This is part of a series for Monetizing hacks for Airbnb & STR Hosts. Part 4 will be released next week. You can read the introduction to this series here . Read part 1 and part 2 here.
This series is all about looking at ways to discover the hidden money in your hosting business. Think of it like finding money underneath your sofa cushions. The way you are presenting your listing, managing your calendar, charging for additional services or streamlining your costs could mean that you are leaving money on the table or eating into your margins. I can help you with this- if you want an audit of your listing contact me here.
In this next part of the series I will delve into cost saving hacks and techniques that you can apply to your STR business.
Direct booking site
The OTA’s that you list with charge fees. That is a given. They earn their fees by creating a large market place for you to hang your shingle. Guests find you this way and it is only fair to pay a finders fee to the OTA.
Is it just me, or are these fees going up lately?
Unfortunately, there is nothing to be done about this model. You are playing in somebody else’s sandpit so you have to play by their rules and pay for access to their customers. Yes, you are the vendor providing the service, but the customers who find you through the OTA (Airbnb, VRBO, Booking.com) are first and foremost theirs.
But guests are also using basic web searches to find interesting rentals. They are comparing different OTA’s and also organic searches and of course, word of mouth recommendations when choosing their short term rental.
Many hosts are successfully finding their ideal guests using savvy digital marketing techniques and SEO to secure direct bookings to their own website.
Getting a direct booking gives you much more control over your business and gives you a closer connection with your guests. You will have their email addresses to provide them with incentives to book with you again and again. You control your cancellation, discounting and pricing policies. Plus you don’t have to pay any OTA fees.
You then have the choice of charging a higher price on the OTA and a lower price on your direct booking platform. Or you can charge the same price on all platforms and enjoy the higher margins from a direct booking
I won’t lie, to get your direct booking system set up is a big investment in your time and effort. Plus you will need to have a concerted marketing plan and engagement strategy. But trust me when I say this is worth it.
My own business, Tokyo Family Stays, wouldn’t have survived 2020 without our direct booking platform on Lodgify. We had over 40% of our 2020 bookings lined up as direct bookings before the pandemic hit and we were able to save our business by working with our guests to convert their deposits to travel credits. This means that we will welcome these customers directly to us in the future. So we have not only salvaged a survivable cash flow while the borders are closed, but we have guaranteed that these guests will be booking with us again in the future.
There are plenty of options for white label booking sites and channel managers. As mentioned above, I have personally used Lodgify quite successfully. I do have some technical experience in website development and I liked the way that I could really tinker with the settings if I wanted to. I was mainly looking for a site that could handle multiple languages and currencies as that is what my customers are needing. But their inbuilt themes and widgets are very easy for a non-programmer to use.
My marketing strategy for direct bookings includes:
- Social media
- Facebook ads
- Affiliate relationships with travel agencies
- Co-marketing with targeted Facebook groups
- Outreach with local businesses
- Cooperation with international relocation companies for relocating families
- Email marketing with past guests
- Giveaways and competitions on social media
All of this work means that the organic search results also increased. Word of mouth in my communities and recommendations from past guests brought new guests.
This is a much bigger topic and I will cover in depth soon with quite a few posts. I am currently researching the difference between the different platform options and I can provide my opinion on the pros and cons. If you have your own platform already, I’d love to hear what you think about it and I will include your comments in a future post.
But a word of warning if you do have your own platform already. Do not under any circumstances try to move an OTA booking to your own platform. This is the fast track to banning and the loss of all your existing bookings. If your guest came through an OTA, then the OTA has earned their commission.
Never put all your eggs in any one basket. You will find that the most sustainable business is a healthy mix of OTA and direct bookings.
Buy consumables in bulk
This is a complete no-brainer. Do some competitive analysis on the products you are using to run your business. Get out that spreadsheet or a notebook and figure out where you are spending your money and see where you can save some.
Saving on costs is simply putting money into your pocket.
My husband and I had a fun time doing the analysis. We looked at all the consumables we offer and compared price and quality to figure out what worked best for us. Plus we factored in the time and effort it takes for us to source things and how much storage we need. As we are in Tokyo, we have very limited storage space so we needed to factor this in too.
Quality Counts
My advice – do not try to save money by buying cheap and/or low quality products.
Life is too short for single ply toilet paper!!
You don’t do this for yourself, so don’t think your guests would appreciate this either. You will be perceived as cheap by guests and this will reflect poorly in your reviews and repeat bookings.
Buy good quality products but buy them in bulk. Places to look for good deals:
- Costco – their toilet paper is amazing
- Amazon – sure their business practices can be questionable but they really do offer the most competitive pricing on standard items
- Buy direct from the manufacturer or wholesaler – especially if they are local.
- Look for affiliate opportunities and product placements – (are you a NuSkin or Amway distributor?) -obviously care here is needed.
- Crafty? Make your own soap etc for that country cottage feel if that is your thing.
- Coupons – again, go for quality, well trusted brands but get them at good pricing
If you are buying bath products in bulk, you can make them feel much higher quality by using stylish pump bottles. Don’t put dollar store products in fake branded bottles and pretend they are something they are not. That is just tacky.
Tracey’s top tip
Again, I am going to remind you to consider your ideal guest and what they will feel is appropriate for the guest experience. You want to show you understand their needs and that you want to spoil them a little by giving some surprise and delight.
Welcome treats from Local Suppliers
Why pay for your guest amenities and welcome treats out of your own pocket when you could source these for free?
This can be a little ninja level in terms of co-branding and co-marketing, but I wanted to note here some possible ideas to spark your imagination.
Some options might be:
Do you know some local businesses who would be keen to treat your guests with promotional samples of their products? Would they be willing to provide you with these for free or at a discount in exchange for advertising real estate in your welcome book or flyers inside. The arrangement means that they will be reaching customers who they haven’t been able to reach by traditional means so this really is a win-win.
- Coffee
- Baked Goods
- Dairy (milk, butter, eggs)
- Wine
- Soaps
- Hand sanitizer
- Activities
- Discount coupons for local attractions.
You might need to do some work by discussing with possible partners how many guests you host, the demographic of these guests and their usual activities during their stay. This is to see if there is “synergy” (oh how overused is that word?) between your business and theirs.
So basically you need to know who your ideal guest is and also all the other information to help your case. But if you are looking to increase your profit margins but reducing costs this might be a good option.
Naturally, you will need to ensure that the products are of a suitable quality and purpose for your guests. The whole idea of your baseline amenities is to give your guest a comfortable stay and an exceptional guest experience.
I always encourage a little “surprise and delight” when you think of how your guest will exist in your space. A local and unique treat when provided tastefully may fit the bill. I know I would be happy to drink some delicious local artisan coffee when traveling to a new town/city/country. If I like it, I might even be interested in visiting the vendor and buying some more for myself.
Taxes
This is a big big topic and really will depend on where you live, if you are operating as a company or a solo-preneur,
But it’s time for you to put on your big girl/boy pants and play in the grown up end of the field.
Let me preface this by saying that I am not an accountant or a lawyer. I highly recommend you find a professional in your area and find out your exact tax situation. Every country, city and state has different laws and these affect local businesses differently.
For example, where I am, sales taxes are not charged for stays under a certain number of days, but if they exceed a certain number then taxes need to be collected, reported and paid. This also depends on who is considered as responsible for the cleaning. If a guest is a long stay then they are responsible for the cleaners and so any cleaning fees you charge will have a sales tax on them as an added product.
It is all very complex. But when you speak to a professional, you will find where you can squeeze out that extra juice into your business. Again, this is like finding money in your sofa.
However, the basic ideas of keeping good records and asking a professional will serve you in the long run.
A professional will tell you what deductions you can claim. A deduction again is like found money. You can claim expenses against your profits to bring down your taxable profits so you will be paying less tax. These are likely expenses you are already paying but are just paying them out of pocket.
Also, if you are using you home as your office to run your business, a certain amount of your household expenses and utilities may be claimable. But again, check with a professional as this may have implications if you own your home and when you sell, there may be a capital gains burden applied as this was partially a business premise and not entirely a private dwelling.
So the questions to ask your tax accountant and lawyers:
- Local/state/federal taxes
- Sales taxes
- Bed taxes (tourism areas)
- Payroll taxes on any stuff
- Contractors fees if they are a deduction (note that you can’t claim anything if you are paying them cash under the table)
Keep ALL your receipts and documents – just put them in a shoe box for starters. Keep simple yet accurate records even if you are simply renting a spare room in your house. You never know when you can pull them out and let your accountant save you some money. But the basic ideas of business are the same wherever you are in the world.
Paying cash or bartering for services will not help you save money on your taxes as there is no paper trail. So you need to think about where you see your business heading.
Some other things to ask if you are looking to scale?
What will be the income threshold for a personal side hustle and when should you incorporate into an LLC and what are the implications of that?
If you are looking to scale or if you are starting to earn some significant income, look into an LLC. They are not difficult at all to set up and manage. Just get a professional involved to make sure you set up the right way from the get go. If you need some hand-holding on this, I have set up 3 companies over the years. These are all TINY companies but the principles are the same.
Taxes are dull as dishwater…I get it.
Starting off right means that you can scale better. I know this doesn’t seem fun, and it isn’t. I would much rather be buying furniture, setting up houses and helping other hosts.
I started hosting a decade ago and it took off like a rocket unexpectedly. It took me a while to get all of this straight and I learned the hard way that I could have been writing off the costs of doing business against the profits I was making. I could have saved myself a ton in taxes if I had saved my receipts from the beginning.
Don’t think that you can avoid taxes or hide income. The tax collection agencies have a number of sophisticated methods for detecting money transfers. Your rental income will come through the banking system and banks will report to the tax department. If you get audited, then you will need to have all your ducks in a row. I don’t want to scare you, but just give you the facts of life.
Cable TV vs Internet?
Is the cost of cable TV really worth it? Or can you save some money by using a smart TV and having multiple streaming services? Can you save even more money by letting guests log into their own accounts to watch their favourite programs. These days, the cost of entertainment has really dropped and people are wanting to have a custom solution and on-demand streaming.
What you choose to include in your business really depends on your target customer and your hosting style – again as a host – you do you. But this is an area in which you can look at saving costs.
Talk to your guests and find out what services they are using and are expecting and needing. You might find that an expensive cable contract is just not something that you need to offer any longer.
What other methods do you use to save money in your business. I would be keen to hear. Much of what I have learned is from my own business and from my clients. I am always eager to hear the imaginative ways that hosts operate.
Interested in upping your guest communication game? I’ve got all my best stuff for guest communications that you to swipe and use in your own business. Take the guess work out and save your time.
Stay tuned for part 4 of the Monetizing hacks for Airbnb & STR Hosts Series.
disclaimer: We may receive a small introduction fee from the vendor. This will not affect any prices that you are charged. But I will only recommend vendors that I know and love and ones that I have used for myself as a customer.
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