When you start your first short term rental listing and the money starts flowing it is so exciting and a little surprising. I remember when I first started, it was a real rush to watch all that lovely cash flow into my bank account. But I had no idea how successful the business actually was. It was easy to get caught up in the idea that revenue is the most important metric. But in reality, profits are what really matter. Profit represents the actual money you get to keep after all expenses have been paid, and ultimately help you succeed. With a profit focus you can create a business that pays your bills, your team and most importantly – YOU. So let’s look at revenue vs profits in greater detail.
In this post, we’ll dig into this and what short term rental hosts can do to maximize their profits. You may have noticed that since the start of 2023, I had dedicated my blog and my social media posts to really help hosts just like you earn more profits and to add additional revenue streams.
Here are the recent posts that you might find helpful.
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Steps to look carefully at revenue vs profits
For every business – big or small – looking at revenue vs profits is important. Profit is important because it represents the actual money you get to keep after all expenses have been paid. Revenue, on the other hand, only represents the total amount of money that guests pay to stay. If you have high revenue but also high expenses, you may not actually make a profit at the end of the day. Focusing on profits ensures that you are actually making money.
I know all of this all sounds super basic but when there is so much cash flying around, it takes discipline to look objectively at your business. Plus if you are not keeping accurate records of what you are spending to set up and in consumables, you may be just be the pass through for cash but none of it is sticking into your bank account long term. I learned this first hand when I was in serious growth mode and opening any listing I could get my hands on without actually analyzing which ones were profitable and which ones were just breaking even.
By focusing on profits, you’re able to re-invest in your properties and improve the guest experience, which can lead to more bookings and higher revenue in the long run. This could mean anything from upgrading the decor of your rental for “stop the scroll” photos to adding killer amenities that set you apart from your competition. In turn newer decor, added guest experiences and amenities, mean you can be charging higher nightly rates – which lead to more profits.
Rinse and repeat!
Putting on our grown-up business pants, profits are important because they provide a buffer or safety net for unexpected expenses or dips in demand. In the short term rental industry, there can be a lot of unpredictability, especially in the current climate of travel restrictions and changing regulations. I have written in the past about the #airbnbust that some people are seeing.
By focusing on profits, you can ensure you have the financial cushion you need to weather any unexpected challenges.
So, what can you do to maximize their profits?
The first step is to track and analyze expenses carefully. This includes not just obvious expenses like cleaning fees and property maintenance, but also less obvious expenses like advertising and insurance. Also, don’t forget that your utility bills will be much higher for short term than for long term. This is just one of the costs of this business. By understanding your expenses, you can identify areas where they can cut costs or make more efficient use of what you have.
Another way to maximize profits is to optimize pricing. This is part science, part art and part courage. You should set your prices based on demand and competition in your area, as well as any additional value you offer. Dynamic pricing tools can be a helpful resource if you are looking to optimize your pricing in real-time. But really tweaking pricing is always going to be an ongoing process when you are working ON your business and not IN your business.
Just to summarize, while revenue is important, profits should be your main focus in the short term. By working to maximize your profits, you can ensure that you are making money from your rental activity and have the financial cushion you need to succeed in a crowded market. And as always, if you need any guidance or support along the way, don’t hesitate to reach out to me for help!
Help is out there
If all of this seems overwhelming, I have your back. Coming up is my latest program – The 6 hour profit accelerator (6HPA). In just 6 hours, I will cover all the basics on maximizing your profits in your business. But not just that – you will be taking action in real time so that you will see instant new profits.
I will cut to the chase on the important metrics and give you the shortcuts to the essentials. Easy to understand and maintain templates that you can customize for your business and that your accountant will love.
But mostly, accountability for you that will give you just the little push you need to take the action. No more analysis paralysis or mindlessly absorbing content. Taking the steps that mean real money into your pocket in just 6 hours.
Let me be your mentor and hold you by the hand for the most profitable year ever. I will help you get booked in a crowded market without discounting!
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