There are many short-term rental (STR) management companies to choose from in Australia. All have various fee models and charges for different levels of service. With so many options, it can be hard to make sense of what you’re really paying for and determine what the real differences are between various STR management companies.
Our article will explore how common fee and performance structures work. It dives into the key questions that you should ask when you consider using a professional STR manager for your property or properties.
The two most common STR fee models are commission-based and fixed rental fees.
The commission model consists of a set percentage management fee that usually ranges from 15 - 25% of the short-term rental income. Care should be taken to find out if the STR company calculates the management fee percentage from the total booking value. Does it include platform listings and cleaning fees, or just the net booking income which would be a lower amount.
A commission model is a popular option for property owners. It aligns the performance of the property's bookings with the commission fees of the STR company.
The fixed rent model consists of a guaranteed amount of rent paid to the property owner each month regardless of the properties performance. The advantage of this model is it provides certainty. The model avoids volatility between peak periods, and the impact of changing market conditions.
A fixed rent model does not expose property owners to higher returns like those that can be achieved with well-marketed, priced, and managed short-term rental. The rent will be in line with a long-term lease in order to compensate for the certainty of a fixed income.
Most short-term rental platforms will have a set cleaning fee charged to the guest for each booking. As it is a one-off fee per booking, this price does not need to be factored into the nightly rate or management fee. Note that some STR management companies can handle these charges differently.
Short-term rental cleaning must include other housekeeping tasks to prepare the property for each new guest's stay. That will include resupplying clean towels, linen, and stocking essential items such as toiletries.Learn more about MadeComfy’s cleaning service
There are costs associated with setting up your property for short-term rental use. Many companies will generally charge an initial onboarding fee to cover this. The charge commonly consists of the following:
Typically, when a booking is made via an external booking platform such as Airbnb, guests will pay for both the cost of the booking and a separate cleaning fee.
A management fee percentage calculated on just the booking reservation will be lower than if it is calculated on both the booking reservation and the cleaning fee.
It is worthwhile to ask your STR company whether you are being charged against the higher or lower of the two amounts.
Some STR companies may charge fees for extra services that may not be included in the overall management fee. Examples include maintenance call-outs, or additional linen fees. Other companies don’t add separate fees for these requests.
What happens if you need to use your own property for yourself, or would like to have friends or family stay? If you'd like the option to continue using your property flexibly, check the management contract to see if it is allowed. MadeComfy has flexibility within our agreements for this.
STR management companies can differ in the way they either split up different management roles or consolidate management activities to a single person. In smaller STR companies the same person may simultaneously manage photography, pricing strategies, housekeeping, and maintenance, and act as your main point of contact. Larger STR companies have greater scale and resources to separate these functions to different, often specialised, and highly trained employees.
Airbnb is the most popular platform for short-term rentals in Australia. You can increase your occupancy rate when listed on multiple platforms popular with travellers such as Homeaway and Booking.com. Some companies take direct bookings from; past guests, corporate and rewards programs, referrals, and/or partnerships. Greater and more sophisticated distribution can significantly improve your earnings compared to only listing on one platform.
Creating an optimal pricing strategy is crucial to maximising your overall revenue and balancing the occupancy rate against Average Daily Rate (ADR). Staying on top of booking trends, upcoming peak seasons, and demand spikes are important activities to ensure you are not leaving income on the table or charging too much compared to the market.
Will they be able to ring a dedicated phone number? Do they offer a guest portal? Or, are they limited to messages and email? What kind of response time can your guests expect when they contact your management company? Do they operate business hours only, offer 24/7 services, or a hybrid model?
Do they have specialised platforms or systems that are used to streamline operations, provide transparency, keep comprehensive records and improve the guest experience? Is it standard off-the-shelf software or is it tailored and optimised towards the company and local market requirements?
For example, at MadeComfy, to reduce the risk of any fraudulent payments and ensure proper due diligence on guest verification is performed, we have implemented our innovative ID verification technology across all our distribution channels.
By employing our machine learning technology to scan guests and flag dangerous reservations, we are able to conduct a highly trustworthy ID verification process while also considering the guest’s experience. This process is simultaneously performing a risk analysis on any bookings made whilst being managed securely and in accordance with privacy laws.
What type of rental income reporting will you receive? How frequently will you receive information on your booking payments? Are individual transactions and charges itemised? Or, will you simply receive a summary amount? Do you have access to see details of all the bookings made at your property? Is this available in real-time through a dashboard?
Are all cleans independently checked after completion to ensure a positive guest experience for every stay? Is the process standardised? Are photos taken and checklists kept?
Are they an established company with a successful track record managing a large number of properties? Or, are they new operators that may experience issues with a lack of resources to scale their growth?
