Sandra Brahn
The process of transitioning your vacation rental business to new ownership is relatively simple — but there’s very little information out there about how to do it right. Selling your business can be an emotionally complex transaction. Knowing what to expect before getting started will help put your mind at ease and set you up for success.
Our corporate development team here at Vacasa has helped more than 80 business owners navigate the sales process in national and international vacation rental markets. With these partnerships, our team has gained invaluable experience and knowledge that we want to share with you.
Here are a few tips to keep in mind if you ever consider selling your vacation rental business:
1. Do some self-reflecting
Is it time for retirement? Would partnering with a larger organization better serve your team and homeowners? Identifying the reasons you want to sell and what you want that sale to look like will help you throughout the sales process.
For example, selling your vacation rental business will impact a lot of people — and it’s likely that they won’t all agree with your decision. Think about the effect such a major transition will have on your colleagues and family, some of whom may have anticipated running the business with you one day. It’s best to go into those conversations with clarity.
Before entering the acquisition process, make a list prioritizing the non-financial impacts of selling. In a perfect world, how would your buyer create value for you, your employees, homeowners and the community? Forming a perspective on these things will help focus decisions you’ll have to make down the line.
2. Familiarize yourself with different buyer types
There are numerous types of buyers in our industry. Explore the pros and cons of each early in your process. Grouping potential buyers into categories can help narrow the playing field, saving you time and easing some of the anxiety around what will be one of your most important decisions.
Cash-flow buyer
Cash-flow buyers such as private equity companies may be your best option if money is the only consideration. Cash-flow buyers can afford to pay a premium for your business. While going this route is often the most profitable, it’s also the most likely to lead to a rough transition for your team and your clients. If you proceed with a cash-flow buyer, make sure there’s a solid management plan in place for running day-to-day operations.
Community buyer
Community buyers are on the other end of the spectrum. This buyer might be a family member or someone already on your team. Selling to a community buyer pays dividends in goodwill, but not always in cash. If money carries the least amount of weight in your decision, this is a great buyer to consider. That said, you know how well or poorly your business is doing: Will a community buyer be able to keep up with industry changes and provide competitive returns for homeowners?
Competitor buyer
The third buyer type is your local competitor. While this could be a good option in terms of community relations, it can also turn out poorly for your team and homeowners. Just because your competitor has the budget to buy doesn’t mean they have the capacity to manage your operation. And a sale to this buyer isn’t likely going to result in a similar payout as you’d see from a cash-flow buyer or the fourth type, the industry buyer.
Industry buyer
Industry buyers — like Vacasa — are well-established, typically larger-scale, organizations seeking to expand their inventory in a new market. A good industry buyer will take care of your team, your homeowners, your guests and even the community. They’re looking for your experience and expertise to launch or strategically grow in your market. Of course, I’m a little partial. Some of our best talent has come from acquisitions.
Whatever buyer type you go with, advocate for close partnership throughout the process. You’ll feel better about the deal if it creates positive outcomes for everyone involved.
3. Get your timing right
Timing should be a top consideration when selling your vacation rental business. The general rule is, you can expect to command the highest premium if you sell prior to peak season, and the lowest premium if you sell after. But that doesn’t mean selling during peak season is the right move for you.
Here are some things to consider when deciding whether to sell your business in peak, shoulder, or off-peak season:
Peak pros
You’ll capture more profits, as staff levels are typically higher, and it’s difficult for owners to seek another property manager during the busy season.
Peak cons
This time of year it’s more difficult to enter units for onboarding, you’ll have the maximum number of reservations to transfer or prorate, and it’s especially burdensome for staff to learn new systems.
Shoulder pros
You’ll have fewer reservations to transfer, plenty of time to transition employees and an opportunity to optimize shoulder season bookings. Plus, all those reservations on the books moving into peak will entice owners to stay.
Shoulder cons
Owners with fewer reservations may be looking to sell or change property managers at this time.
Off-peak pros
Training is easier, as you’ll have more access to homes and employee time.
Off-peak cons
After peak-season, the units may need some TLC. Plus, with fewer reservations on the books, owners may not be encouraged to see the transition through.
4. Prepare for valuation early
Preparing for valuation is the least fun and most unavoidable part of the acquisition process. But devoting effort to doing it right can lead to more money in your pocket. The information you provide will be the basis for price, deal structure and timing. Missing or inaccurate information creates risk for buyers and, thus, a less enticing offer for you.
We recommend breaking the work into four weekly pieces so you don’t lose your mind.
Week 1: Assets and audits
Start with the easy stuff, like documenting your org chart. Then, compile a list of all the tangible and intangible assets used to run your business. Tangible assets are things you can touch, such as vehicles, guest supplies, cleaning supplies, linens, lockboxes and office equipment. Intangible assets include your advanced deposits, owner reserve funds, domain names, phone numbers, email addresses, unit photos and inherited reservations. Wrap up the week by doing a full systems audit, creating a spreadsheet that lists each tool you use for business as well as any passwords.
Week 2: Sales details
Start by compiling reservation data for the past two years, documenting rental charges, fees and commission structures for each unit — It’s best to have this report in Excel format so it’s easy for your business partner to transfer. Your reservation data should include each property ID as listed on your website or in your books. Then, create a report of the booking data for each home, including any owner holds, guest booking dates, and the first and last nights of each stay.
Week 3: Contracts & Reports
Kick off week three by creating an Excel report showing your 12-month base rental income, including all fees (booking fees, taxes, and cleaning fees). Once that’s done, compile and review all your contracts, specifying any that are wrapping up in the next three months. Then make a list of your marketing channels and document any special service deals you’ve made and are obliged to continue with homeowners.
Week 4: The financials
Create two sample P&L statements with one broken down to the unit level. The P&L should include all of your company’s costs, including licenses, HOA fees, and office supplies, etc. Finally, calculate your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and account for any extraordinary expenses. Keep everything clean and organized in spreadsheets—and don’t forget to backup your work.
At this point, you should have all the basics covered for your buyers. It’s time to make sure you’re covering them for yourself.
5. Make a smooth transition
The first 30 days after the sale of your business will be a transition period for both your homeowners and employees. They may still reach out to you with questions and concerns. In a partnership-stye acquisition, this is great—it’s why you stuck around. If you’re moving on, it can be difficult to separate yourself from relationships you’ve had for so long. It’s crucial at this time to redirect questions to the new management team. This will help them establish the proper rapport.
Make sure your buyer is willing prioritize a smooth transition. A transition team can be a true lifesaver. Here at Vacasa, we provide a crew to be the “boots on the ground” during acquisitions. The team helps sellers create an operating plan to ensure a strong future for our joined forces. While transition teams eventually leave, the support and resources don't.
When it comes to announcing the transition, it’s always best to work with the buyer to create a communication plan. Your homeowners will want to know if contracts and local teams will stay the same. Your employees will have questions too—will their roles change? What happens in terms of compensation and benefits? Who will be the new boss?
If you’ve built a large or long-running organization with deep ties to the community, it can be helpful to work with your local newspaper to share the news. Some buyers will have communications teams that can do this for you. If you’re selling to a cash-flow buyer, reporters will want to know what the change means for local jobs. If it’s an industry buyer, why did you choose to partner with them and what will their relationship be with the community?
Once the deal is done, the first thing you should do is congratulate yourself. You can now spend time doing what you truly love. You may choose to join the buyer’s team. Or maybe you’re eager to focus on what you’re passionate about outside of the vacation rental industry. Either way, if you entered the deal prepared, you’ll move on feeling great.
Please feel free to reach out if you have any questions. We’d love to hear from you!
By Sandra Brahn, Director of Corporate Development, Vacasa
