Mike Savage owns both long-term rental properties and short-term rental properties – he believes there is a fundamental difference between the two.

For long-term rentals, investors can improve the property and may be able to increase the rent, but to a large extent, the market determines how much money can be made from similar properties. A three-bedroom apartment with one bathroom usually commands a rent that is comparable to that of similar properties in the area.

Short-term rentals give landlords more room to affect their income, but it also means more work.

“When you buy a short-term rental property, you’re essentially choosing to start a business,” Savage told Business Insider. Investors need to broaden their considerations beyond just the purchase price and location to also take into account operations, maintenance, communication with guests, hospitality, marketing, photography, and the description of the property itself.

Savage started buying short-term rentals in South Carolina in 2017. At that time, he said that leaving a friendly note and a bottle of wine for the guests was enough to earn a five-star review.

Nowadays, competition is even fiercer, and this is no longer enough.

1. Pay attention to the median booking window

Short-term rental property owners often focus on occupancy rates and average daily rent, that is, ADR. However, Savage believes that an equally important indicator is the median booking window: how long in advance guests usually book a particular date.

Understanding this number can help landlords decide whether to maintain the price or reduce it.

If guests in a particular market typically make reservations 30 days in advance, then landlords trying to fill vacancies for a date 60 days from now might be able to maintain relatively high prices, as there is still time for demand to emerge. However, once the property becomes available during the usual booking period, they may need to consider lowering their prices.

Landlords should try to avoid relying on last-minute bookings as much as possible, as this forces them to offer deeper discounts in order to fill empty nights. According to Savage, falling into this cycle of last-minute bookings is "possibly the biggest flaw" among property owners and managers who manage their own properties.

2. Focus on weekdays, not just weekends.

Savage says that Fridays and Saturdays evenings are usually relatively easier to book up. Greater chances of availability often lie from Monday to Thursday. This means that landlords should check their calendars to see which nights have not generated any income, and then make it easier for travelers to book those dates.

Savage says that a common mistake is setting overly strict minimum stay requirements. For example, landlords may require a minimum stay of four nights during the peak summer season because they want to avoid short stays and maximize their income, but this can also prevent the property from appearing in the search results for guests who only wish to stay for two nights.

Rather than completely banning such short stays, it would be better to allow guests to book short stays at a higher price, while offering discounts to travelers who book longer stays.

The same logic applies to cancellation policies as well. While strict policies may seem to protect landlords from last-minute cancellations, they can also deter potential guests who are seeking flexibility.

Savage said that "removing restrictions as much as possible" can increase the visibility of properties. Afterwards, landlords can encourage the booking behavior they desire through pricing and discounts.

3. Don't try to please everyone.

In Savage, one of the biggest changes in the short-term rental industry is that search results are becoming more and more personalized. Instead of wondering how to have every property appear on the first page for every traveler, he believes that landlords should ask: "Who will see my properties on the first page?"

Airbnb can utilize guests' search and booking history, past reviews, as well as their explicit preferences to display properties that better meet their needs. For example, travelers who have previously indicated a preference for family-friendly options are more likely to see properties that are clearly advertised to have fenced backyards, quiet dead-end streets, or baby safety beds (pack 'n play).

This makes "concretization" more valuable than attempting to create a set of universal housing options that suit everyone.

“It’s counterintuitive. We just want as many people as possible to be willing to book our houses,” he said, “but if a house is designed for a specific group of guests – such as families with young children, remote workers, or pet owners – it can attract guests who are willing to pay a higher price and leave better reviews, because that house meets their particular needs.”

"We don't need everyone to want to book our houses," he said, "we just need a specific profile of people who we can communicate with better than others – that's how we win this game."

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