The three P’s of running a short-term rental business.
There are three main components in running a successful STR business; people, process and price. All three components are equally important and interdependent, one cannot have a successful STR business without paying attention to all three. In this post we will take a granular look into each component as to why they are all vital factors and how they are interdependent.
It is said a chain is as strong as its weakest link, this aphorism rings very true when it comes to your teams. We can break down teams into 3 subcategories: cleaning team, communications team and management team.
The beast of the STR business is cleaning, no other component will have a bigger effect on the revenue consistency of your business. As hosts, it is our obligation to instill best cleaning practices for the health of our guests and business. Cleaning people should enjoy cleaning, people are best at what they enjoy doing. Always be hiring, trial and error are going to happen when it comes to putting together the right cleaning team, as a business owner it’s incumbent upon you to work through the turnover in order to assemble the right cleaning team. Be patient, set your expectation at 10% employee retention rate, when you find the right people be sure to take care of them monetarily and with a high emotional quotient. We are all people and we all deserve consideration and respect especially your cleaning team who are the front line to guest experience.
Your communications team should be the grease to the gears of your STR machine. The obvious key is guest communication which should be prompt, direct and polite. The other types of communications the team must facilitate are inter-team, with the cleaning & maintenance teams as well as 3rd party communication with the booking channel. The people of the communications team should function like one mind with no barriers. Everyone should know what is going on in the business as to not skip a beat when it comes to guest relations, inter-team task communication and booking channel follow up. Training is of the utmost importance, there is a nuanced way in which to communicate with guests and every host has their own style. Real time training through practice and adaptation are the best methods to acquire and retain the best people for your communications team.
The management team should practice preventative maintenance, work as a resource to other teams and as a check to catch any mistakes. Management has a birds eye view of the business and should provide correct overall guidance but also must be able to get into the weeds of the business and take on any task.
All of the people on your teams should know the overall purpose of their function and how they are interrelated. Getting the right people is not an easy task but worth the time, investment and peace of mind.
What is a process? A quick google search defines the word process as “a series of actions or steps taken in order to achieve a particular end.” With this definition as our understanding we take a look into the correct process of running a STR operation. First, let’s begin with the end in mind, we need to define the purpose of our process. The purpose is pretty simple; to make our lives easier. If we encounter a problem which is repetitive then we need a process to solve the problem, keep it simple with the least amount of actions required to solve any given problem. A process should be systematic and automated if possible. An example of a systematic process in the STR world would be use of a detailed cleaning checklist to ensure quality control and the use of an automated bot messaging service to make guest communication more efficient with immediate response time. Redundancy is important to process. People make mistakes, but mistakes cost time and money in one form or another. Double checking certain tasks with built in redundancy will mitigate mistake risk. A process needs to be communicated well within the team and written into policy when appropriate. When your process is right it will reflect in reviews and revenue. The process is the design of your dynamo, being lean and efficient is the outcome of the correct design.
sets guest expectations, highly correlated with price is value. No one likes to feel as if they have been misled and overpaid, therefore it’s imperative for an STR operator to price their product appropriately. If a listing is overpriced a host will consistently have low reviews because the price did not match guest expectations. Consistent low reviews will put a downward pressure on price causing lower revenue, decrease in bottom line profit and risk to the overall listing longevity. The paradox in pricing is that a revenue manager is rightly obligated to get as much as possible for the nightly rate but the pricer should not lose touch with the product being offered to the market in order to achieve consistency and longevity. Know your occupancy target and price accordingly, higher occupancy should produce higher revenue.
A part is never greater than the whole, all of these components are equally important to deliver a finished product which provides value to the marketplace and cash flow to the operator. Having effective inter-team communication, systematic processes and adaptable pricing strategy is how you will achieve long-term success in this business. Look at your business with a holistic lens and let the instrument of your STR business produce beautiful music.
The three P’s are people, process and price.
Look at your business as a machine, the people are the parts (although much more), the process is the design and the price is the outcome of production.
Keep your processes simple.
Provide value in your pricing.
Think about the longevity of your business.
Always work on your machine.
Thanks for your time and attention,
CEO and Founder