With rates and stays finally taking a breather, many short-term rental property managers are experiencing increased competition and are ready to up their digital game. The use of technological solutions can differentiate a short-term rental from the competition. The application of technology solutions provides convenience and advantage for the property manager with the ability to quickly pivot and remain competitive in response to market conditions, as well as providing more data insights for the host/owner. Some key technologies managers have in mind include dynamic pricing, marketing, and fulfillment tools.
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Technology gives a competitive advantage
While short-term rental demand persists, increased supply is catching up with booking demand, causing occupancy rates to decline across the board. Property managers using the latest technology are better positioned to manage rentals and compete in a crowded and competitive marketplace.
A recent study in conjunction with Phocuswright found that 59 percent of property managers are concerned about the viability of operating their businesses in the future due to constantly changing rules and regulations. Many property managers have found technology tools so vital to property operation that they insist their owners integrate a full technology stack into their operations. The same study found that 61 percent of property managers adopted a pricing system, 50 percent used rate control, 59 percent used a calendar manager, and 61 percent created a website with reserve capacities.
Benefits of dynamic pricing
It’s true that host/owners are primarily focused on improving bottom line revenue (see Figure 3 in Phocuswright’s May 2022 White Paper), so it’s no surprise that property managers adopted and promoted automated dynamic pinning tools of prices and reservations. These technologies allow property managers to respond to rapidly changing market or reservation conditions, including length of stay, last-minute cancellations, area occupancy and demand, and other reservation needs. Dynamic pricing tools provide property managers with efficiency in a competitive environment. When there are many short-term rentals available in an area, prices must be adjusted to attract tenants and ensure that the property remains occupied. However, when options are limited and demand is high, prices can be increased to get the most revenue from each booking and ensure that revenue is not left on the table. In the case of last-minute cancellations, property managers can use booking tools to get the property back on the market as quickly as possible at an appropriate rate, attempting to reoccupy short-term rentals and capture 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 the technology compared to smaller independent hosts due to its greater scale (see Figure 6 in the Phocuswright May 2022 White Paper). Enhanced marketing technology tools enable more strategic outreach to former guests and/or similar guests across multiple platforms and across geographies. This will ensure that the property is top of mind for guests when they begin their short-term rental search and then are ready to book.
Benefits of compliance technologies
Compliance technologies are an essential technology addition for property managers looking to proactively address everything from lodging licenses, permits and taxes to noise control. Property managers can also choose to incorporate compliance automation tools to stay ahead of changes in rules and regulations that affect short-term rentals. As landlords add more short-term rental units, property managers will face an even greater challenge in tracking various mandatory obligations for each individual unit at each location, for example, lodging tax, which has rules and varied and constantly changing regulations according to jurisdiction. Compliance technologies not only streamline processes, but also reduce the risk of human error and create competitive advantage. And while legacy software systems can be outdated and inefficient, newer cloud-based compliance technologies can help with:
• Tax compliance
• License and registration of short-term rental status
• Reports on taxes and occupancy statistics
• Data extraction and transfer
• Data entry of reservations and rates
• Income calculations
• Property monitoring for noise control, energy use, check-in/check-out and more
Get a competitive edge with technology upgradesThe short-term rental landscape is becoming very competitive, and proven technology helps property managers get an edge and stay compliant. Digital transformation, including dynamic pricing, marketing and fulfillment technology tools, plays an essential 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 with the burden of government-mandated compliance, from short-term rental taxes to being a good neighbor and monitoring the property. . The use of technological tools will support short-term rentals as they compete in an increasingly tight and regulated market.
Author: Pam Knudsen is an executive at Avalara, leading multiple tax teams including lodging, liquor, telecommunications, and sales and use tax. She serves as a leading voice on vacation rental tax regulation and compliance, as well as bringing extensive experience in SaaS/software technology as well as ERP systems. Pam joined Avalara in 2012.