High short-term vacation rental demand = high need for STVR supply. But with the current property-management consolidation trend, homeowner inventory is tight. Which makes it that much more important that growth-minded vacation-rental property managers approach acquisition strategically. And that means understanding what goes into vacation-rental customer acquisition cost (CAC) and how to plan for long-term growth.
- The types of properties you need to fill gaps in your vacation-rental portfolio.
- How much you should expect to spend on marketing as part of your vacation rental customer acquisition cost.
- How to figure vacation-rental customer acquisition cost into your long-term growth plan.
1. What Types Of Properties Do You Need To Grow Your Vacation-Rental Portfolio?
The first step in homeowner acquisition strategy is identifying properties to fill gaps in your portfolio. Are you tapping into the kinds of guests you need to meet your revenue potential? Are your past guests eager to continue booking with you? Do you have the right properties to satisfy their needs?
- Digital Nomads: These tech-reliant travelers have jobs一or “gigs”一they can do from just about anywhere. They’re typically attracted by high-speed wifi, a quiet place to plug in and work, cool design touches, nearby food and drink options and on-site laundry. They also tend to book longer stays. And don’t think they’re only interested in urban environments: These guests are just as likely to set up shop in a downtown high-rise as they are in a mountain cabin
- Staycationers: The lifting of COVID-related travel restrictions has lots of folks eager to get out there–just not too far out there. Couples and families who desperately need some R&R but are still wary of air travel or straying too far from home are on the hunt for clean, safe, private accommodations. Win their business with comfortable, attractive homes stocked with creature comforts, vacation toys, and home entertainment options. Outdoor decks, patios and terraces are catnip for these getaway guests, as are special amenities they may not have at home, like a fancy espresso machine, hot tub, spa-style bathroom or luxury bedding.
- Bleisure Travelers: Came for work, stayed for fun: This is the mantra of the growing number of short-term-rental guests who travel to a location for a business meeting or conference, and linger on for extra days enjoying the local scene. These travelers may be looking for a condo or house in a city that’s known for great museums, fabulous restaurants, renowned music venues or nearby outdoor activities. And they probably want it to be equipped with fast wifi, plenty of towels, toiletries, laundry and gym access.
A Growth Plan Is Only Valuable If It’s Realistic And Scalable.
Once you identify what kind of properties you need most, your next step is figuring out how many properties you can realistically expect to acquire. Brooke Pfautz of leading vacation-rental acquisition sales and marketing platform Vintory explains: “If a property management company tells us they have 25 properties now and they want to grow to 500 by next year, that’s not really realistic.” Why? Because “there’s an acquisition cost associated with each property,” Pfautz stresses. “Do you have a quarter million dollars to acquire new homeowners?” If the answer is no, fear not. You can substantially improve your vacation rental marketing business without a huge expenditure. It’s all about using the most effective marketing platforms and spending your marketing dollars wisely.
2. How Much Should You Expect To Spend On Marketing As Part Of Your Vacation Rental Customer Acquisition Cost?
There are several costs associated with a homeowner-acquisition strategy. Some property managers, for example, have management issues that need to be addressed before scaling up to a larger portfolio. Encountering problems managing between-stay cleanings or maintaining consistent quality in cleaning and maintenance? You may need to turn to a services automation and compliance provider, such as Breezeway. Struggling to coordinate bookings and transactions across multiple channels? You may need to upgrade your management software. Battling neighbor noise complaints or dealing with property damage that’s affecting occupancy or community relations? You probably need to invest in privacy-safe noise monitoring.
But no matter what else you do or spend to better manage your properties, if you want to grow your portfolio, you will have to invest in marketing.
So, how do you determine how much you’ll have to spend on marketing to get the properties you want and the ROI you need?
Hypothetically, let’s say your one-year goal is to add five new properties to your existing portfolio of 20 properties. Realistic? Yes. As long as you market to homeowners effectively, working with the right platforms and budget. A moderately aggressive marketing plan may look like this:
- Platforms: Email, PPC (ex: Google Adwords), Facebook, YouTube
- Annual marketing budget: $2,000 – $3,000
- Estimated CAC per property: $4,800
You can easily modify your marketing plan by subbing out platforms based on which ones are performing best for you, or changing ad content in real time. For example, maybe your PPC ads are doing great, but Facebook isn’t producing the leads you want. The great thing about digital marketing is that you can make changes to creative content (photos, videos), headlines and calls to action (CTAs) just about anytime you want. Just make sure to give your marketing time to prompt action, which can take weeks or months.
You can also modify your budget as you go. If, for example, you decide to pivot your focus to an area where inventory is particularly tight, or where you’re competing with PMs that have splashy marketing assets or offer homeowners features you may not offer (yet), you may need to increase your spend. Got a great landing page for your digital marketing that seems to be converting targeted homeowners into warm leads much more effectively than you’d expected? You may be able to decrease your spend and still realize a great conversion rate.
Just know that it’s important to take a long view when thinking about vacation-rental customer acquisition cost. Because the plan is not just to get these properties under your umbrella, but to keep them there.
3. How Should You Figure Vacation-Rental Customer Acquisition Cost Into Your Long-Term Growth Plan?
Immediate returns on your homeowner-acquisition marketing investment are obviously great. But they’re not enough. To really evaluate your CAC over time, you need to focus on long-term acquisition value.
Looking at the marketing budget above, if you figure in a marketing spend of $4,800 on a property that will deliver $15,000 in expected annual commission revenue, you’re looking at an annual ROI of about 200 percent, which is good. Multiply that $15,000 commission by five years and you’ve added $75,000 in gross revenue to your business. That’s a healthy chunk of change.
But if you’re planning to continue to grow your business, you’ll need to plow some of that revenue back into marketing.
Once you’ve seen your property-targeting and marketing efforts bear fruit, you may want to intensify your growth plan. That may mean increasing your marketing spend, paying very close attention to digital marketing analytics, and thinking even more strategically about properties and locations where you can realize strong revenue-to-CAC. It will also mean investing money in the services and staff to support your properties and market them to the right guests through the right channels.
And don’t forget your homeowners: Acquisition means nothing if you don’t have the tools and people in place to make your homeowners一who are people, after all, not buildings一feel cared for, valued and protected. So make sure you make good communication and transparent reporting a part of your growth plan, whether you’re looking to scale by 25%, 250%…or much, much more.
Natasha Garber covers short-term-rental industry trends, news, regulations and compliance for NoiseAware. Her posts on STR property management technology, privacy-safe noise monitoring, and licensing laws can be found weekly on the NoiseAware blog.