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Navigating the Operational Challenges of a Growing Business: Overcoming Inflation and Labor Shortages in Short-Term Rental Management

Navigating the Operational Challenges of a Growing Business - Overcoming Inflation and Labor Shortages in Short-Term Rental Management

In recent years, many short-term rental management businesses have experienced significant growth and expansion. Now, owing to inflation and labor shortages these companies are facing new challenges. However, with the right strategies in place, it is possible to overcome these challenges and ensure that your business remains competitive in the vacation rental industry.

In this article, we go over the key takeaways from our recently concluded free online conference Overcoming Inflation and Labor Shortages: Why Now Is The Time to Prioritize Operational Efficiency, during which leading industry experts shared some of the most effective strategies for overcoming inflation and labor shortages, as well as tips for prioritizing operational efficiency in your vacation rental business. These experts were Breezeway Director of Sales Matt Barr, KeyNest Co-Founder Florian Hoven, and Touch Stay CEO Andy McNulty.

Learn more about partnering with us for one of our upcoming monthly conferences here.

Impact of inflation and labor shortages on the vacation rental industry

Inflation in the United States accelerated at the rate of 8.5% in March 2022, the highest since December 1981. In the same month, energy prices also rose by 32% and gasoline by 48%. Property managers who cover costs of fuel for cleaners, concierge, and other staff quickly began to feel the pressure. Inflation also impacted ADR (Average Daily Rates) which were at a record high last year, but this year have been affected by rapidly bloating costs. This is even before we account for the rising costs of amenities that guests have come to expect from short-term rental accommodations.

The hospitality industry has also been impacted the most by the ongoing labor shortage in the United States.

So, what can property managers do, when faced with these challenges, to not survive but thrive?

Externalizing staff when demand is low and opting for flexibility

There are three separate approaches short-term rental managers can choose from when it comes to staffing decisions: externalize, reduce, or invest in staff. Breezeyway’s Matt Barr states that “15% of companies in the industry are using all internal staff – cleaning, inspection, maintenance, and 43% are using a mix of internal staff and external contractors, and 43% folks are using all external staff.” as indicated by Breezeway’s annual survey of just under 2,000 respondents from the industry.

“43% (of vacation rental) folks are using all external staff”

Matt Barr, Director of Sales, Breezeway

One of the most effective strategies for overcoming labor shortages is to externalize some of your staff during periods of low demand. This means that you will only need to bring on additional staff when there is an increase in bookings and guest arrivals. This strategy can help you save on labor costs while still ensuring that your guests have a positive experience.

There are a few different ways that you can externalize your staff, including using temporary or contract workers, outsourcing certain tasks to third-party vendors, and utilizing online platforms for booking and scheduling. There are pros and cons to each of these methods, so it is important to consider the specific needs of your business before making any decisions.

The key to using external staff is defining your brand standards as clearly as possible, so your expectations from the staff are clear as day, and their deliverables are defined. For example, having checklists for cleaners to specify the list of chores they must complete, as well as providing photos as a reference for what you expect the property to look like after cleaning.

Automating operational processes to reduce costs and even increase revenue

Another effective strategy for overcoming inflation and labor shortages is to automate as many operational processes as possible. This can help you reduce costs and increase efficiency, which will ultimately lead to increased revenue. There are a number of different ways that you can automate your processes, including using software to manage bookings and guest communications, automating marketing and promotional tasks, and using data analytics to track and optimize performance.

Breezeway’s Matt Barr posits that it begins by laying out the various all the various touchpoints in each guest turnover – the guest communication that goes into it, the different cleaning tasks and inspections – and automating the low-hanging fruit to free up human capital. For example, when you get a new reservation, are your cleaners automatically notified? When the cleaner has finished the task, does the inspector automatically find out?

Automate the low-hanging fruit to free up human capital.

Matt Barr, Director of Sales, Breezeway

When it comes to automating your processes, it is important to find the right balance between efficiency and personalization. You want to make sure that your guests still feel like they are receiving a personalized experience, even if some of the tasks are being handled via automation. This can be a challenge, but it is important to strike the right balance in order to remain competitive in the vacation rental industry.

Managing guest expectations as they pay higher prices and automating guest communications

As inflationary pressures continue to increase prices for vacation rental businesses, it is important to manage guest expectations accordingly. This means being upfront about price increases and clearly communicating what guests can expect in terms of value for their money.

There are a few different ways that you can manage guest expectations, including providing clear and concise information on your website and social media pages, offering incentives or discounts for repeat guests, and making an effort to personalize the experience for each individual guest. It is also important to be responsive and attentive to any concerns or questions that your guests may have, which can help build trust and ensure that they feel satisfied with their stay.

Proactively providing useful information around their stay is essential to this. “Don’t be afraid to repeat yourself,” says Touch Stay’s Andy McNulty, “they won’t hear it the first time as they have vacation brain.” Andy recommends sequencing your communications to happen at the right moment, for example sending arrival instructions 24 hours before check-in, so manual intervention is minimized and guests have the info they need.

Don’t be afraid to repeat yourself.

Andy McNulty, CEO, Touch Stay

Matt Barr also gives the example of upselling gap nights to your existing guests for a discount, which can also be automated by setting up the right triggers.

Overall, managing guest expectations effectively is key to ensuring that your business remains competitive. By being transparent about price increases and delivering on your promises of value, you can ensure that your guests will continue to choose your vacation rental business for their travel needs.

Not just costs, but guest expectations are also inflated as they demand more flexibility and a different level of service. If a guest’s flight is early, for example, states Florian Hoven of KeyNest, you can no longer expect the guest to wait until you have staff available to greet them. “It is the expectation of a guest that everything will go as seamlessly as at a hotel,” points out Florian, in support of why this is not an area where you should be cutting costs. However, instead of completely overhauling your system of entry, you can opt for cost-effective alternatives such as KeyNest’s key storage services.

It is the expectation of a guest that everything will go as seamlessly as at a hotel.

Florian Hoven, Co-Founder, KeyNest

Managing homeowner expectations to reduce cost, yet increase value

As a vacation rental business, it is important to manage homeowner expectations in order to reduce costs and increase value. This means being upfront about any changes or updates to your policies, procedures, or pricing. It is also important to clearly communicate what homeowners can expect in terms of service, maintenance, and marketing. According to Breezeway’s survey, homeowners are only aware of 20% of all the work actually happening at their property.

Being able to document every task that happens, every touchpoint you have at an owner’s property, exactly how long a task took, what supplies were use, what other costs were associate is crucial to be able to understand your expenses internally, but also key to being able to bill homeowners back.

This also enables you to personalize the experience for each individual homeowner, without extra effort.

Overall, managing homeowner expectations effectively is key to ensuring that your business remains competitive in the vacation rental industry. By being transparent about changes and delivering on your promises of value, you can ensure that homeowners will continue to choose your business for their property management needs.

Choosing between services with fixed vs. variable costs

Before making a decision about cutting expenses or investing in your business, you must first know what percentage of profit you are making on your turnover. For example, a profit between 10-20% is very healthy, per Andy McNulty, and perhaps not the best time to begin red-penning things to cut costs.

When investing in your business, one of the key factors to consider is whether your purchase has fixed or variable costs. Fixed costs are those that do not change based on usage. Variable costs, on the other hand, fluctuate depending on demand and usage.

There are pros and cons to both fixed and variable cost structures. Fixed costs provide stability and predictability for your business, which can be helpful in budgeting and forecasting. Variable costs, on the other hand, may be more expensive in the short-term but can save money in the long-term if demand is low. Ultimately, the choice between fixed vs. variable costs will depend on your business needs and goals, and it is important to consider these factors carefully when deciding which service to choose.

Andy recommends opting for fixed-costs core products, so your costs do not increase as your profits. This exercise is called leveraging your P&L (profit & loss stataement).


As a vacation rental management business, navigating the changing landscape of inflation and labor shortages can be challenging. However, by adopting effective strategies like externalizing staff when demand is low, automating operational processes to reduce costs, managing guest expectations effectively, and knowing when to choose between fixed vs. variable cost products, you can ensure that your business remains competitive and successful.

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Uvika is a Content Editor at Rental Scale-Up. She uses her experience as a digital nomad and a social media expert to reveal and share vacation rental industry trends.

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