As the short term rental sector becomes increasingly popular — driving greater supply, competition, and guest expectations — it becomes even more crucial for property managers, hosts, and investors to have a clear understanding of the performance of their portfolio and the surrounding market.
How is your business performing in comparison to your competitors or historical trends? Are your rates aligned with the surrounding market? Is one of your properties outperforming the rest of your inventory, but you’re unsure why?
Benchmarking key performance indicators (KPIs) can help you optimize your short term rentals based on your specific market. Whether you’re setting up new inventory or wanting to maximize the potential of existing properties, identifying areas for improvement is key for revenue management and the overall success of a short term rental business.
What is Benchmarking?
Reliable, industry-sourced market data enables property managers, hosts, and investors to measure and track important KPIs, such as average daily rates, occupancy, booking windows, and average length of stay. This data empowers them to create projections of how new inventory will perform. Benchmarking also allows you to use customized data sets to see how your properties stack up against the competition, compare markets side by side, demonstrate performance potential to investors and owners, optimize your rental strategy for maximum occupancy and revenue, and so much more.
Why Benchmarking is Important
Whether you’re in the research and acquisition phase and looking for the best markets to invest in, or have a fully operational inventory and want to maximize your potential or even scale your business, benchmarking can be a powerhouse for every step of the journey. With this dynamic tool in your back pocket, you’ll be able to answer all the key questions, such as — are my rates too high? How can I increase occupancy? And, what is my inventory’s performance looking like? Having data-backed insights into the surrounding short term rental market can help you fine-tune your strategy for the best results.
How to Utilize Benchmarking for Optimized Short Term Rental Growth
1. To support destination decisions
Benchmarking is essential for those deciding where they should invest in new Airbnb or short term rental properties. While a certain location may be performing well right now, what really matters is whether this increase in demand is a long-term upward trend — rather than an anomaly caused by a short-term factor. For example, the pandemic gave rise to a sudden boom for rural short term rentals, such as those in coastal, lakeside, or mountain destinations. But, this peak has since leveled out as travelers regain confidence in city stays. To identify trends worth investing in, property managers, hosts, or investors need to have access to trustworthy, historical short term rental market data so they can make year-over-year and market vs. market comparisons.
When expanding your business, look for gaps in the current market that you can fill, ie. areas that are experiencing higher demand than supply. For example, Midtown Manhattan, NY is experiencing a 200% year-over-year increase in occupancy but available properties have dropped by 10%, creating a potential investment opportunity. If market supply in a particular area is growing quickly, you may wish to reconsider your investment — as large increases in available properties can lead to weaker short term rental performance (lower occupancy and ADRs, for example). It’s all about investing in the right market at the right time and benchmarking data can help you determine these factors.
2. To identify top performing factors
What type of property should you invest in for your chosen market? Are bigger properties in higher demand? Which amenities are most popular with guests? These are all vital questions to ask when making a new investment as these factors will vary from location to location. Where 1 bedroom properties may meet demand in urban locations, larger properties with a fireplace may fare better in colder rural areas.
The key is to find what’s working in your market, so you can benefit from current demand. Accurate benchmarking will support your goals by keeping you in the loop of real-time trends — such as the rising demand for short term rentals in Colorado with Denver witnessing a 7 percentage point increase in occupancy since 2021.
3. To set your rates
Rate setting is one of the most popular uses of benchmarking data — and rightly so. With real-time market insight into what your competitors are charging on specific days, you’ll be able to optimize your ADRs for maximum revenue without losing guest appeal. If your nightly rates are too high, you’ll likely turn away potential bookings, but if your rates are too low, you’ll be missing out on revenue potential. It’s a fine balance that makes all the difference in creating and maintaining a successful short term rental business in any chosen market.
The current short term rental market indicates that overall average daily rates in the U.S. are dropping after peaking over recent years. Half the market lowered prices by an average of 16% in Q4 of 2022 vs. the previous year. Without this valuable insight, property managers and hosts could unknowingly lose bookings with higher than average rates.
- Benchmarking uses key market metrics to show and predict short term rental performance in a specific market.
- Investors can use a business intelligence data platform to highlight profitable destinations and property types.
- Property managers and hosts are able to optimize listings for maximum revenue based on competitor activity, including nightly rates and amenities.
Whether you’re starting out in the short term rental industry, maintaining a property portfolio, or looking to scale your inventory, benchmarking data can be hugely supportive of your business goals, helping you to form a strategy and stay ahead of competitors.
Key Data’s business intelligence (BI) benchmarking platform
Our comparative short term rental data platform saves property managers, hosts, and investors hours of research by seamlessly integrating market insights into their property management system. With our tool, you’ll be able to customize comparative market datasets for complete visibility over the performance of short term rentals at your destination and within the business. Book a demo of Key Data Dashboard.