A vacation rental company is a business designed to allow travelers to rent private properties for a short period and these rental properties are often located in vacation destinations and feature more benefits and greater flexibility than staying in a hotel.
Please note that some vacation rentals, particularly condominiums or apartments, offer many of the same services hotels offer to their guests, e.g., front desk check-in, 24-hour maintenance, in-house housekeeping, and concierge service. Available data shows that the market size of the sector in the United States reached 411.9 million U.S. dollars in 2020. The sector saw a 1.7 percent growth over the previous year’s size of 405.2 million U.S dollars.
Steps on How to Start a Vacation Rental Business
Table of Content
Conduct Market Research
Conducting market research before starting any business is key to the success of the business hence you must not start a vacation rental business without conducting market research. This is so because market research provides critical information about your market and your business landscape. It can tell you how your business is perceived by the customers and clients you want to reach.
It can help you determine where your customers are, and which customers are most likely to do business with you. In essence, thorough market research will help you understand how your target customers think and adapt to their needs to turn them into regular customers and brand advocates.
a. Who is the Target Market for Vacation Rental Business?
- International students
- International businessmen and women
- Sportsmen and sportswomen
- Corporate organizations
b. Is the Vacation Rental Business a Profitable Business?
Yes, the vacation rental business is very profitable. The industry is projected to be worth $6.8 billion in 2022.
c. Are There Existing Niches in the Industry?
No, there are no existing niches when it comes to the vacation rental line of business.
d. Who are the Major Competitors?
- Marriott Homes & Villas.
- TurnKey Vacation Rentals.
- Utah’s Best Vacation Rentals
- Roelens Vacation Rentals and Management
- Isle of Palms Vacation Rentals by Exclusive Properties
- Sykes Holiday Cottages
- The Travel Chapter
- Original Cottages
- iTrip Vacations
- My Property Host
- Happy Holiday Homes
- City Relay
- CorpHousing Group.
e. Are There County or State Regulations or Zoning Laws for Vacation Rental Business?
Yes, and zoning laws require vacation rental operators to follow specific rules and regulations. Please note that in many communities, zoning laws require vacation rental service companies to apply for a permit from the city. This application process allows the city’s zoning department to determine whether the vacation rental company meets the zoning rules for the community.
Permits also ensure that all vacation rental companies are properly licensed by county or state agencies. In many counties, towns, and cities local authorities attempt to regulate or ban vacation rentals after complaints from residents or competing lodging businesses.
In the U.S., New York City, Chicago, and other cities have introduced restrictions on short-term rentals, though regulation is not always strictly enforced. The City of Portland, for example, does not allow rentals of less than 30 days in residential zones but according to local vacation property managers such as Vacasa, the average guest stays 3-10 nights.
f. Is There a Franchise for Vacation Rental Business?
Yes, there are franchise opportunities for vacation rental businesses, and here are some of them;
- Book by Owner
- Happy Holiday Homes
- Property Management Inc.
- iTrip Vacations
- Direct Booker
- SkyRun Vacation Rentals
- Pass the Keys.
g. What Do You Need to Start a Vacation Rental Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- A Good Office facility
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
- Vacation Apartments
- Startup Capital
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a vacation rental business are;
Vacation Rental Business Name ideas
- Red Roof® Vacation Rental Company, Inc.
- Barrow Villas® Vacation Rental Company, LLC
- House Top© Vacation Rental Company, Inc.
- House Solutions® Vacation Rental Company, Inc.
- Lugard Lodge™ Vacation Rental Company, Inc.
- Harmony Lodge™ Vacation Rental Company, LLC.
- Silver Linning© Vacation Rental Company, LLC
- Jonny Moore® Vacation Rental Company, Inc.
- Tender Apartments© Vacation Rental Company, Inc.
- Luke Linus© Vacation Rental Company, Inc.
- Williams Barkey and Sons® Vacation Rental Company, LLC
- Golden Heritage® Vacation Rental Company, LLC
- Tony Martins™ Vacation Rental Company, LLC
- House Nation© Vacation Rental Company, Inc.
- Aaron Isaac® Vacation Rental Company, Inc.
- Merry House™ Vacation Rental Company, Inc.
- Holland House™ Vacation Rental Company, Inc.
- Anderson Global© Vacation Rental Company, Inc.
- One Stop® Vacation Rental Company, LLC
- Mega Suites™ Vacation Rental Company, Inc.
Register Your Business
a. What Type of Business Structure is Best for Vacation Rental Business?
The truth is that you have several options when it comes to the business structure of a vacation rental business, but the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits.
Please note that an LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Start a Vacation Rental Business?
- General Business License
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections
d. What Type of Certification is Needed to Start a Vacation Rental Business?
In reality, you don’t need any special certifications to start a vacation rental business.
e. What Documents are Needed to Start a Vacation Rental Business?
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering starting a vacation rental business, usually you may not have any need to file for intellectual property protection or trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start Vacation Rental Business?
The cost required to start a vacation rental business may vary significantly and it could be high, moderate, or low. But on average, you can budget over a million dollars to start your vacation rental business.
b. What are the Cost Involved in Starting a Vacation Rental Business?
- Business Registration Fees – $750.
- Legal expenses for obtaining licenses and permits – $7,300.
- Marketing, Branding, and Promotions – $5,000.
- Business Consultant Fee – $7,500.
- Insurance – $5,400.
- Properties (holiday villa, apartment, cottage, condominium, townhome) – $5 million
- Other start-up expenses include commercial satellite TV subscriptions, stationery ($500), and phone and utility deposits ($2,800).
- Operational Cost (salaries of employees, payments of bills et al) – $60,000
- Start-up inventory – $55,000
- Counter area equipment (countertop, sink, ice machine, etc.) – $29,500
- Store Equipment (cash register, security, ventilation, signage) – $14,750
- Website: $1,500
- Opening party: $10,000
- Miscellaneous: $20,000
c. What Factors Determine the Cost of Starting Vacation Rental Business?
- The size of the vacation rental business
- The choice of locations
- The required licenses and permits
- The type of facilities (holiday villa, apartment, cottage, condominium, town home)
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the vacation rental business
- The cost of furnishing and equipping the vacation rental business office facility
- The cost of the insurance policy covers
- The cost of registering the business
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
- The cost for the grand opening of the business
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
It is compulsory to build new facilities for your vacation rental business and it will cost you several million dollars depending on the number and type of facilities (holiday villa, apartment, cottage, condominium, town home), and of course, the locations.
e. What are the Ongoing Expenses of Vacation Rental Business?
- Cost of stocking up supplies such as toiletries and food ingredients
- Utility bills (gas, internet, phone bills, signage and sewage et al)
- Maintenance of facility
- Salaries of employees
f. What is the Average Salary of your Staff?
- Chief Executive Officer (Owner) – $75,000 per year
- Facility Manager – $38,000 per year
- Accountant / Cashier – $35,0000
- Marketing and Sales Officer – $35,000 per year
- Attendants (Staff like House Keepers, Concierge, Cook, and Hostess) (5) – $35,000 per year
- Cleaners – $22,000 per year
- Security Officers – $21,150 per year
g. How Do You Get Funding to Start Vacation Rental Business?
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Source for soft loans from your family members and friends.
a. Executive Summary
House Nation© Vacation Rental Company, Inc. is a registered vacation rental company that will be located in New York City, New York but with an active presence all across tourist cities in the United States and the globe. We have been able to secure all the necessary permits for our facilities.
b. Products and Service
Renting out of a furnished apartment, house, holiday villa, cottage, townhome, and professionally managed resort-condominium complex temporarily to tourists as an alternative to a hotel.
c. Mission Statement
Our mission is to establish a vacation rental business that will provide top-notch and safe vacation apartments to both individual and corporate clients in the United States.
Our vision is to establish a standard vacation rental business that will be become one of the leading brands in the vacation rental line of business in New York, and also to be amongst the top 20 vacation rental companies in the United States of America within the first 20 years of operation.
d. Goals and Objectives
The goals and objectives of the vacation rental business are to provide short-stay accommodation such as holiday villas, apartments, cottages, condominiums, townhomes et al as an option for travelers and tourists who would not want to lodge in a hotel.
e. Organizational Structure
- Chief Executive Officer (Owner)
- Facility Manager
- Marketing and Sales Officer
- Attendants (Staff like House Keepers, Concierge, Cook, and Hostess) (5)
- Security Officers
a. SWOT Analysis
- Ideal Location for vacation rental company
- Highly Experienced and Qualified Employees and Management
- A wide network of property owners spread across vacation cities
- Availability of all kinds of apartments in safe and secured locations and cities.
- Availability of support services
- Financial constraints may restrict the business from building new facilities in key cities
- A new business that will be competing with well-established vacation rental companies and franchises in the city
- Inability to retain our highly experienced employees longer than we want during the teething stage of the business.
- A rise in the number of travelers
- The high cost of hotel fees will push people to rent vacation homes
- Online market, new services, new technology, and of course the starting of new markets.
- The arrival of a new vacation rental business within our market space
- Low demand during the pandemic will reduce industry profitability.
- Economic uncertainty
- Liability problems
- The government could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses like ours.
b. How Do Vacation Rental Companies Make Money?
Vacation rental companies make money by renting out furnished apartments, houses, holiday villas, cottages, townhomes, and professionally managed resort-condominium complexes temporarily to tourists and visitors.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your vacation rental business by sending introductory letters alongside your brochure to corporate organizations, travel and tour agencies, and other key stakeholders throughout the city where your vacation rental business is located.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business to give your business an online presence
- Directly market your service
- Advertise our business in travel and tours magazines, community-based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
a. How Much Should You Charge for your Service?
The amount vacation rental companies charge their clients depends on the type of facility, the number of days the client wants to lodge, and of course, the additional services rendered. However, vacation rental companies charge between $58 to $259 per night.
b. How Much Profit Do Vacation Rental Business Owners Make a Year?
It depends, but the available report shows that on average, a small to medium-sized vacation rental business can earn anywhere from $60,000 to $200,000.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the vacation rental business
- The types of additional services offered
- The location the vacation rental business is covering
- The management style of the vacation rental business
- The business approach of the vacation rental business
- The advertising and marketing strategies adopted by the vacation rental business.
- The number of years the vacation rental business is in business
d. What is the Profit Margin of a Vacation Rental Business?
The profit margin of a vacation rental business is not fixed. It could range from 4.5 percent to 15 percent depending on some unique factors.
e. What is the Sales Forecast?
Below is the sales forecast for a vacation rental business. It is based on the location of the business and other factors as it relates to such startups in the United States;
- First Fiscal Year (FY1): $750,000
- Second Fiscal Year (FY2): $1.2 million
- Third Fiscal Year (FY3): $2.2 million
Set Up your Office
a. How Do You Choose a Perfect Location for Vacation Rental Business?
- The demography of the location especially as it relates to people that travel regularly
- Accessibility of the location
- The number of vacation rental companies and hotels in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Start a Vacation Rental Business?
- Las Vegas, Nevada
- Los Angeles, California
- Ponte Vedra Beach, Florida
- Dallas, Texas
- Silver Spring, Maryland
- Rowland Heights, California
- Portland, Oregon
- Oak Lawn, Illinois
- Green Bay, Wisconsin
- New York City, New York
c. What Equipment is Needed to Operate a Vacation Rental Business?
- Booking software
- Computers and laptops
- Fax machine.
When it comes to hiring employees for a standard vacation rental business, you should make plans to hire a competent chief executive officer (you can occupy this position), facility manager, accountant, attendants (staff like housekeepers, concierge, cook, and hostess), cleaners and security guards.
Launch the Business Proper
No vacation rental business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can go for a grand opening party.
The bottom line is that with a proper launching of the vacation rental business, you will officially inform people in your city that your vacation rental is open for business.
a. What Makes vacation Rental Business Successful?
- Choose good locations and standard apartments to launch the business
- Make sure your partner with key stakeholders and offer a wide range of apartments (give your customers options)
- Be deliberate with your marketing approach
- Encourage the use of word of mouth to promote your vacation rental business
- Leverage all available online and offline platforms to promote your vacation rental business
b. What Happens During a Typical Day at a Vacation Rental Business?
- The business is open for the day
- All the apartments are cleaned and ready to welcome guests
- Guests are welcomed and ushered to their apartments
- Administrative work is done concurrently
- Stocking of toiletries, cooking ingredients, and other supplies is done
- Maintenance of the properties is carried out when due
- The facility is administratively closed for the day.
c. What Skills and Experience Do You Need to Build a Vacation Rental Business?
- Excellent facility management skills
- Excellent customer services skills
- Interpersonal skill
- Accounting and bookkeeping skills
- Business management skills
- Bargaining skill
- Work experience in a vacation rental industry
- Experience in managing people
- Experience in business administration
- Experience in handling different types of booking software.