How to launch a short-term rental business

When Timothy Kwesiga lost his job due to the coronavirus pandemic, he knew he did not want to be employed ever again.

To keep the many nieces and nephews who were quarantining at his parents’ home in Koranorya, Mbarara District, busy, he started organising camping trips on their expansive property.

Soon, their neighbours were asking if they could join his camps. He started sharing pictures of the camps on his social media platforms and many people showed interest. 

“This is how I knew I had stumbled into a great business idea. I decided to use my business training and put a business plan in place. I also streamlined activities and services I could offer. Because the business was literally based at my parents’ property, we agreed on what percentage they would get from the venture,” says Kwesiga.

Kwesiga says the business has since grown and is now in partnership with some Scandinavian tour operators who send him tourists who want to experience an authentic African lifestyle. 
“Now in addition to camps, I do homestays,” he adds.

Just as Kwesiga discovered, there are many people in search of short term accommodations from upscale accommodations for vacations, short stays or even business spaces. 

In an entirely competitive market, this has provided many real estate players an opportunity to start lucrative businesses.  

Premium short-term rental businesses are hence sprouting in exclusive locations such as bustling city centres, serene mountains or lake sides to provide exceptional and personalised experiences to guests who are willing to pay top-notch for amenities, services and a comfortable stay. 

These accommodations include luxury apartments, vacation homes, villas, rural homes and other high-end properties that provide rent of periods between four days and two months.

Starting 
Similar to other businesses, the start is always complex and requires careful planning and paying attention to detail to achieve one’s goals.

Launching a short-term rental business is costly as one has to ensure maintaining a balance between luxury offerings and exceptional customer service. 

Whereas the goal is to create a memorable and luxurious experience that justifies the pricing that earns the business a positive reputation in the hospitality industry, it involves various steps and considerations to start.

Jeff Rodhe, a property management expert, says as a property owner, it is important to understand your target market by creating a business plan. 

“A written business plan for the investment can help an investor stay focused on the game. The plan should describe specific, realistic, and measurable short- and long-term goals,” he says. 
Rodhe also adds that business owners should understand the rules that govern an area in which they plan to locate their short-term rentals as this makes their businesses legal to operate by paying taxes and licenses.

As the world advances, people are looking out for unique hotel features to include in their homes. As a premium short-term rental business owner, investing in high-quality furnishings, appliances, and decor to create a luxurious atmosphere is key as this will create an attractive environment for your guests.

Additionally, it is also significant to develop a strong brand identity (on social media and online advertising) by creating a professional website with visually appealing photos, videos, and virtual tours to give potential guests a comprehensive view of your accommodations.

Pricing
Whereas there is great competition for clients seasonally, as a business owner, setting competitive yet premium pricing that reflects the value of your accommodations and services is likewise important. This can be done by considering seasonal pricing adjustments (discounts) to account for high and low demand during holidays such as Christmas, Easter and New Year’s.

A lot of people love to travel and get personalised services. Offering a range of premium amenities such as private chefs, spa treatments and guided tours enhances their overall experience and caters for specific needs and desires of your guests.

Go digital
Another tip for launching such a business is implementing an easy-to-use online booking system that allows guests to book directly through your website. 

Furthermore, whereas the business involves offering several services, as a business owner, it is essential to build collaborative networks and partnerships with local businesses such as restaurants, tour operators, and transportation services to offer additional perks to your guests.

Also staying up to date with emerging technologies is crucial as it helps evolve your business overtime.

Capital
The amount of money needed to launch and operate a premium short-term rental business can vary widely basing on factors such as location, property size, property condition, local market dynamics, and the level of luxury and amenities you plan to offer.

The costs for this kind of business are categorical. They include property acquisition, legal and regulatory expenses, insurance, furniture and amenities, marketing and advertising, contingency funds, taxes and fees, and costs for providing personalised services.

From the cost categories, the capital required can range from tens of thousands to millions of dollars depending on the scale and level you are aiming for. 

Experts thus recommend business owners to create a detailed business plan that outlines all potential expenses and sources of revenue.

As a business owner launching a premium short-term rental business can be very tricky as you will need to have several channels from which to obtain the necessary funds. These can be from personal savings, bank loans, investors, or partnerships.

However, you can start small with services such as Airbnb, which allows you to turn your extra bedroom into a rental facility for short stays. Similarly, one can rent out apartments, furnish them and turn them into short term stay rentals. 

Legalities
While we all live in a world that has designated rules and laws, it is important as a business owner to know and also understand laws and regulations governing an area. This helps in ensuring that your business is compliant and operates within the bounds of law and helps in protecting business interests. 

The legalities involved include permits and licenses for running the business, safety, local taxes, insurance, lease and guest agreements, data protection, eviction and guest removal and local laws and ordinances.

Keep in mind that regulations and laws can change, so staying informed and adaptable is key to running a legally sound premium short-term rental business.