We all know someone who has become a successful entrepreneur thanks to modern accommodation booking websites such as Airbnb. As popularity for vacation rental properties continues to increase more homeowners are starting to ask themselves whether this a worthwhile income option.
As a rental associate at Rego Sotheby’s International Realty, one of the most common conversations I have with homeowners is advising them of the pros and cons of entering the market with a long-term rental versus a short-term/vacation rental. People often want to know which option will generate a higher revenue opportunity, what will work best for their lifestyle, and whether renting their property or apartment on Airbnb is truly worth it. The answer to these questions is yes! Renting your home on the vacation rental market can be worth it if you have the time, resources and a property that can exceed the average vacation rental market statistics.
What do the average market statistics look like in Bermuda?
First, let’s take a look at the short-term/vacation rental market. The average daily rate is $160 BMD per night and the average number of nights that a property is booked is 72 nights per year. Therefore, the average annual revenue of vacation rental properties is $11,520. Of course, many exceptional properties in Bermuda will far exceed this number.
Now let’s compare that with the long-term rental market. An average one-bedroom apartment rents for $1,200-$1,500 per month. Therefore, the average annual revenue of one-bedroom properties on the long-term rental market is $14,400-$18,000.
It is important to consider that the operating costs of a vacation rental are higher than a long-term rental. For a long-term rental your operating costs are land tax, landscaping, appliance maintenance and general property maintenance. The operating costs of a vacation rental encompass all the costs of a long-term rental but have additional expenses such as utilities (electricity, internet, TV package, water), cleaning costs, maintaining supplies for guests (toilet paper, dish soap, salt, pepper etc.) and cost of replacing furniture or kitchenware due to normal wear and tear.
So how can a property owner create a vacation rental business that will be more profitable than renting their property on the long-term market? Maintaining a 5-star rating on the website which you use to advertise your property is critical. You get a five-star rating by providing an exceptional experience for your guests.
A quick response and being available to your guests 24/7 is crucial to achieving the profit you desire. The work involved in this could include things such as: answering all guests questions before their arrival, arranging airport transportation, facilitating grocery store deliveries, supplying basic toiletries and pantry items, check-in/out inspections and condition reports, professional standard cleaning and attending to property maintenance or internet issues without delay. There is also a requirement to report bookings to the Bermuda Tourism Authority and pay a 4.5% Vacation Rental Tax.
Ensuring that a vacation rental is ‘guest-ready’ for each booking requires a financial investment, as well as a time investment. Do not underestimate the value of your time. Many successful vacation rental property (VPR) owners will tell you that operating a successful VRP is a full-time job.
When you are deciding on a rental option for your property ask yourself if you have the time to properly commit. Are you prepared to work an on-call job on top of your full-time job? Or do you have the means to make VPR management your full-time job? If you have a passion for tourism, a property that will be in high demand and the drive to work for yourself, then you can absolutely create a VRP that will beat the vacation rental market average statistics.
If the time commitment is daunting, and you desire an easier revenue stream from your property then renting your property on the long-term market will most likely be better suited for your lifestyle, while still being profitable. Remember, there is also the option of hiring a property manager for a small fee to alleviate some of the responsibilities related to maintaining a vacation rental property.
There is no denying that websites such as Airbnb have had a significant impact on the tourism industry, and it is only growing. Every property and every owner is different. Take the time to reflect on which option is best for your lifestyle, and of course, do not hesitate to contact the professionals for advice!
Allison Settle-Smith is the Long-Term & Vacation Rental Advisor at Rego Sotheby’s International Realty.