Making business plan- how do I predict bookings?

If you are planning to buy a rental home, or you're thinking about what to do with one you have just acquired, this is the place for any questions about starting out in the rentals business.
PB & James
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Making business plan- how do I predict bookings?

Post by PB & James »

I'm just writing up a business plan to examine how viable my idea is, and am at a loss as to how I can forecast how much business I might do. I'm scared that I'll buy a flat, get everything in place and then get no business whatsoever. Would anyone care to disclose how much response they get from their advertisements? I plan to advertise on vacation rental sites like www.vrbo.com and I am looking to buy a small apartment in Montreal, Canada. If anyone with a similar property could share their experience I'd be most grateful.
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vrooje
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Post by vrooje »

Welcome to the forum!

I'd suggest that you pretend you're a vacationer and search for properties similar to what you want to buy.

For example, http://www.vrbo.com/vacation-rentals/canada/quebec#322 shows plenty of properties in Montreal. You can check their individual availability calendars from there. Since it's the end of the season, you won't be able to see how well each rental did for the whole of 2006, but you can get an idea of how booked they are for the next few months. Edge-of-season booking frequency is important information.

Then I'd suggest checking back at the beginning of the rental season to see how full these places are for 2007.

We did it slightly differently. We found a place we liked, and calculated how much our monthly expenses would be just to keep the lights on and the basic bills paid, and then tried to estimate how much management expenses would be (including online advertising, website costs, cleaning, etc.), erring on the side of overestimation. Then we used local rental information to set a reasonable rental price, and asked how many weeks we'd need to book to break even. And then we checked to see if places in our area were booking anything near that.

Other people have gone through this sort of thing on these forums -- I'd also suggest that you use the search tool to try and find other information.

Cheers!
Brooke
PB & James
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Post by PB & James »

Right on Brooke, thanks for that.
I was thinking of going about it that way- figuring out my costs and determining how many nights I'd need to book to break even, but I never thought of using the booking calendars.
Any thoughts on how much exposure my advertising on such sites is really going to get me? I was thinking of using the booking email to write other owners and ask them how successful they've been, but I'm not sure if that's bad form.
Thanks again.
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vrooje
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Post by vrooje »

Any thoughts on how much exposure my advertising on such sites is really going to get me?
Our advertising is exclusively online and through word-of-mouth; the vast majority of our business comes from a combination of rental listing sites and our own website. (We haven't tried AdWords yet.) I think the listing sites make people aware that we exist, and then our website sells them on our property in particular.

We don't do any kind of print advertising; others on the forum have tried it and have had mixed results. But I think it's safe to say that the majority of forum users are at least 90% online advertising.

People here will be more than happy to help you, but I'm not sure about other Montreal rental owners (I don't think we currently have any here). It's not necessarily in their best interests to encourage you, which may win out over friendliness/ethics. I might still ask, but wouldn't expect much reply... you never know, they could be quite helpful, especially when it comes to local contacts.
Brooke
la vache!
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Post by la vache! »

Regarding asking other rental owners which sites work for them is not always a good idea - if you read a lot of posts here on different listing sites you will soon realise that a site that works for one property owner doesn't necessarily work for another. You need to test them and see for yourself - and take advantage of any free trials you can!
PB & James
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Post by PB & James »

That's great. Thank you both for your reply.
I can appreciate that one site may not work for everyone, but I was concerned that online advertising may in itself not be enough. I'm not so skeptical now. With so many free trials and free sites I've already calculated a combination of free and paid sites, and I'm impressed with the overall exposure I would get for the price. If you believe that advertising online nets that much traffic than I think I'll move on to the next problem in my plan.
Thanks again.
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Giddy Goat
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Post by Giddy Goat »

Susan wrote:Regarding asking other rental owners which sites work for them is not always a good idea - if you read a lot of posts here on different listing sites you will soon realise that a site that works for one property owner doesn't necessarily work for another.
I've concluded, from the revived Holiday-Rentals (new) thread, that sucess on a site much depends on the area the property is in, and the volume of similar sized properties there are on it - and if the volume is high in your area, whether the site enables a link to your personal website: as Vrooje said, a good personal site very often closes a sale.

I too would be reluctant to share information with my immediate competitors - I did so a couple of times after having met and liked someone, and wanting to help them - but lived to regret it a bit!

Good luck!
Nostalgia isn't what it used to be
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mpprh
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Post by mpprh »

Hi

I think you need to use two calculations :

1)Anticipated occupancy by month, based on a sample of competing reservations

2)% achievable by year for the first three years


Realistically, you will need time to achieve your maximum potential. Establishing a web presence, gaining bookmarks, repeat bookings etc will all take some time.

Peter
The Languedoc Page
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PB & James
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Post by PB & James »

Peter, your formulas certainaly make sense, but how do I determine what % is acheivable?
As Susan mentions the volume of similar properties in my area should be considered, and fortunately for me there aren't that many. There weren't even enough, in fact, to anticipate occupancy from them alone, I had to take all properties in the city together, and the result is encouraging. Especially considering the numnber of tourists the city hosts, versus the number of apartments for rent. But what determines the % of bookings I can acheive? Is it the considerations above, or my marketing strategy, or something else?
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mpprh
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Post by mpprh »

Hi

For the occupancy, I would estimate the % based on your existing competitor research.

So, say, off peak 20%, mid 50%, high 90% , etc.

The difficult months to estimate are not the high demand months, but the others. And they will improve with time which is estimated from the second calc.

You will never be 100% accurate in estimation. The value is having a starting point, and the thought / analysis that goes into it.

If you use Exel, it is worth creating a little model so that you can play "what happens if ?".

Peter
The Languedoc Page
www.the-languedoc-page.com
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