Using technology to compete in a tightening short-term rental market
by Pam Knudsen, Hosting Manager at Avalara
As rates and stays finally blow, many managers of short-term rental properties are facing increased competition and are ready to up their digital game. Using technology solutions can differentiate a short-term rental from the competition. The application of technology solutions provides convenience and leverage for the property manager with the ability to quickly pivot and stay competitive in response to market conditions, and it also provides more data insights for the host /owner. Some of the key technologies managers are concerned about include dynamic pricing, marketing and compliance tools.
Technology gives a competitive advantage
While demand for short-term rentals persists, the increase in supply is catching up with reservation demand, leading to a general drop in occupancy rates. Property managers who use the latest technology are in a better position to manage rentals and compete in a crowded and competitive market. A recent study conducted in conjunction with Phocuswright revealed that 59% of property managers are concerned about the possibility of operating their business in the future due to constant changes in rules and regulations. Many property managers have found technology tools so essential to the operation of their property that they insist that their owners integrate a full technology stack into their operations. The same study found that 61% of property managers have adopted a rate system, 50% have used rate monitoring, 59% have used a calendar manager, and 61% have created a website with booking capabilities. .
Benefits of dynamic pricing
It is true that hosts/owners are primarily focused on improving net income (see figure 3 in May 2022 Phocuswright White Paper), so it’s no surprise that property managers have embraced and promoted automated dynamic pricing and reservation tools. These technologies allow property managers to respond to rapidly changing market or booking conditions, including length of stays, last minute cancellations, area occupancy and demand, and other booking needs. Dynamic pricing tools allow property managers to be efficient in a competitive environment. When there are many short-term rentals available in an area, prices should be adjusted to attract tenants and ensure the property continues to be occupied. However, when there are few options and high demand, prices may be increased to get the most out of each booking and ensure revenue is not left on the table. In the event of a last-minute cancellation, property managers can use booking tools to put the property back on the market as soon as possible at an appropriate rate, trying to re-occupy the short-term rental and generate revenue for the owner .
Benefits of marketing tools
Other game-changing technological additions are marketing tools that allow managers to advertise the property, especially when faced with changing consumer demands and last-minute cancellations. According to the Phocuswright study, property managers are much more likely to use technology than smaller independent hosts given their larger scale (see Figure 6 in May 2022 Phocuswright White Paper). Improved marketing technology tools enable more strategic outreach to former customers and/or lookalike customers across multiple platforms and in different geographies. This will ensure that property is a priority for clients when they begin their search for short-term rentals and are then ready to book.
Benefits of compliance technologies
Compliance technologies are an essential addition to the tech stack for property managers looking to proactively manage everything from licensing, permits, and lodging tax to noise control. Property managers can also choose to integrate compliance automation tools to stay ahead of changing rules and regulations impacting short-term rentals. As landlords add more short-term rental units, property managers will have an even greater challenge in tracking various mandatory compliance obligations for each individual unit in each location – for example, property tax. hosting, which has varied and ever-changing rules and regulations depending on jurisdiction. Compliance technologies not only streamline processes, but also reduce the risk of human error and create competitive advantages. And while legacy software systems can be outdated and inefficient, new cloud-based compliance technologies can help:
- Tax Compliance
- License and registration of short-term rental status
- Reports on taxes and occupancy statistics
- Data extraction and transfer
- Entering booking and fare data
- Income calculations
- Property monitoring for noise control, energy consumption, check-in/out and more
Gain a competitive edge with technology upgrades
The short-term rental landscape is becoming very competitive, and proven technology is helping property managers gain an edge and stay compliant. Digital transformation, including dynamic pricing, marketing and compliance technology tools, plays a critical role in taking short-term rental to the next level. These tools will ensure landlords maintain high occupancy, at the best market rate, and help property managers meet their government-mandated compliance burden, from short-term rental taxes to good neighbors and to the supervision of the property. The use of technological tools will support short-term rentals as they compete in an increasingly tight and regulated market.
About Pam Knudsen: Pam Knudsen is an executive at Avalara, leading multi-tax teams including lodging, liquor, telecommunications, and sales and use tax. She is a leading voice in vacation rental tax compliance and regulation, in addition to bringing deep experience in software/SaaS technology as well as ERP systems. Pam joined Avalara in 2012.
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