How to Write a Short-Term Home Rental Business Plan or Template
The short-term home rental industry has enjoyed significant growth over the last several years, which has driven demand for short-term home rental business plans and templates.
The short-term home rental industry offers vacationers and business travelers an alternative to traditional hotels, providing unique and customizable lodging experiences. In 2023, the U.S. short-term rental market was valued at $18 billion and is expected to grow at a compound annual growth rate (CAGR) of 7.8% through 2030, driven by increasing demand for unique stays and the flexibility offered by platforms like Airbnb and VRBO (Statista, 2023). This growing industry presents significant opportunities for entrepreneurs looking to enter the market.
Recently, in Nashville, Tennessee, Cozy Stays LLC, a small short-term rental business, closed in 2022 due to declining bookings and rising operational costs. Despite owning prime properties in tourist areas, the business struggled with ineffective marketing, inconsistent pricing strategies, and inadequate financial planning, which led to its inability to stay competitive.
A well-written short-term home rental business plan could have transformed Cozy Stays LLC’s operations. The plan would have included financial projections to manage expenses, marketing strategies to attract guests year-round, and operational guidelines to maintain competitive pricing. Initiatives such as leveraging seasonal promotions, optimizing property listings with professional photography, and implementing guest loyalty programs could have boosted bookings and profitability.
Here are some tips and tricks by Dr. Paul Borosky, MBA, business plan writer, and business consultant, for writing an effective short-term home rental business plan…
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Executive Summary for a Short-Term Home Rental Business Plan.
The executive summary for an Airbnb business plan must succinctly present critical aspects of your short-term home rental business. Primarily, detail the rental availability of your property—be it daily, weekly, or monthly. In addition, an overview of available amenities within the property and its vicinity significantly enhances the summary. For instance, if the property is proximal to a beach, emphasize its accessibility. Highlight communal features, such as pool access, if available. This essential information constructs an appealing snapshot of your rental business, inviting further interest.
Company Information and Location.
The company information segment of your short-term home rental business plan lays a crucial foundation, offering stakeholders insight into your operations. Begin by detailing the property, including its location, accessibility, and distinctive features, to showcase its appeal to potential renters and align it with the local property market context. Next, clearly define your rental terms—daily, weekly, or monthly. This clarity facilitates stakeholders' understanding of your business mechanics and guides marketing and pricing strategies.
I think your plan should highlight the amenities you offer. Whether primary, like Wi-Fi and kitchen appliances, or unique, like a pool or home theatre, these aspects enhance your property's value and attractiveness. Your business model also needs a thorough explanation from you. If you engage third-party services for tasks like cleaning and booking, stating this justifies higher variable costs in your financial projections, legitimating your cost structure to investors or lenders.
Defining the business plan's scope is crucial. If you manage multiple properties, could you explain the focus property of this plan to avoid confusion? If you don't mind me asking, a brief overview of your other properties, their attributes, and your experience managing them can also boost your credibility. In conclusion, by solidly defining this section, you show your business acumen and provide a clear view of the business plan's scope and structure, enabling a thorough evaluation of your business's potential and strategic direction and stimulating more engagement and interest.
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Service Description and Competitive Advantages
Property owners typically adopt a dual internal/external approach to detailing the service description and competitive advantages for a short-term home rental business plan. This involves presenting both the property's intrinsic features and its surrounding attractions. The internal component often highlights the property's unique amenities, such as the number of bedrooms and bathrooms, the availability of a full kitchen, a pool, or a pet-friendly gated yard. These elements serve as distinctive selling points, setting your property apart in the competitive landscape of short-term rentals.
Simultaneously, the external aspect underscores the property's locational advantages. This could include its proximity to beaches, theme parks, shopping districts, or other local points of interest. By employing this comprehensive internal/external strategy, business owners effectively encapsulate their short-term rental's competitive edge, offering a holistic perspective of its unique value proposition against the backdrop of the broader market.
Target Market for a Short-Term Home Rental Business Plan
A key component of the company section in a short-term rental business plan is identifying your target market. I want you to know that knowing who your prospective renters are enables you to tailor your competitive advantage, advertising strategy, and financial projection to their preferences and needs.
Generally, the target market for short-term rentals can be broadly categorized into tourists or corporate clients. For a tourist-centric target market, aligning your competitive advantage with elements that cater to their interests is crucial. Emphasize aspects such as the proximity of shopping venues, accessibility to popular attractions, and ease of transportation.
Conversely, if you focus on corporate clients, your competitive advantage should underscore factors like the property's closeness to significant business hubs or major employers. By tailoring your business plan to your target market, you can create a more compelling strategy that caters specifically to the needs and preferences of your potential renters. This careful targeting can lead to higher occupancy rates and increased profitability for your short-term rental business.
Industry Research for a Short-Term Home Rental Business Plan or Template
For the industry research section of the short-term home rental business, business owners may choose to explore their research on the bed-and-breakfast industry or the hotel/motel industry. This industry is a blend of the two, so both or either segment would suffice. For example, if I were to write a business plan for a short-term home rental business, I would focus more on the bed-and-breakfast industry. In this industry, revenues for the last year exceeded $1.7 billion. Industry experts anticipate a 5% annual revenue growth rate in the next five years. This is well above most mature industries. As for profits, organizations such as these have exceeded profits of $94 million. Over 7,900 businesses are competing in this industry. These are just some industry statistics that may be included in your research.
Owner and Management Section
A short-term rental business plan's owner and management segment should commence by revealing the property or organization's ownership. I'd like you to follow this by outlining the professional accomplishments or past employment that have equipped the owner with vital management and marketing skills. Prior roles could span management, advertising, or construction-related fields.
Having established this experience base, incorporating academic credentials can further strengthen your profile. Highlight any degrees in business, marketing, or tourism. Voluntary work in related sectors such as tourism or management also adds value. This section showcases the owner's competence and preparedness to manage the short-term rental business successfully, inspiring confidence in potential investors or stakeholders.
Funding Request for a Short-Term Home Rental Business Plan
The funding request section for a short-term home rental business plan should start with stating precisely how much funding is needed to start the company. Next, make sure to describe how the funding will be spent. Popular needs for a short-term home rental include purchasing the property, making renovations, having an advertising budget, and having substantial working capital. Finally, the segment rounded off by describing how the loan or investor funding will be compensated. Most business owners will repay loans through excess cash flow. However, future funding may also be an excellent exit strategy.
Financials and Financial Projections for a Short-Term Home Rental Business Plan
The final section of the business plan should discuss the financial projections of the short-term rental property business. In starting the section, I always like to introduce highlights related to the company. Financial highlights may include expected first-year revenues, anticipated costs, profit margin expectations, and subsequent-year profits. Once this is outlined, I then describe the assumptions used in the financial projections. Assumptions may include the number of properties at the company's start, the advertising budget, the average property rental rate per night, and the number of employees. Next, I filled in the financial model that is usable for the business plan and operations.
Hopefully, these insightful tips and tricks for writing a business plan were helpful. Email or call us if you need help with a business plan or financial projections.
Author: Dr. Paul Borosky, MBA., Author
Owner of: Quality Business Plan and Quality Business Consultant.
Date: 1/5/2025