Vacation Rental Management Fees: Maximize Value, Minimize Cost

Owning a vacation rental can be a great investment, but managing it comes with a unique set of responsibilities—and fees. Unlike long-term rentals, vacation rentals require frequent cleaning, guest communication, marketing, and maintenance, all of which contribute to the higher fees typically charged by short-term rental property management companies. In this post, we’ll break down common fee structures in the industry, compare these to TruStay’s performance-based model, and explore what to look for (and watch out for!) when choosing a management partner.

Why Are Vacation Rental Management Fees Higher?

Vacation rentals have a much faster turnover rate than long-term rentals, with new guests arriving every few days or weeks. Each turnover requires a fresh round of cleaning, maintenance, restocking, and often re-listing to attract new guests. Additionally, vacation rentals demand a high level of customer service to maintain good reviews and repeat bookings, which can include handling inquiries, addressing last-minute issues, and ensuring a seamless check-in and check-out process.

All of these services contribute to the higher fees generally seen in vacation rental management, which may range from 10% to as high as 50% of gross rental income, depending on the location, services, and fee model used.

Common Fee Structures in Vacation Rental Management

There are three primary ways that vacation rental management fees are typically structured. Each has its pros and cons, depending on the needs and goals of the property owner.

1. Commission-Based Model

In a commission-based model, the management company takes a percentage of the rental income from each booking. For example, if a property rents at $300 per night and the management company charges a 20% commission, the fee per booking would be $60 per night.

Pros:

• This model aligns the manager’s incentives with the property owner’s since the manager benefits from keeping the property fully booked.

• A commission structure can work well for properties with high rental demand, as both the owner and the manager can benefit from frequent bookings.

Cons:

• Owners can sometimes face additional fees for services outside of standard management, such as emergency repairs or in-person guest check-ins, so it’s important to review what’s included.

• Commission-based models can lead to “nickel and diming” if extra fees are added for routine tasks.

2. Fixed-Rate Model

A fixed-rate model charges a set monthly fee regardless of how many bookings are made. This option can make budgeting simpler, as costs are predictable from month to month.

Pros:

• Fixed rates provide consistent, predictable management costs, which is helpful for budget planning.

• This model can be advantageous for properties in areas with stable booking patterns, like those frequented by business travelers.

Cons:

• Managers don’t have the same incentive to keep the property fully booked, as their income doesn’t change with booking volume.

• In highly seasonal locations, owners may feel they are overpaying during off-peak months.

3. Guaranteed Income Model

In a guaranteed income model, the management company agrees to pay the property owner a fixed amount each month, regardless of the property’s actual rental income. This can be appealing to owners who want steady income without fluctuations.

Pros:

• Provides a consistent income, which is helpful for properties in seasonal areas with varying demand.

• Removes the income risk from the owner, as the manager covers any shortfall in rental income.

Cons:

• The owner might miss out on higher potential earnings during peak season if the property performs better than anticipated.

• This model can sometimes attract low-quality management companies that rely on low occupancy rates, leading to lower property standards.

The TruStay Difference: A Performance-Based Model

TruStay offers a performance-based model that goes beyond traditional fee structures by aligning incentives with the property owner’s success. Unlike fixed or guaranteed models, TruStay’s fees are tied to the performance of the property. When occupancy and income rise, both the owner and TruStay benefit.

What Makes TruStay’s Performance-Based Model Different

• Aligned Incentives: TruStay’s success is directly tied to maximizing your rental income, incentivizing them to keep occupancy rates high and guests happy.

• Transparent Fee Structure: TruStay’s fees cover all standard services, eliminating surprise costs for typical management tasks.

• Higher Standards: With a vested interest in each property’s success, TruStay maintains high-quality service standards that foster positive reviews and repeat bookings.

Essential Services Included in Vacation Rental Management Fees

Here’s what you can generally expect to be included with a quality vacation rental management service:

• Marketing and Listing Management: Creating listings on top platforms (e.g., Airbnb, Vrbo) with optimized descriptions, photos, and dynamic pricing to attract guests.

• Guest Communication and Support: Handling inquiries, confirming bookings, and providing a smooth check-in and check-out experience for guests.

• Routine Cleaning and Maintenance: Coordinating cleanings between stays, managing supplies, and arranging for minor repairs as needed.

• Revenue Reporting: Generating monthly income reports, expenses, and net cash flow statements to help owners understand their earnings.

Be Wary of Extremely Low-Cost Management Services

Some property management companies may advertise ultra-low fees that sound too good to be true—and often are. Low-cost services may skimp on essential aspects, such as marketing, guest communication, or even cleanliness standards. This can result in lower occupancy rates, poor guest experiences, and ultimately, a damaged property reputation. Inadequate management can lead to costly repairs, negative reviews, and a loss of repeat bookings, negating any savings from lower management fees.

When evaluating a management company, remember that quality service requires investment. Companies like TruStay that prioritize service, transparency, and performance can drive higher rental income, offsetting the cost of fees.

Comparing Short-Term and Long-Term Management Fees

Vacation rental management fees are generally higher than those for long-term rentals, primarily due to increased turnover and the intensive, hands-on service required. For example:

• Higher Turnover: Short-term rentals may have guests staying for just a few days, requiring frequent cleaning, check-in/out coordination, and guest support.

• Guest Experience: Maintaining positive reviews means providing a hotel-like level of service, with managers on call to handle unexpected issues or emergencies.

• Marketing: Each booking requires ongoing marketing to keep occupancy rates high, which is not a concern for long-term rentals with stable tenants.

Conclusion

Vacation rental management fees vary depending on the fee structure, services offered, and the quality of the management company. By understanding the different models—commission-based, fixed-rate, and guaranteed income—property owners can choose the best approach for their goals. TruStay’s performance-based model offers a unique solution that aligns the success of the property manager with the property owner, creating a win-win approach to vacation rental management.

If you’re looking for a management partner that’s as invested in your property’s success as you are, TruStay provides full-service, performance-based management designed to maximize your rental income while maintaining high-quality service.