A Booming Short-Term Rental Industry Requires Professional Property Managers To Thrive
Running a short-term rental (STR) business is a complex responsibility, requiring a growing range of technology automation tools for the successful management of day-to-day operations and regulatory compliance.
It’s no surprise that many hosts are turning to professional property managers (PMs) for varying degrees of assistance with their rentals. This trend towards professionalization has sharply accelerated over the last two years. PMs currently provide many services for hosts, but there are additional areas to address for added success and longevity within this growing industry.
Avalara, in collaboration with Phocuswright, conducted comprehensive research and surveyed over 442 U.S. STR hosts, and 90 short-term rental PMs. This new research uncovered new insights into the evolving role of PMs in the STR ecosystem.
The Rise of Professional Property Managers
STR hosts have a variety of reasons for turning to professional PMs to help run their properties. If a host has multiple properties, resides far away from their rental property, or has other responsibilities, it is convenient, and sometimes essential to hire a property manager to operate the STR.
PMs can oversee everything from reservations, refunds, re-bookings, and cancellations, to check-ins/check-outs, arranging cleaning services, adherence to health and safety protocols, compulsory obligations including lodging tax compliance, STR registration, business licensing, and any required permits.
Engaging the services of PMs can offer financial benefits as well as convenience, particularly for hosts who hire PMs to fully manage their rentals. Survey results showed that 54 percent of hosts stated that their business goals included increasing profitability, and the numbers support hiring a PM to fully manage rentals to meet that goal. Hosts who used PMs to provide some services but not fully manage their property were the least likely to meet their financial goals in both 2019 and 2020.
Fully managed and independent hosts had similar chances of meeting their financial goals in 2019 when the STR landscape was more stable. However, when uncertainty jolted the markets in 2020 due to COVID restrictions, fully managed properties were the most likely to meet their financial goals.
In addition to day-to-day management as well as driving bookings, PMs are more likely to integrate back-end technology tools such as property management systems, rate monitoring, revenue management, booking-enabled websites, and calendar managers. The integration of technology systems can support strategic pricing and smoother operations, directly impacting profitability. Independent hosts may not have the capability or technological know-how to add these systems, tools, and processes to their management suite, but career PMs are adept at leveraging integrated technologies for the benefit of hosts.
Mastering and Managing Short-Term Rental Regulations
While non-professional hosts might, in an ideal world, understand all local rules and regulations surrounding rental operations, the process of uncovering, comprehending, and tracking the intricacies of local and state STR regulations is daunting and inordinately time-consuming. PMs step in to play an essential role for their clients by managing ongoing complexity and change.
Survey results showed that while 92 percent of PMs are aware of local laws and regulations that concern their rentals, only 78 percent of independent hosts can say the same. Broadly, PMs are much more likely to stay on top of regulatory requirements and keep hosts in compliance via their services.
When it comes to managing current regulations for short-term rentals, digital transformation empowers managers with the latest technologies to address mission-critical areas like dynamic pricing, guest communication, property access, noise control, and the above-mentioned tax and licensing requirements.
Ongoing regulation of the short-term rental industry has been an enduring source of disruption for hosts and PMs in recent years. There is an inherent tension as destinations face dust-ups between full-time community residents and short-term rental hosts. Our survey results show a large majority of hosts (86%) desire to be good neighbors and 93% of PMs indicate that complying with regulations is important to them because they are a part of the local community.
However, hosts and PMs can become frustrated when guidelines and laws change without input from the STR community, while at the same time communities can struggle to find a balance between the need for affordable housing and the bottom-line economic benefits of tourism.
There’s potential for significant benefits if professional PMs play a collaborative role in these local discussions, including the initiation and shaping of regulatory policy. The downstream effects could include a responsible, compliant short-term rental industry that generates local jobs and tax revenue and creates shared prosperity for the community.
More Than Manage
As the STR landscape continues to be unpredictable, host expectations for success and guest expectations for their stay will only continue to evolve. We anticipate hosts will continue engaging with professional PMs to ensure the best chances of long-term success for their rental property. These professionals create value through expert application of the latest technologies and methodologies to deliver smooth operations, with both guest-facing and back-end systems.
The successful future of short-term rentals will to some significant degree coincide with PMs’ evolving role in the ecosystem — and they will be integral not only in the running of STRs but in working with hosts and communities on conflict resolution and resulting policy formation.