This is the second piece in a three-part series covering New Revenue: Innovative Revenue Models from the Vacation Rental Industry and Beyond. This series is based on the successful session at the 2014 VRMA Eastern Seminar with the same title, and will also be provided at the Western Seminar next week. The first piece in the series covered how to grow your inventory. This one will delve into how to grow your business beyond your inventory. Our third covers how to grow what you get from your inventory.
Expanding services beyond inventory
Many VRMs have developed a number of procedures, systems and additional home services to create a competitive advantage and operational efficiency in their businesses. Most of these managers are only targeting their current customer bases for these services and have neglected to see the market need outside of their inventory. Below are six steps to take to expand your revenue sources beyond your current inventory, namely by expanding your customer base for services you already provide.
Step 1: Survey your geographic area to determine the size of your market.
I find pulling property information from your county assessor to be a great way of determining the size of the market. This list should contain mailing info and info on all the properties in the county. If the mailing address does not match the property address it is fair to assume this is a second home and will have a need for your services in one degree or another.
Step 2: Determine the need of the market.
You can determine the need of the market by checking listings on craigslist as well as VRBO.com.
Craigslist will be helpful in determining the size of the long term unfurnished rental market. National vacancies are typically less than 10 percent. If you find 50 homes currently for rent it is fair to deduce that the total size of the market is 500 homes.
VRBO is a great way to determine the size of the vacation rental market in your area. In my areas I find that the number of listings in a given area is a fair estimate of the size of the market, but in your area it may only represent a fraction. In any case, such a search can at least help provide a baseline for analysis.
After you have performed this research you will likely notice that there is a portion of second homes that are not represented in either the vacation rental or long-term rental markets. These homes are likely unoccupied and still have a need for service-- typically home-tending. Home-tending services are a great way to cultivate relationships with owners who do not have a current need or desire to rent their homes. It is likely that these owners will need other services offered such as maintenance and cleaning.
Step 3: Determine the opportunity of expanding your current services.
Many vacation rental managers are not currently operating housekeeping, maintenance and other home care services. Doing so gives the manager the ability to not only increase operational efficiency but increase revenues as well. Before deciding to add in services evaluate what you paid to outside vendors such as housekeepers, plumbers and other licensed trades to determine what the revenue opportunity on an annual basis really is.
Step 4: Get the right people on the bus.
When hiring these licensed individuals you will want to determine that bringing this person on the team is the right decision for both parties. Will the level of work sustain this new person? Does this person’s view of customer service align with the service standards your company offers? Will this new situation create operating efficiency for the new hire?
Step 5: Market those services.
Once you have everything set and running you will want to market these new services to your current list of clients as well as the list of second home owners your uncovered in Step 1. Before expanding these service lines outside of your inventory you will want to make sure that the bandwidth is in place to maintain high service standards to both new and existing customers.
Step 6: REPEAT
Your market will change on an annual basis as will the needs of the market. To ensure your companies longevity you will want to repeat these steps on an annual basis.