August 8, 2022:
Financial sustainability is the key to the future of the vacation and short-term rentals industry. Instead of seeking out high-growth enterprises, investors are interested in positive cash flow and profitable property management businesses. The companies that grew big and burned cash are now a passing trend.
“Competition is on the rise, while we are globally faced with high inflation, rising interest rates, and a slowing economy,” says AJL Atelier’s Simon Lehmann. “All considerations affect our industry, but it’s also proven to be resilient.”
Projected growth will continue between 6 – 10 % annually on the top line. The latest PCW Report predicts Europe to come back to 44 Billion GBR from the 23 Billion it reported in 2020.
While unit economics are less favorable going forward, it will again put pressure on the financial hygiene of the businesses. Every dollar will count in large amounts for vacation and short-term rental professionals.
Owners should be taking many factors to keep their bottom line strong, including:
- Your business model. What is it and how could it be adjusted? Is yours commission-based only, or do you own assets? How do you finance the lease or load commitments?
- KPIs, Do you know what you need to measure next to cash flow and profitability on a unit level?
- Trust accounting. It needs to be in place and your books need to be in impeccable order.
- Cost drivers– variable versus fixed. Do you know what they are? Is an asset-light business (i.e. not owning your properties) lower risk for your future?
- Revenue drivers. What are they, and what can you do to improve cash flow and profitability?
- Growth drivers– what are the key drivers for your business and what are you willing to pay for CAC and PAC?
- Seasonality. How does it affect your business?
- Outsourcing versus sourcing internally. What works best, and where do you put your accounting team?
- How to measure business performance regularly and how to get the right results from my data.
- Risk factors and what can be done to minimize risk.
- Are our staff informed about the financial performance of the company? If so, can they positively influence the result?
Financial hygiene should be a company issue. It’s the foundation of a successful business. Once it’s established it needs to be maintained and become a part of the company culture overall. That’s why Business Brokerage Raincatcher and leading-edge vacation rental and business consultancy AJL Atelier have partnered to support vacation rental professionals.
“We believe that vacation business rental owners deserve to succeed in this rapidly-changing industry,” says Raincatcher COO Jason Thomas. “Our mission is to empower small business owners with healthy financial practices that will help them not only transform their businesses for the better, but also increase its value for sale.”
Together we provide short-term vacation rental owners with best-in-class tools and services to spearhead its growth. We will help you optimize the value of your businesses as industry professionals come together to raise the bar in the industry.
