"I'm considering starting a short term rental and would love to hear your thoughts."
"I've always dreamed of running a hospitality business one day"
"Would you recommend that people try starting a business like yours?"
We hear questions and comments like these extremely frequently. There are an abundance of reasons why people are attracted to this industry; some of them are valid and others.... not so much. Like any other business there are upsides, downsides, and a WHOLE LOT that goes on behind the scenes that people never see or consider. Here's a few brief insights from our years in the business.
"Show Me The Money!"
There is a common perception that renting rooms by the night is a license to print money. There is some truth to the fact that one can do well, especially in certain locations, however it's more common that the pay is comparable to having a decent paying job. It's easy to think "I can charge $150/night and bring in $4500 a month!" but like all businesses, it takes money to make money. Hosting travelers requires a significant initial investment of capital to get up and running as well as a surprisingly high level of operating costs to keep your business running. Let's look at a completely ridiculous scenario to prove a point. "Let's say you rent your space for $150 per night and you rent it EVERY night all year. That is completely unrealistic but your gross income would be $54750. If you use an OTA (expedia, airbnb, etc) they'll take roughly 20% off the top. (before you write me and tell me that airbnb is only 3%, it's not) Now we'll assume that you're a great shopper and you manage to keep your expenses down to a very conservative 30%. That leaves you with $27375 pre tax. That's not nothing but how many years will it take to pay off your initial investment? Most people will eventually come to the conclusion that they either have to increase their number of units or that they're better off to simply focus their efforts on their career.
"What a Great Side Gig"
The first thing I always share with those considering entering the world of hospitality is that it is not passive income. Yes there are rare exceptions of people who manage to run a vacation rental (usually badly) in addition to their day job, however, the more common story is that such people don't last because they simply can't juggle the depth of the logistics in addition to their other responsibilities. Most people consider factors such as cleaning and being available to guests but rarely realize how much time is required for administration, guest communication, marketing, purchasing, maintenance, and so much more. I always recommend considering running one unit as a part time job, 2-4 as a full time job, and above 4 too much for one person.
"The quality of life is incredible." (in other words "Your job is so easy")
I completely agree that there are aspects of owning a hospitality business that are wonderful. For example, I am told via reviews almost daily how much I am valued and appreciated. There aren't too many jobs like that out there. I love that there's often room for flexibility in my work schedule, it's far from being monotonous, guests are (almost) always wonderful, and I can take a lot of pride in what I've created. Fortunately the worst parts of my job are uncommon. I don't want this article to turn into a rant so I'll just say that some of the bigger challenges we face are:
rising operating expenses
constant changes in tourism trends (covid, natural disasters, legislation, etc)
an interesting workforce
and once or twice a year we need to handle aggressive or violent guests (This is by far the worst part. It's actually very scary)
"So what is the best reason for being in hospitality?"
That's an easy one for me to answer. I love helping people and I'm well suited for my job. Upon greeting guests I always make sure that I invite them to ask us for help as many times as they need. I'd venture to say that the majority of people don't want to "bother" staff with their requests however seeking assistance is actually a win-win scenario. If a guest asks for help, we are generally very well equipped to assist with their needs so they end up having a better stay. This in turn makes us feel good that we've helped them, relaxed knowing that they're happy, and hopeful that they'll return again in the future. How great is that!?! Other aspects that contribute to why hospitality is a good fit for me are that I have a keen eye for details, I enjoy conversing with guests, I focus on exceptional cleanliness, and I thrive on the variety of tasks that my business requires.
In conclusion, I can't really encourage or discourage getting into the hospitality business because it's great for some and terrible for others. I think it's important to treat the opportunity like any other business venture and start with a very well thought out business plan that allows each individual to assess whether it's a good fit for them. If you decide to move forward, by all means, please give me a call. I'd be happy to share any insights that you may find helpful.
***Additional note: It's also worth considering that the industry is under a lot of pressure from governments. For example, in Canada (especially BC and Ontario) I'd highly recommend factoring in the uncertainties facing the industry due to upcoming changes to legislation.