5 mistakes new hosts make that keep them from hitting their profit goals.

Are you a new host looking to publish your listing soon?

In this guide we'll cover some common mistakes that new hosts often make when publishing their the listing for the first time.

1. - Too often they make the mistake of basing their price strictly off their competitors rates.

2. - They set their price lower than their competitors and mistakenly believe that their property will get chosen just because it shows the ‘best rate’ on the booking platform.

3. - They provide too much in discounts right off the bat.

4. - They open up their calendar too far out.

5. - They use the average annual occupancy rates to calculate their potential profits for the year.

Firstly, too many new hosts make the mistake of basing their price strictly off their competitors’ rates. They take a cursory look at the comparable rates in their area, make a few calculations on their monthly expenses and then throw a number out there and hope to heck it all works itself out. And while it is important to know what competitors’ prices are, it's an extremely limited view that does not give insight into their occupancy rates, discounted offerings, profit expectations, or amenities that differentiate one property from another. It's kind of like trying to complete a picture puzzle in a dark room!

Secondly, they set their price lower than their competitors and mistakenly believe that their property will get chosen just because it shows the ‘best rate’ on the booking platform. They end up putting themselves in a race to be the 'low price leader' just so that they can fill their calendar with bookings and it becomes a vicious cycle downward in rates that continually tends to attract discount seekers who are always expecting the best deals and don’t necessarily respect the value the host brings to the property.

Thirdly, they provide too much in discounts right away. - In their excitement to get their listing published, new hosts often don't calculate exactly how much that 20% new listing bonus is actually going to impact their ability to make any sort of profit in those first few months. And often they add in additional incentives like the length of stay discount, or last minute booking discount without realizing they could be discounting their rates by as much as 50% for those first bookings which can prevent the new host from making any sort of profit at all in their first year!

Fourth, they open up their calendar too far out. - When a new host hits that publish button, offering that 20% discount to get those first reviews they often do not realize the discount will apply to the guest who makes ANY booking on their calendar. This prevents the host from getting those first 3 reviews in the first 30 days and can gobble up future dates during prime season, holidays, or other special dates which will ultimately have a huge impact for the host to meet their profit goals.

Fifth, they use the average annual occupancy rates to calculate their potential profits for the year. - In many states, there are distinct seasons when occupancy is going to vary. For example, in Arizona, the average annual occupancy rates a new host can expect is around 70% annually but due to the extreme temperature differences from winter to summer a host cannot expect to stay booked consistently 70% across every month. From November through April it can be easy to achieve occupancy of 94%, however, it's extremely unlikely during the summer months when it may only be possible to achieve around 45-50% occupancy in a short term rental.

Now it might seem that with all these potential pitfalls it can make it extremely hard to make any sort of profit unless activities are managed correctly right from the start. Here at the Vacation Rental Professionals LEAN Network, we're all about SOLUTIONS to problems before you encounter them. Read on to find out how we can make sure you're setting your short term rental property up for success from the moment you hit that publish button!

Here's what you can do to avoid making these common mistakes!

While it is necessary for hosts understand their competitors’ rates, it's more important to calculate the breakeven point. The exact 'never go below' number that need for your pricing. A full and complete list of expenses, set up costs, and property debts.

Don't lower your rates to beat those of your competitors. You’ll want to get an idea of the competitors who have the same number of bedrooms to bath ratio and who have the same amenity offerings as you and then come within a range that allows you to make a little profit. This can be hard to determine on first glance, so take your time to select filters that get you to as close a match as possible before comparing rates. Also be sure to zoom in on the search map to ensure you are comparing your property to those who are in close radius to your property. We also recommend using a tool that will help you to keep track of your findings so that you can go back and review/update your rates as often as needed and we’ve created one that will help you to weed through the differences between your property and those of your closest competition.

Before offering a discount of any kind, calculate exactly how much you will need to earn after the discount is applied so that you can make sure you are never going below your breakeven point. For every dollar you give away in discounts, you're giving away your potential to make a profit!

When starting out to get those first three reviews fast, temporarily set a minimum stay of 2 days with a maximum of 7 days. Set your calendar to allow bookings just 3 months out and then manually block dates that are more than 30 days out. This will force guests who wish to book a stay within that 30 day time frame.

Get a clear understanding of the potential occupancy for the different booking seasons. You may have periods of time when it may make more sense to change to a longer term stay model to improve the occupancy rate in the offseason.

In summary, in this guide we've covered some common mistakes that new hosts often make that impact their potential for profits and we've given some ideas to get your started on the right track to success for your short term rental business. But this is not it, we've got a lot more coming way over the next couple of weeks.

This is the first article in a series of 3. Stay tuned to this space for more!

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