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Want to Maximize Short-Term Rental Profits? Do Short-Term Stays

The Airbnb Ambassador & Super Host Coach (A-Coach) sat in his office when the phone rang. It was on the Airbnb business line, and he picked it up.

“Good morning, A-Coach here. How may I help you?”

“Hi, Coach. I am Michele from your Facebook group. I have a question about the length of stay. Is now a good time?”

“Yes, now is a good time. Tell me more about what you are trying to answer.”

“I asked a question of fellow Airbnb hosts, and we got into a heated argument over the facts. My question refers to my listing and what renting strategy would give me the most revenue, short-term or long-term stays.

“The group seemed equally divided. One faction insisted that giving a discount to guests wanting to stay longer brings in more revenue because of less turnover. The other group said just the opposite. Which is true?”

“Wow! Great question. This argument has been around as long as the new short-term hospitality phase started with the likes of Airbnb. Airbnb’s platform does much of the rental overhead work for you, such as website management, a communications platform, charging guests, collecting from guests, paying local taxes, host/user reviews, and depositing rents into the host’s bank account. Hosts have the responsibilities of guest communication, pricing, and maintaining the physical listing.

“Many Airbnb hosts come from the long-term rental industry where leases for a year or more were common. Many are new to the short-term rental market and do not have clarity. Machelle, where are you on the rental spectrum?”

“I am widowed and have a big house that I would like to rent out several of my bedrooms to help pay the mortgage. Being able to maximize revenue is very important to me.”

“Michelle, you fit the demographics of this new wave of Airbnb hosts.

Do you know the difference between short- and long-term rentals?

“Before we start, do you know the difference between short-term and long-term rentals”

“No.

“Short-term rentals are less than 28 days. The long-term is 28 days or longer. Airbnb helps manage either.

If you prefer long-term rentals, know the pros and cons

Pros

  • A consistent stream of revenue. Monthly income may reduce host income anxiety.
  • Fewer management responsibilities. Fewer host demands such as guest communication, check-in and check-out, and online marketing.
  • A furnishing choice. When tenants have their furniture, they are looking for a longer lease. The potential benefit is saving furnishing expenses.
  • Different amenity requirements. Guests looking to rent for more extended stays will search for essential amenities such as a dishwasher, washer, and dryer rather than a pool.

Cons

  • Hosts have less freedom to manage their rentals. Long-term renters pay for space and privacy. Hosts cannot work on the rental unit when it is only convenient for the host. Also, hosts cannot use their Airbnb long-term rental on a weekend or a holiday if you have guests staying in it. 
  • Less potential to maximize profit. With short-term renting, hosts can adjust the price to maximize earnings during high-season periods and lower it during low-season. While this can be good because you can earn more during the low season, you’re also likely to make less during the high season.
  • You may need to screen all potential tenants. With short-term renting, your guests are likely to spend a few days in your property before leaving. Because they pay upfront, there is no risk of payment defaults. Long-term rentals have an increased risk of payment defaults. Credit checks are advisable to minimize default risk. Credit checks can become time-consuming and costly.

“That makes perfect sense, Coach. I can see that the long-term takes less effort. But isn’t it true that potential revenue depends on the market?”

“Good observation. What do you think are some influencing factors?”

“It is obvious that many locations have seasonal markets, and with long-term renters, you can’t just increase the rate. The same goes for events like golf tournaments, concerts, and local celebrations. I heard people making lots of money when the World Series or basketball finals or homecoming came to town.”

“That is precisely right, Michelle. As for the non-seasonal markets, the story is a bit more straightforward. Month-to-month fluctuations are nonexistent. Listings with 1-night and 2-night stays dominate market share year-round. 

“But here is the kicker and the reason I like talking about this. Just because most hosts prefer one strategy over another does not mean it is necessarily the best for maximizing rental revenue. I have found a substantial disconnect between what’s most profitable and what many hosts choose to do based on the data. They are leaving money on the table

What do triggers indicate when to change your listing to maximize revenue?

“There are certain times during which hosts should consider toggling minimum stays. Big-ticket events are one of those times.  If there’s a music festival, conference, or sports match coming up; it may be worth altering your minimum stay.”

Do the math between long-term and short-term – seeing is believing

“Finally, Michelle, I want you to pay close attention to a mathematical revenue comparison of the two listings in the SAME house. The host booked Room ONE in response to market demands. The host booked room TWO to one guest for the month. The results AND DIFFERENCES are astounding!

CategoryRoom OneRoom TwoDifference
Occupancy94%77%16 percentage points
Revenue Total$1277.04$1012.00$265.04 more for room ONE
Cleaning Fee$200.00$25.00$175 FREE money

“With this data, you see over a year; you increase revenue by $3,180. If you raised the cleaning fee by only $10, not only would your listing base stay competitive, but you increase revenue by $80/month or $960 for the year. The biggest surprise is that the occupancy rate of room ONE was less than room TWO, yet ONE produced MORE revenue.

“Michelle, do these numbers make sense to you? Does it give you a different perspective on a renting strategy?

“Yes, it does. I cannot see any reason for me not to let the market dictate what I can charge and then adjust to the most I can get. I am responsible for turning the rooms. That means I get an extra $200/month for only 30 minutes of my time per turn. Besides, I don’t trust anyone else with my high demand for cleanliness.”

“I am happy that you now have a different perspective on long-term vs. short-term renting and how you can maximize your revenue return.”

“Thank you so much, Coach. You are fantastic in the way you uncomplicate things.

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