New vacation rental managers often set expectations too early–before they fully understand their competition (or their customers). Which is why it is important to start with a market analysis: You will gain valuable insight, and will be better informed on establishing rent tiers, planning property upgrades, and more.
A market analysis provides a survey of the surrounding area and allows you to answer questions such as: Am I charging enough? Should I charge more? Less? What improvements do my properties need to stay competitive? Can I afford upgrades, or will it negatively impact my profit margin this quarter?
Here are some suggestions on conducting your own market analysis:
Thorough analysis can be time consuming, which is why you need a clear understanding of what you want to uncover before you begin. Fundamentally, there are two analytic models used: demand-based or supply-based.
In demand-based analysis, competition that offers similar housing features are identified (e.g. amenities, location, access to public transportation and price.)
Supply-based analysis explores and identifies rental properties that market options similar to your apartments or single-family homes.
These approaches will ensure a thorough examination of your competition, helping you determine where funds should be allocated to remain competitive.
After conducting market analyses, it is important to follow up with a comprehensive review. Try to ascertain the following information about your area:
- Average vacancy rate
- Number of days on the market, per unit
- Tenant profile: age, occupation, length of tenancy, families or singles
- Proximity to your property
- Established vs. new construction
- Rent in the area (more below on this topic)
Using the Internet to Your Advantage
The Internet is a treasure-trove of information, helping make analysis less time-consuming and easier than ever before. Between social media, business directory reviews, and competitor websites, valuable information on how your competitor is doing is widely available. Furthermore, you can track your competitor’s market and see how they interact with customers.
Do a Rent Comparison
One of the advantages of doing a market comparison is that you will discover current market rates for rent. After you’ve done adequate comparison, it’s time to set prices for your rental units. As resource-intensive and time-consuming as making rent comparisons are, they are a necessary component in devising a profitable business strategy. There are software solutions that help, such as AppFolio, that offer rent comparisons for free. Apps can greatly reduce time investment and expedite the process.
Once all the data has been collected, it time to create a plan of action. A market analysis can give your team an advantage over your competition, so it’s always worth conducting one.
About the Author:
Avi Vaknin is the CEO of HomeEscape.com. HomeEscape™ is a free vacation rental listing website with an easy to use interface. We have combined your favorite features among vacation rental sites into one convenient interface. This allows owners and managers the ability to update listings as much as they want, and provides travelers an easy way to communicate with them.