Buying a vacation rental property is a huge accomplishment. But once you’ve signed the final contract, it’s time to decide how you’re actually going to rent it out to guests. The 3 main options you have as an owner are to accept short-term bookings, extended bookings, or a mixture of both.
What are short-term and extended bookings?
A short-term booking is when a guest reserves your vacation home for smaller periods of time (anywhere from 3 nights to a week). Online listing sites, like Airbnb and Vrbo, have increased the popularity and accessibility of short-term vacation rentals in recent years. These types of rentals are popular among all types of travelers looking to explore a new locale.
On the other end of the spectrum, an extended booking is when your home is rented out for, well, longer periods of time (anywhere from a month to a few months). These types of rentals are popular among those who might be moving to a new city, people who have a temporary job or internship, or snowbirds who might be escaping the cold temperatures of the winter for a few months.
Each method has its own pros and cons for vacation rental property owners. To help you decide which strategy is right for you and your revenue goals, we’ve broken down those advantages and disadvantages below.
The pros of extended bookings
With extended bookings, you’re essentially a landlord for a tenant. The biggest advantage of offering extended bookings is the security that your home is completely booked for a long period of time. You won’t have a few days here and there that your home is empty and not making money. This also helps cut down on all of the tasks you have to do between each guest’s reservation. If you have a new traveler coming to your home every 3-4 days, you’ll have to coordinate with housekeeping and restock your place every single time someone checks out (or have a full-service property manager who takes care of this). With a long-term vacation rental, you only have to do this about once a month (or less!). You’ll spend less time and money on marketing your rental property because there are fewer days throughout the year that you need to find new guests.
You can also charge guests who stay month-to-month for utilities like water, gas, electricity, cable, and internet (with short-term rentals, the homeowner typically pays the utilities).
Another pro is that extended bookings can bring in money during slow times. Offering discounts on extended bookings during off-peak seasons can help you keep making money off your rental even when the majority of tourists have left town. And yes, while lower rates might mean less revenue than your average nightly rate, your vacation rental home is still booked rather than sitting empty.
The cons of extended bookings
One of the top cons of extended bookings is that owners have less oversight into their properties. With short-term rentals, you can inspect the vacation home between each guest to make sure everything is in working order. For extended bookings, you don’t have the ability because the guest is occupying your property for months at a time. You’ll only know if something is broken or damaged when the person checks out or if they happen to let you know while they’re staying at your home.
You also won’t have the ability to escape to your rental and take a vacation whenever you want. Since it’s booked all month or longer, spontaneous trips are a no-go. However, if there are periods of 2-3 days throughout the year where the rental isn’t reserved, we recommend accepting a short-term, last-minute traveler to increase your revenue.
The other con is that the amount of people seeking long-term vacation rentals is less than those who are looking for short-term vacation rentals. If you’re only opening your home up to long-term vacation renters, you may have a harder time keeping it full throughout the year, which means you’ll generate less revenue.
The pros of short-term bookings
Short-term bookings keep your calendar open for any travelers seeking last-minute rentals, and they also provide you with more flexibility to personally use your rental. You can block off your calendar for weekends you want to go on vacation, and then when you leave, you’ll have a short-term guest ready to check in.
You can maximize the revenue of a short-term rental by using a dynamic pricing strategy. This means that you can raise or lower your nightly rate based on demand. If there’s a big sporting event, festival, or concert in nearby, you can earn even more revenue by upping your rates for these events. This strategy also works for holidays and the peak season.
If you rent out your home less than 14 days per year, another benefit is that you don’t have to pay taxes on any rental income that you earn. (But remember, if you aren’t claiming any of this income, you also can’t take the deductions that other owners might, like housekeeping, insurance, and supplies).
The cons of short-term bookings
Similar to long-term vacation rentals, there’s the chance that you’ll have periods of time where your home isn’t booked throughout the year so you won’t be earning any money from the rental (but as we said above, this might be a great time to take a vacation for yourself at your property!).
We also recommend checking your city’s and homeowner’s association rules and regulations surrounding short-term rentals. You may be required to abide by occupancy requirements, obtain a special license, or pay occupancy taxes for rentals that last less than 30 days.
Extended bookings vs. short-term bookings
Every homeowner has a different strategy that works best for their vacation rental property. Depending on your revenue goals, needs, and lifestyle, accepting extended bookings, short-term rentals, or a mix of both might work best for you.
No matter what you choose, a good property manager can help you navigate the difficult tasks and make that decision. Property managers, like TurnKey, can help you set your pricing throughout the year based on data in order to maximize your revenue and encourage more bookings. They’ll also conduct regular inspections and make suggestions for improvements that could make the home more appealing to guests and maximize future revenue.
An experienced property manager can manage housekeepers, maintenance, and restocking for you. This way, you have fewer tasks on your to-do list in between each guest’s reservation. They’ll also take care of marketing your rental on listing sites across the internet, answering guest questions, and responding to reviews.
If you want to talk through the best booking strategies for your vacation rental property, goals and how to manage you rental, schedule a consultation with us here.