vacation rental business Best Tip across the internet in how to run your company. What we have learned and applied in the last 15 years.