A rental property business plan is a document describing in detail the idea you want to undertake, the objectives to be achieved and the strategy that will be taken to achieve success.
Industry experts agree on one thing: developing a good action plan is essential before setting up a tourist apartment business. It is a fundamental tool for calculating the profitability potential of a vacation rental. Nobody wants to start a business if they are not going to make money with their idea.
What should a rental property business plan include?
If you are still taking your first steps in the vacation rental sector, knowing which strategy is the best can be quite complicated.
Luckily, at Maven Business Plans, we aim to make things easier for owners and managers of tourist accommodations, whether present or future. With that goal in mind, we have prepared this guide, showing you the 10 essential sections a business plan for vacation rentals must include.
Read on to discover them.
Executive Summary
Unless you are a top manager of the IBEX, preparing an executive summary likely gives you a bit of vertigo.
Luckily, it’s not that bad. The executive summary is nothing more than a brief description of your vacation rental business and the services it will offer.
Ideally, anyone who reads it can get an idea of what you want to achieve with your business without having to be an expert in the sector.
For this purpose, we recommend that you try to answer the following questions:
What type of property will it be?
- A large and luxurious villa near the beach?
- A small studio in the old part of the city?
- A wooden cabin in the Pyrenees?
Where will it be located?
- Will it be by the sea?
- Will it be in the city’s center, close to the main tourist attractions?
- Will you be in the field?
Who will be staying at the property?
- Families?
- Couples?
- Groups of friends?
- Digital nomads?
When are you going to have more guests?
- In summer?
- In winter?
- All year?
What are your reasons for renting the house?
- Do you want to live from it?
- Just looking for some extra cash?
- Do you want to supplement your retirement pension?
Although you do not need to follow this structure in the letter, the questions posed here can be very useful for you to prepare a consistent business plan for your tourist accommodation.
Business objectives
While the Executive Summary will give you an overview of where you want your vacation rental to go, the Objectives section is where it becomes concrete.
The objectives will allow you to clearly and unequivocally measure the success of your business. Is it enough for you to get a couple of reservations from time to time, or do you want to have your calendar full every month?
Ask yourself this question and set goals based on what you decide.
Value proposition
As with any other business, with your vacation rental, you will have to find a way to convey to your potential clients why they should choose your accommodation and not another.
In this section, your objective will be to explain the USP (in Spanish, Unique Sales Proposal) of your accommodation for others: highlight its characteristics and what differentiates you from your competitors.
Sometimes it’s not even a matter of effort or expense. The key is to know your potential guest well to know what he wants and how you can offer it. If you manage to get this aspect right, you will have a clear advantage over the competition.
Company analysis
When you carry out the analysis of your company (whether it exists or not yet), you should reflect on its strengths, weaknesses, opportunities and threats: what is known as a SWOT analysis.
But how? – you may be wondering.
Carrying out a small analysis of your business and finding its strengths and weaknesses is easier than it may seem initially. First, ask a few simple questions to determine how it differs from other vacation rentals. Some examples are:
Does it stand out for its location?
- Is it close to the beach?
- Is it well connected by public transport?
- Is it in a place away from noise, stress and pollution?
Does it stand out for its price?
- Is the accommodation cheaper?
- Is it the best deal for the money?
- Will you offer discounts at certain times of the year?
How is the interior of the accommodation?
- Is it decorated in a rustic and cozy style?
- Do you have a fireplace that provides warmth during the winter?
- Do you have a minimalist design with open spaces?
Industry analysis
If you want your rental property business plan to succeed, you must think strategically. It is not enough to know your business thoroughly; You should also be aware of the peculiarities and trends of the sector.
The easiest way to do this is through a thorough analysis, which will tell you everything you need to know to make a good business plan. Keep in mind that knowledge is power!
Here are some questions you might want to ask yourself as you do your industry analysis:
What is the price range in the sector?
- Do you offer affordable rates?
- Are they good value for money?
- Do you charge less than $50 per night?
- Or, on the contrary, more than $300?
Think of these figures in relative terms. Then, weigh the value that others offer against what they charge; I’m sure it will help you to establish competitive prices.
What is the target audience of the sector?
- Are they families?
- Are couples looking for a romantic getaway?
- Students and school groups looking for large but basic accommodation?
Which approach is more common: luxury or low cost?
- How is your brand?
- How do they talk about their products in their ads?
- How are they decorated?
- Do they use high-quality materials?
Is it common to offer accommodation or also other services?
- Are they simple tourist flats without the provision of services?
- Do you offer a basic breakfast, typical of a B&B?
- Do you offer extra services, such as key custody, reception or full board?
What are promotional channels usually used?
- Do they use online travel agencies like Airbnb, Booking or TripAdvisor?
- Do they use any alternative channels that you could take advantage of?
- Do you collaborate with the local tourist office?
Customer analysis
Your customers (or rather, your guests) give life to your business: if your accommodation were a tree, its customers would be the sap that runs through its roots. For this reason, understanding their motivations and language is key to conveying why they want to stay with you.
Make sure your plan includes different customer profiles based on the different types of guests you want to attract. These customer profiles can be re-study each time you want to achieve a higher volume of reservations.
It is often said that the customer is always right, but if you know your customers well and what they want, proving them right will also be good for your business.
Analyzing the client involves getting to know him thoroughly: what he wants, needs, and expects from your accommodation.
Here are some short questions you should ask yourself about your typical customer:
As it is called?
- Ana Maria de Velasco?
- Gunther Schmidt?
- Pavel Novikov?
It may sound silly, but giving your ideal client a fictitious name can help you better visualize their personality and desires.
What is your job?
- A high-flying banker?
- A GP?
- A school teacher
How old are you?
- 18-25 years.
- 25-40 years.
- More than 40 years.
What is your marital status?
- Single.
- Couple.
- Married with several children.
Analysis of the competition
No business plan for tourist apartments is complete without a thorough analysis of the competition. However, unlike what happens with sector analysis, which seeks to obtain an overview, the objective of analyzing your competitors is to know the keys to their success.
For example, imagine your vacation rental project is a small house near Los Gigantes in Tenerife. What is your real competition: other vacation homes or the hotel macro-complex also in the area?
When you do the sector analysis, you should look at both, but in the competition analysis, you will only care about those businesses similar to yours.
Now, what should you look for when you are analyzing your direct competitors?
How much does the competition charge?
- Competitor 1 – $50
- Competitor 2 – $70
- Competitor 3 – $90
With this information, you can decide where to place your prices. Perhaps you want to lower them from $50 to be the cheapest option, or on the contrary, focus on the luxury tourist with a rate of $180 per night and an experience according to the price.
What standard of accommodation do you offer?
- Do they offer anything more than what is necessary to stay without spending much money?
- Are they designer accommodations with high-level equipment?
- Are they somewhere in the middle so that most travelers can use them?
Do you offer airport transfers/pick-up service?
- Nope.
- Yes, at a reasonable price.
- Yes, at a very high price and in a luxury vehicle.
What services do you offer on the property?
- Basic things: washing machine, Wifi and little else.
- An intermediate point: air conditioning or television with Netflix, for example.
- Luxury services: swimming pool, gym, private cinema…
Operational plan
The operating plan is, plain and simple, a document that summarizes the specifics of how you will manage your new business.
A good operating plan should include things like whether you’re going to hire staff, what cleaning and maintenance standards you’re going to set, how you’re going to manage your inventory, or how other administration tasks will be carried out.
In truth, this is probably the easiest part of your rental property business plan to put together, as often budding owners have been planning it in their heads for some time.
Still, we’ve compiled a short list of things you should include:
Are you going to hire staff?
- No, I will only rent a room in my house, and I can manage it myself.
- Yes, I am renting several large apartments and also work full-time.
- No, my partner and I will take care of it.
Who is going to clean the property?
- A cleaning agency?
- Yourself?
- A neighbor?
Are you going to want to hire a manager?
- No, I’m comfortable dealing with all those things.
- Yes! I don’t even know where to start when handling taxes.
Who will take care of reservations and customer service?
- Myself with only one room, it will be easy.
- I will hire a person to take care of it.
- My children: it is not a lot of work and will help them learn and earn a little money.
Marketing Plan
The marketing plan for your accommodation will outline how you will advertise and promote your business to your potential customers. Developing a good marketing plan will allow you to know which strategies will best generate reservations from your target audience.
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