FRIDAY, AUGUST 1, 2025
How to start a vacation rental business
By Nechama Rausman | Updated: March 20, 2025
Considering starting a vacation rental business? If so, it’s important to do your research beforehand to make sure you are set up to succeed. First, you need to look at the current state of the industry to establish reasonable goals to formulate your plan. So we will start with a look at the most recent industry forecast.
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Over the past few years, the short-term and vacation rental industry has seen significant gains in demand and the length of guests’ stay, contributing to an average overall increase in revenue for hosts and property managers. Yet it has also reached all-time highs in the number of listings on the market, making competition fierce.
Most projections see a continued increase in the supply, demand and total revenue for the short-term rental and vacation home industry, Predictions for the industry are expected to reach $96.85bn in revenue in 2023 and to continue to rise on target with an annual growth rate of 2.69% (Statista).
Under the right circumstances, a short-term rental business can become a relatively passive stream of income, but these results don’t come from simply purchasing a property or two and listing them on sites like Airbnb.
Running a successful vacation rental business requires a business plan, marketing strategy and a financial strategy. It requires research, planning, financial investment and significant time and commitment. It also requires a number of tools that allow you to run your rentals effectively and to grow them into a thriving business – at whichever scale you hope to achieve.
In this article we will cover the basics of how to start a vacation rental business:
Researching and planning your vacation rental business
Options for investing in your short-term rental property
Designing, renting out and maintaining your property
Insights into tools that help you run and scale your business effectively.
Let’s start with the basics.
How to starts a vacation rental business
What is a vacation rental business?
Short-term rentals (STRs) refer to private properties that are rented out for short-term use (typically from a number of days to weeks). They may be used by travelers, business professionals, nomadic workers or anyone looking to relocate temporarily. Short-term or vacation rentals differ from hotels in that they generally offer more facilities (ie. kitchens, appliances, private outdoor areas etc.), more privacy, and sometimes greater access to authentic, local culture or a unique lodging experience.
A short-term rental business involves acquiring, maintaining, marketing and renting out these properties to guests. Running a vacation rental business may mean that you own your own properties or that you rent and manage the properties for the owner. A short-term rental business can be specifically focused on vacation rentals or leisure properties, which are usually situated in geographic locations that are tourist destinations, or they can be urban rentals that are likely to attract both tourists and corporate travelers. Depending on which population you want to serve, the amenities you provide, your seasonal budgets, your nightly rates and your business plan will need to be adjusted accordingly.
While there are some differences in how one would run a vacation rental as opposed to a short-term rental that is used for other purposes, this doesn’t really affect how you would start the process. Therefore, for the sake of consistency in this article we will be using the term “vacation rental” but the tips here are relevant for getting started with any “short-term rental”.
What Traits Define a Successful Vacation Rental Business Owner?
A typical vacation rental business owner embodies the spirit of entrepreneurship, bringing distinctive qualities to the table that set them apart.
Adaptability: These individuals thrive on diversity, adjusting seamlessly to ever-changing industry trends and customer demands. Their ability to pivot and embrace new strategies is crucial in a dynamic market.
Visionary Mindset: Driven by a relentless desire for growth, vacation rental owners consistently seek ways to enhance their offerings. They identify areas for improvement and innovate to deliver exceptional guest experiences.
Perseverance: This is a critical trait. Owners are fueled by an unyielding drive to succeed, often going above and beyond to meet—and exceed—goals. Their ambition propels them to scale new heights continuously.
Risk Management: Calculated risk-taking is a staple in their approach. While eager for success, these owners carefully evaluate potential risks and rewards, balancing ambition with caution to secure a stable yet prosperous venture.
Problem-Solving Skills: Their work is never truly complete, which means problem-solving is part of their daily routine. They continuously seek to refine and streamline operations, ensuring both efficiency and effectiveness.
Goal Orientation: These owners are intensely focused on their objectives. They meticulously set and pursue goals, navigating challenges with a strategic mindset aimed at long-term achievement.
In summary, the traits of a vacation rental business owner blend adaptability, visionary thinking, and perseverance with a keen sense of risk management and problem-solving—each critical for reaching the pinnacle of success in this competitive industry.
If you have already acquired a vacation rental and are looking to increase your bookings check out these recent articles for the next steps in your journey:
The Ultimate Airbnb Host Checklist to Secure More Bookings
Reducing Double Bookings on Airbnb and Other Channels
Sustainability Matters: 8 Ways to Make Your Vacation Rentals More Eco-Friendly.
guesty vacation rental tips
How much profit can I make from vacation rental properties?
According to data from Mashvisor from August 2022, the median monthly Airbnb rental income in the US reached $3,196 per property (vs $1,787 for a traditional rental income). These numbers can, of course, fluctuate based on the quality of the property, the level of service provided and the efficiency and effectiveness of internal operations.
No matter what kind of property you’re renting, one of the key strategies for maximizing your profit is implementing a dynamic pricing model that reflects dips and rises in demand. Using a dynamic pricing tool, your prices can automatically be adjusted based on market demand, making it effortless to optimize your prices and encourage bookings. This way, your prices will adapt during shoulder seasons (the periods of time between the peak season and the offseason) and will invite the most revenue possible when people are most willing to pay.
Determining the right rental rates for your vacation property is crucial to ensuring profitability while attracting the right guests. Here’s a comprehensive guide to help you set optimal rates.
Understand Your Costs
Assess Total Expenses: Begin by calculating all costs associated with your property. This includes fixed expenses like mortgage payments, property taxes, internet, insurance, and variable costs such as utilities, guest supplies, and maintenance. Ensure that your rates cover these expenses while still allowing for a profit margin.
Analyze the Market
Research Competitors: Gain insights by exploring nearby vacation rentals similar to yours. Look into their pricing, amenities, and occupancy rates. Understanding what the competition offers will give you a benchmark to align your rates without pricing yourself out of the market.
Differentiate from Hotels: Remember, vacation properties often provide more space and privacy than hotels, which can justify higher rates. Yet, ensure these are competitive enough to tempt potential guests away from hotels.
Implement Smart Tools
Consider Dynamic Pricing: Leverage pricing tools and services that automatically adjust your rates based on market demand and trends. Platforms often use algorithms to tweak prices in real-time, ensuring competitiveness while covering your base costs continually.
Factor in Additional Fees
Evaluate Extra Charges: Decide whether to include additional fees such as cleaning, late check-outs, or premium services. Position these as optional to give guests flexibility; however, they can boost your revenue without affecting the base rate appeal.
Review and Adjust
Monitor and Adapt Rates: Setting rates is not a one-time task. Regularly review and adapt based on occupancy data, guest feedback, and seasonal trends. Staying flexible and informed allows you to optimize profitability and maintain high occupancy throughout the year.
By taking a structured approach—factoring in expenses, competition, automated pricing, and extra fees—you can establish a rental rate that not only appeals to guests but also supports a sustainable business model.
What Are the Potential Consequences of Setting Rental Rates Too High or Too Low?
Renting out a vacation property can be a lucrative endeavor, but setting the right price is crucial. Charging too much or too little can have significant repercussions.
Setting Rental Rates Too High
Reduced Occupancy: An exorbitant rate may deter potential guests, leading to vacant periods. Visitors may seek alternatives that better fit their budget.
Unmet Expectations: High prices may raise expectations beyond what the property delivers. Disappointed guests can translate into negative reviews, harming your reputation.
Setting Rental Rates Too Low
Profit Loss: Undervaluing your rental can result in insufficient income, as the revenue generated may not cover expenses like maintenance and utilities.
Attracting the Wrong Crowd: Lower prices might appeal to guests who don’t respect your property, leading to potential damage and increased wear and tear.
Market Perception: Consistently low rates can give the impression of lower-quality accommodations, which can be difficult to correct.
Finding the optimal rental price requires a balanced approach, ensuring the price is attractive while maintaining profitability. To achieve this, many property owners employ a strategic process to evaluate market trends and adjust rates as needed.
Potential Drawbacks of Owning Vacation Rental Properties
Owning vacation rental properties can be a lucrative investment, but it also comes with its fair share of challenges. It’s essential to weigh these potential drawbacks before making a decision:
Uncertain Rental Income: Unlike long-term rentals, vacation rental income is variable. There’s no assurance that your property will be booked regularly, which can lead to inconsistent cash flow.
Ongoing Maintenance Costs: Keeping a property in pristine condition requires regular upgrades and maintenance, which can add up over time. From fixing leaky faucets to updating decor, these costs are inevitable.
Management Challenges: Handling multiple aspects of a rental, such as bookings, cleaning, and maintenance, can become overwhelming. Property management might become necessary, adding to your expenses.
Stiff Competition: In popular destinations, the competition is fierce. Continuous effort is needed to market your property effectively, attract guests, and deliver superior customer service.
Difficult Guests: While most guests are respectful, occasionally you may encounter difficult tenants. These rare occurrences can lead to stressful situations and property damage, testing your patience and resolve.
Understanding and preparing for these potential challenges is crucial for anyone considering the vacation rental business.
Getting started with vacation rentals
Like any business venture, a vacation rental business requires a multifaceted skill set including savvy in finance, legal, tech, marketing, sales and more. Luckily, the STR community is extensive and there are endless avenues of support available for guidance along the way including online and digital courses, forums, influencers, webinars and in-person events and conferences (check out more of Guesty’s resources for additional tips in each of these areas).
Why Understanding Consumer Needs is Crucial in the Vacation Rental Business
In the highly competitive vacation rental industry, prioritizing consumer needs isn’t just beneficial—it’s essential. This approach ensures that your property stands out and continues to attract guests, season after season.
Anticipating Guest Expectations
Understanding what travelers seek allows you to anticipate and exceed their expectations. Think about the details you would appreciate in a rental home. Small touches like high-quality linens, a well-equipped kitchen, or even a welcome basket can transform a stay from ordinary to extraordinary.
Creating Memorable Experiences
Guests are more likely to remember and rave about experiences that feel personalized. Offering conveniences such as local recommendations or easy check-ins demonstrates attention to detail. These thoughtful gestures can turn first-time customers into loyal, repeat visitors.
Enhancing Property Appeal
When you tailor your offerings to what guests truly desire, your property becomes more appealing. Features like fast Wi-Fi, smart technology, or pet-friendly accommodations can cater to different demographics, widening your potential market.
Boosting Positive Reviews and Referrals
Catering to guest needs directly impacts your online reputation. Satisfied customers are more inclined to leave glowing reviews and refer friends or family. This cycle of positive reinforcement boosts your property’s visibility and credibility.
Staying Ahead of Market Trends
Consumer preferences are ever-changing. By keeping a pulse on trends and adapting accordingly, you not only meet current demands but also set your rental apart as an industry leader. This proactive approach positions you ahead of competitors.
In summary, by diligently focusing on the needs and wants of travelers, vacation rental owners can secure more bookings, foster guest loyalty, and ultimately, achieve long-term success.
Let’s walk through the basics of the process to get started on your vacation rental business.
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Step 1: Crunch the numbers and decide how to invest
Before you commit to any property, you want to crunch the numbers to get an estimate of how much income you can potentially make. This depends on a number of factors including the investment requirements and potential returns on the property. You will need to evaluate the particular property (location, value, cost of repairs, size, etc.), loan or payment details, anticipated income projections, and rental expenses. For more information on how to estimate income on a vacation rental property check out this article on Forbes.
You don’t have to have a large amount of expendable income to start a vacation rental business as there are a number of paths to enter into the industry with or without purchasing a property yourself. When it comes to building a vacation rental business there are a few options; purchasing properties (on your own or with a partner), rental arbitrage or managing properties on behalf of the owners. Let’s delve into these a bit more.
Investing in properties of your own
This option requires significant research into market demand, local short-term rental laws, and other factors to determine which locations are ripe for investment and will draw a steady flow of guests. You will need to conduct price comparisons before you purchase as well as research into average nightly rates of similar properties in the area to calculate your ROI. You will also need to look into mortgage options, downpayment requirements and any legalities around owning a vacation property to rent.
Managing properties on behalf of their owners
These options are less demanding when it comes to start-up costs and may be the way to go – even just initially – if you find yourself lacking the funds necessary to purchase your own units.
Rental arbitrage
Short-term rental arbitrage is when a renter sub-leases a long-term rental property for short-term increments at higher rates. This option is great for those who don’t have money to invest and are willing to take the responsibility onto themselves to market and maintain the property.
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Property management
Becoming a property manager for an owner or number of owners allows you to take on the roll of renting and managing the property without having to invest in the property at all. Still, you will need to put in the work and become well-versed in the operations of vacation rental management if you’re going to convince homeowners they should put their keys – and revenue streams – in your hands.
Beyond the property itself, there are other business expenses and factors to consider such as legal implications, financing options and budget. You will need to calculate whether you have sufficient cash reserves for projected start-up costs and slow periods, furnishing and decorating if necessary, unexpected repairs and maintenance, and operating expenses such as booking fees to the OTA sites (such as Airbnb, Booking.com, VRBO and any other sites that you find relevant for your audience), utilities, supplies, etc. In short, like any business venture, you need to work the numbers and have a clear strategy in place.
Once you have the numbers straight, it’s time to further the plan. Determine your budget and use that to plan out your finances, vision and goals. Based on these decisions you can then move on to scoping out your property.
Roles and Responsibilities in Managing a Vacation Rental Property
1. Property Management:
Decide whether you’ll handle the day-to-day management tasks yourself or hire a professional property management team. Self-management gives you control, but can be time-consuming. A property management team can streamline operations if you’re managing multiple properties or have a busy schedule.
2. Cleaning and Maintenance:
Ensure the property is spotless before each guest arrives. You can manage cleaning duties personally or outsource to a reliable cleaning service. Additionally, regular maintenance is crucial to keep the property in top condition. Establishing a network of trusted professionals for repairs and regular check-ups can prevent minor issues from becoming major headaches.
3. Technology and Operations:
Implement the right software solutions to manage bookings, track availability, and communicate with guests efficiently. Utilizing platforms like Airbnb, Booking.com, or specialized vacation rental management software can simplify these processes, providing you with tools to automate tasks and optimize guest interactions.
4. Financial Management:
Handle the accounting side of your business diligently. This includes setting competitive rates, managing expenses, and tracking income. You might choose to use accounting software or enlist the help of an accountant to manage the financial aspects, ensuring everything complies with local tax regulations.
5. Guest Experience:
Plan how guests will access the property, whether via digital door locks, key safes, or personal meet-and-greet services. A seamless check-in process sets the tone for a pleasant stay, and being available to address guest inquiries promptly will enhance their overall experience.
By clearly defining these roles and responsibilities, you can manage your vacation rental property efficiently and provide a memorable experience for your guests.
Common Mistakes Vacation Rental Business Owners Often Make
Vacation rental business owners frequently encounter pitfalls that can hinder their success. Understanding these mistakes and learning from them is crucial to thriving in this competitive industry.
1. Giving in to Complaints
The vacation rental industry, while booming, comes with its fair share of challenges. Many owners fall into the tr
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