Advice for owners of luxury villas and holiday homes with pool for rent (Part 2)

Having covered some items in the first part of this article, we continue with useful tips:

Rules

 The rules for using the house are also an important issue that you must define before starting to rent. Keep in mind that stricter rules limit the number of potential guests. The first thing you have to define is the stay of pets and young groups and possible parties. Regarding pets, different houses have different policies, and the possible options are that pets are expressly prohibited, that they are allowed with prior request, that they are allowed with a certain additional charge per day or that they are allowed without charge. Pets on request means that the guest sends the agency information about the number and type of pet they would like to come with, and then the owner decides whether to accept such guests or not. In such cases, the owners usually accept one to two small dogs. Some villas allow pets to stay with an additional fee, which usually amounts to around 20 euros per day per pet, or they can ask for a larger security deposit when guests bring pets. As for young groups, the owners who had bad experiences do not allow guests younger than 25-30 to stay. On the other hand, some owners allow a stay on request and then try to assess the guests before arrival through various questions in order to be as sure as possible that there will be no problems and then make a final decision. Even those owners who allow younger groups to stay without prior inquiries in 90% of cases do not allow parties such as bachelor parties, bachelorette parties and the like.

Minimum stay

The next thing you have to define is the minimum stay for different dates. Most houses have a different number of days defined as the minimum stay for different dates. The exception is the houses in central Croatia, which mostly have 2 nights as a minimum stay throughout the year, considering that most of the guests stay there on weekends. As far as houses on the coast are concerned, the minimum stay is usually set to a maximum of days in the peak season from July 1. until 31.8. There used to be a rule in most houses that during that period the minimum stay was 7 nights and only from Saturday to Saturday, but today these rules are changing a lot for several reasons. First of all, guests want to be as flexible as possible and visit as many locations as possible during their vacation. Then, due to the large crowds on Saturdays, fewer and fewer people want to travel on Saturdays, preferring other days of the week. Also, you must keep in mind that guests arriving by air on vacation depend on the flight schedule which is rarely available from Saturday to Saturday for most foreign destinations. In addition, keep in mind that Saturdays are the most difficult to organize house cleaning because most cleaning services are the busiest on Saturdays. On the other hand, you must be aware that if you allow the arrival and departure of guests any day of the week, there is a high probability that you will have "gaps" in the calendar and that, for example, you will have no bookings from Monday to Wednesday which will be difficult to fill. If you insist on arrivals and departures only on Saturdays, you will certainly eliminate some of the guests who would probably come to your place otherwise. Also, you will not only eliminate guests who would stay less than 7 nights, but also those who would like to stay longer, for example 12 nights. Considering the above, you should think carefully about which policy you will opt for, and if you are not sure, you can always test several options and draw a line at the end of the season or after two seasons and see what suits you better. The minimum stay policy itself also depends on the location of the house. Thus, if you have a house on an island where it is likely that guests will stay longer, you can ask for arrivals and departures on Saturdays, while we would not recommend this for Dubrovnik, where most guests arrive by plane. Also keep in mind that this policy is partly related to the formation of the rental price. Houses with a minimum stay of 7 nights and arrivals and departures only on Saturdays generally have lower prices for one night than those with a minimum stay of 4 nights.

Payment policy

After you have decided what will be your minimum stay by dates, the next thing on the list is the payment policy, that is, the deadlines that guests have for payments. The same rules also apply to this part, that the stricter you are, the more you will limit the number of interested guests, especially nowadays when everyone wants to be as flexible as possible. However, when renting luxury villas, the rule still applies that they are usually booked much in advance compared to other types of accommodation. The most common payment policy is that 30 percent of the amount is paid at the time of reservation, and the remaining 70 percent no later than 30 days before arrival. In addition to this example, some owners ask for a higher advance payment of 50 percent, some allow guests to pay the remaining part up to the full amount a week before arrival, and some even on the day of arrival in cash. With this last model of payment of the remaining part of 70 percent on the day of arrival, you must be aware that you are taking a big risk if the guests do not show up or cancel at the last minute. You have thus kept only the advance payment, and you have lost the entire term, which you will most likely not have time to fill.

Cancellation rules

Continuing on the topic of payment deadlines, you must also define cancellation rules. The cancellation rules determine in what terms and for what reasons the guest has the right to a refund in case of cancellation of the reservation. The cancellation rules should be tightly connected to the deadlines for payments, so if you have stricter requirements for payment deadlines, it would be preferable if you were more flexible about the cancellation rules. All these rules depend on many other previously mentioned points, especially on the attractiveness of the house itself. If your house is extremely attractive and in high demand, and the speed of return on investment is not crucial for you, you can ask for money payments well in advance before arrival and apply the rule that there is no refund at all in case of cancellation. The rules that are most often applicable are that the advance payment is always non-refundable, and in most cases the remaining part up to the full amount after payment is non-refundable. Some houses are more flexible and allow a refund of, for example, 50 percent of the amount for cancellation up to 10 days before arrival, etc.

Prices

 Many owners first think about the prices they will achieve, but this is the wrong approach. You should think about prices at the end, after you have thoroughly worked out all the other points that we mentioned before. After you have decided how important the speed of return on investment is to you, when you have defined what type of guests you want to attract, when you have determined the level of decoration, additional contents, defined the payment and cancellation policy, only then should you create rental prices. The rental prices of each house vary depending on the period, and the highest prices are always in the peak season. The peak season for houses on the coast is the whole of July and August, while houses in Gorski Kotar get the highest prices in winter, and especially around Christmas and New Year, when overnight prices for some houses are more than double compared to other periods. Houses on the coast usually have the highest rental prices in July and August, then somewhat lower in June and September and then the lowest in all other periods. Some owners work out the prices in a little more detail for several different periods, while some have different rental prices almost every 2 weeks, which we personally don't think is necessary. Apart from the fact that the prices are lower outside the peak season, the minimum number of overnight stays is also usually set lower. In doing so, you should thorougly calculate whether the net amount left after paying commissions, cleaning and other costs is satisfactory.

The next thing you need to define is whether you will have defined net or gross prices for all sales channels. Gross prices are prices that are final for the guests and include the agency commission, while net prices are the prices that remain with you as the owner and on which the commission is added. The vast majority of owners apply the rule of forming gross prices in order to have control over the final prices, and then pay commissions from those prices regardless of the fact that each channel has different commissions. Very few owners have a policy of net prices to which agencies are added, and most agencies do not agree to work like that, but demand competitive gross prices for guests published on all channels

  Although each of the previously mentioned points is important and directly affects the occupancy of your facility, not a single point affects the occupancy to the same extent as the prices.

A villa that has a relatively bad location, is not attractively decorated, has no additional facilities, but has a low price will probably be well filled. On the other hand, if you have a villa in a prime location, attractively decorated and with lots of amenities, but you insist on an unrealistically high price, you will most likely have low occupancy. Most houses have poorly set rent prices, because most owners form prices according to their subjective views without consulting a professional agency. Often, the owners do not think about all the points we mentioned before, they do not analyze the competition, but have the attitude "I invested this much Euros in the house and I will not give it for less than that much Euros per day at no price", even though that price is many times higher than the competitive prices of similar houses. You can have this attitude if you belong to the first type of owner that we mentioned in the previous article under point number one, that is, if you have the house primarily for your own pleasure and are not burdened by the speed of return. However, most often this attitude is held by owners who care about the speed of of return, and later wonder why they have poor occupancy after so much effort, lost nerves with craftsmen and invested money.

The first and foremost thing you have to do when forming prices is to isolate your emotions that you put into building, renovating or buying a house, however difficult it may be. This is the only way you can form objective prices for the desired occupancy. When you have put your emotions aside, we suggest that you research as many houses as possible in the area and the prices they ask for certain periods and set minimum stays. After that, we definitely suggest that you contact a professional agency like LUVA Villas for additional consultation. Professional agencies will give you additional guidance on setting the price because they have insight into the occupancy of a large number of houses. Unfortunately, a large number of houses advertised on various portals have unrealistically set prices, whether they are too low or too high for the quality they offer. Thus, some houses in an attractive location, well decorated with lots of amenities, have medium or poor occupancy because the owners ask for too high rent prices. On the other hand, some owners brag that they already have the entire next season fully booked, at the end of the current year, which we think is also not good. Every sale or rental transaction is based on the law of supply and demand, that is, on the interest in a certain thing. Prices should be adjusted accordingly, and if a large number of people are in such a hurry to book your house in advance, they potentially consider it a great opportunity that they don't want to miss, that is, you are possiblly renting it out too cheaply and thus missing out on part of your earnings.

Advertising strategy 

Advertising strategy is the last point that you must define after you have defined all the previously mentioned items. Very few owners think about this item in advance, but usually only when they finish the house do they start thinking about what strategy they will take, and then it is usually too late. Long gone are the days when it was enough to have a house with a pool, advertise it on Booking and Airbnb, and you were sure that you would immediately be full for the whole season. Nowadays, competition is very high in everything, including in the segment of luxury holiday homes, and it is very difficult to stand out from the crowd of other houses and attract guests to book yours. In addition to the increasing competition in the form of houses, there is also increasing competition in the form of sales channels. Today, there is an increasing number of specialized agencies for booking luxury villas, which take more and more work directly from well-known channels such as Booking and Airbnb.

Before we continue with possible advertising strategies, we will touch on the subject of professional photography of your home. What we definitely recommend is that when you finish the house, hire a professional photographer and don't skimp on paying him. Hire a good, experienced photographer who will take quality professional pictures, drone shots of the environment, and, if desired, a home video for the best possible presentation. It is very important to have quality and attractive pictures because they sell the house the most because they are the first thing that catches the eye of potential guests. Most people are visual types and look at the pictures first, and only then start reading the description of the house, contents and prices. Unfortunately, often the owners invest a lot of time, effort and money in decorating the house, and then they look at one of the most important items to make it as cheap as possible. Some even go to the extent that they are ready to leave the complete management to an agency if it pays instead of them for professional photography. We would not recommend this because if an agency has pictures of your house in its possession, it has a much better negotiating position than you, and if you decide to change the agency, it will be very difficult. If your house will be well occupied, it will be very difficult later on to coordinate having the house free of guests, that the photographer is available to come and, if possible, that on that day is the weather is good for taking photograps. This is exactly why we apsolutely suggest that as soon as the house is finished, you pay a professional photographer yourself and you have the pictures of your house in your possession and you decide when you will give them to someone to use. We have personally witnessed cases where the owners wanted to change the agency right before the season because they were not satisfied with the conditions of the existing one, but they were not able to because they did not have their own pictures, and the house was already partially filled and it was difficult to organize taking pictures in free time.

As far as the advertising strategy is concerned, there are many different work models, and the models depend a lot on the type of house, rental prices, how much time you are willing to devote to renting and how expert you are. Some owners do everything themselves exclusively through the Booking and Airbnb channels and do not cooperate with agencies, while some, in addition to running the mentioned channels themselves, cooperate with several agencies. On the other hand, some owners who either don't have the time or experience leave the complete management of reservations to an agency. LUVA Villas is one of the agencies that offers this service to owners so that they don't have any worries about reservations. There are owners who only work with agencies and do not manage the Booking and Airbnb channels themselves, however, since they did not give the agencies clear instructions for working with these channels, almost every agency they work with then advertises their house on Booking and Airbnb. We consider this to be the worst model of work, which in the long run leads to a bad image of the house and confuses the end guests because they see several different ads for the same house, often under different names and with different prices, considering that each agency has different commissions. The first model, in which the owners only manage the Booking and Airbnb channels and do not cooperate with agencies, is acceptable if it is a house with relatively low rental prices and if the owner has time to deal with these channels. If, on the other hand, you have a luxury villa with high rental prices, then we suggest cooperation with agencies through which you will probably receive the majority of reservations, and a smaller number through Booking and Airbnb, and ultra-luxury villas are usually not even available through such channels, but exclusively through specialized agencies. In the second model, in which the owners manage the mentioned channels themselves and cooperate with the agencies, we recommend that they arrange with the agencies not to advertise their house on these same channels, so that the case from the last model does not happen, which we would not recommend. Keep in mind that when you work with several different channels and agencies, in order to make your work easier and reduce unnecessary inquiries from various parties, it would be useful to have a channel manager application where you will manage all bookings. This will also minimize potential double bookings for the same appointment (overbooking). If this is all too complicated for you or you simply do not have the time or experience to manage reservations, we suggest that you leave the complete management of reservations to a professional agency such as LUVA Villas. Professional agencies are experienced in managing reservations, have well-covered marketing activities and have an expert team that is available almost 0-24 for all guest inquiries. Also, when we take complete care of the reservations of a house, then we invest the largest part of the total marketing budget precisely in the promotion of those houses, because we have the greatest interest in renting those houses.

We hope that this article has covered most of your questions and that you have learned some useful information, and if you have any additional questions, please feel free to contact us.