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15 hidden costs causing property managers to lose six figures a year

By Guesty Marketing Team | Jan 24, 2024

If you’re managing 10 properties and each one has a hidden cost of $100 per booking, that’s $1,000 in overlooked expenses. If you have 100 bookings a year, that’s $100,000 in extra spend going right out the door.

In the realm of hospitality operations, particularly for short-term rentals and vacation homes, traditional property management methods can often dominate the scene. Picture the property manager who swears by their trusty ledger book or those still grappling with piles of paper contracts. You may even identify with the 56% of property managers who still hinge on basic spreadsheets for their operations. Time, as they say, equals money. And, not to forget, money itself directly impacts profitability.

All-in-one solutions increase your efficiency, helping you chip away at operational costs to bolster the bottom line, maximizing your company’s market value. For forward-looking property management leaders, the message is clear: the future thrives on integration.

In this guide, we look at:

  1. The different types of costs associated with hospitality operations
  2. How an all-in-one platform can help you save both soft costs (time) and hard costs (good ol’ cash)

Categorizing your costs

We can categorize all our costs down into three buckets: opportunity costs, operational expenses, and compliance costs

  • 1 Opportunity costs

    Opportunity costs are the potential benefits or income that property managers forego when they choose one course of action over another.

    Example:

    Your cozy vacation property is listed just on Airbnb. You know there other platforms like Vrbo or Booking.com but feel a little intimidated by the idea of managing multiple listings. Besides, you are getting bookings from Airbnb.
    Now, imagine it’s peak holiday season. You hear whispers of a major local event drawing tourists from all over. Suddenly, your regulars on Airbnb are fully booked, but you notice empty spots in your calendar. Why? Because the event enthusiasts usually book on Vrbo. Since you never expanded to that platform, you’re left watching potential guests (and their money) go to competitors. And that’s not the holiday spirit you were hoping for

    It’s critical to consider the value of the alternatives you’re not choosing to make the best decision for your business and its growth.

  • 2 Operational expenses

    Operational expenses cover the routine expenses linked with keeping those cozy vacation homes and snazzy urban rentals tip-top.

    Examples:

    Fixing that leaky faucet, paying the monthly power bills, or having the place spick-and-span before the next guest checks in.

    Ensuring you’re on top of these outgoings is vital; it’s about guaranteeing guests get the experience they expect and safeguarding your property’s rep and revenue.

  • 3 Compliance costs

    Diving into the world of hospitality operations means navigating some tricky waters: meeting legal standards and ensuring guests have an exceptional stay.

    Examples:

    The nitty-gritty of local rental laws, making sure your properties are accessible for everyone, decking it out with must-have amenities, and not skimping on security.
    As property whizzes, it’s essential to splash some cash here. Not just to sidestep those pesky legal hiccups, but to also ace those guest reviews and ensure repeat bookings. Don’t let overlooked costs dent your rep or revenue!

    Now that we’ve arranged your business costs into these three distinct categories, let’s start pulling back the curtain on what it is really costing you.

Hidden opportunity costs

Lost revenue & missed opportunities

  • Hidden cost 1

    Your listing's playing hide and seek

    When managing properties, especially those holiday-perfect short-term rentals, it’s a lot more than just having a fab space. It’s about getting it seen, loved, and booked.

    Lost in the crowd — even the most amazing property can get totally overshadowed if it doesn’t stand out on rental platforms. Think about it: does your space pop up when potential renters search for their next vacay spot?

    Missed appeal moments — Maybe your beach house has that killer sunset view, but if your listing lacks crisp photos or catchy descriptions, it’s like sending guests on a treasure hunt without a map.

    Pricing pitfalls — Pinning down the perfect price is tricky. Go too high and you’re the pricey penthouse nobody books. Too low? Looks too good to be true.

    Example:

    Meet John. He’s got this beachy retreat that’s straight from a postcard. But, here’s the twist: it’s mostly vacant. Why? It’s buried pages deep in search results, and when folks do stumble upon it, there’s a bit of a ‘meh’ moment. Lackluster photos, vanilla descriptions – you get the drift.

    The real-time data and insights delivered by an all-in-one hospitality operations platform can help you zero in on and harness these opportunities. By streamlining property details, listing performance, and guest feedback all under one digital roof, You can understand your true capacity for growth and make smarter decisions to increase that capacity.

    You might like: How to scale to 1000+ units

  • Hidden cost 2

    Underutilized pricing opportunities

    Much like the nature of dynamic events, rates for short-term rentals are ever-evolving based on real-time market demands. A beachfront view might skyrocket in value during the summer season, but without the right pricing strategy, you’re leaving money on the table.

    Example:

    Consider Sarah, who manages a picturesque chalet. During peak season, her rates are set below the property’s actual value. Because she is not leveraging dynamic pricing strategies, she is missing out on thousands of dollars of potential

    Solution:

    To truly cash in on this fluctuating demand, Sarah needs to bring onboard a dynamic pricing tool that recalibrates rental rates on the fly. By factoring in variables like seasonal surges, local festivities, or even a sudden influx in tourist bookings, this tool ensures she remains competitive and that her revenue is maximized year-round.

    Are you eating small costs that add up to big costs? Now think about that year over year.

    There’s another huge benefit that an all-in-one platform can help you leverage. Today’s hospitality operations platforms aren’t just about managing bookings – they’re about optimizing every opportunity. No more missing out on potential revenue just because “you forgot to adjust the rate.” Any shift in property demand or unique selling points can be instantly logged, monitored, and adjusted for in real-time, ensuring every factor is considered in the final pricing.

Hidden operational expenses:

Costing you more than you realize

Expenses are an inevitable part of managing properties. The tricky part is identifying those hidden operational costs that can sneakily pile up, leaving you puzzled about the dent in your revenue.

What hidden costs are silently chipping away at your returns? Well, if you knew, they wouldn’t be hidden, would they?

So instead, we’re going to shine the spotlight on them for you.

  • Hidden cost 3

    Inefficient check-in/check-out processes

    In an era where convenience is king, manual check-in and check-out systems are relics that belong in a museum, not in a modern vacation rental business. Every guest touchpoint contributes to their overall experience, and let’s be honest, first and last impressions matter immensely.

    Example, In-house properties

    Imagine a situation with a week-long booking at one of your prime condos. A group arrives, and due to outdated manual check-ins, they’re left waiting for 20 minutes for key handover. This lag might seem insignificant, but when aggregated over a year, you’re gifting away hours of guest satisfaction, a fertile ground for negative reviews.

    Example, Outsourced properties

    For property managers who rely on third-party check-in desks or agencies, delays due to manual processes can mean extra costs. A 20-minute delay across, say, 100 check-ins over a month, adds up. Not just in financial terms but in reputational risks.

    Solution:

    You can minimize these inefficiencies by implementing automated check-in and check-out workflows. This can streamline guest experiences, enhancing convenience and reducing operational headaches. Automated systems can also send guests key codes or access instructions, making their stay seamless and stress-free.

    Again, when you’re dependent on traditional methods, manual guest transactions offer no additional value to your hospitality operations.

    Imagine a world where these delays and inconveniences didn’t exist. Just think of all the positive reviews and returning guests you could gain for every property, every stay.

  • Hidden cost 4

    Reactive repairs

    Think of maintenance as health check-ups for your property. Regular, proactive check-ups prevent severe ailments. Reactive, emergency repairs, however, are akin to last-minute ER visits – expensive, stressful, and avoidable.

    Example:

    You manage a fleet of 15 beachfront villas. Each minor hiccup – a leak here, a broken fixture there – tackled individually, accumulates in costs and effort. Over a year, handling these issues in isolation can snowball into a significant expenditure, not to mention the administrative fatigue and disruption it brings.

    Transition to scheduled, consolidated maintenance using advanced vendor management tools. A planned approach means you tackle multiple issues in a single maintenance session. Efficient, cost-effective, and far less disruptive.

  • Hidden cost 5

    Unexpected property damages

    Accidents happen. But in the hospitality operations business, these ‘accidents’ can lead to substantial out-of-pocket expenses. It’s essential not just to prepare but to protect.

    Example:

    Remember the case of a luxury penthouse you rented out for a weekend? An unintentional mishap by guests led to property damages that burned a significant hole in your pockets.

    Solution: The answer lies in damage protection coverage. Robust protection plans act as shields, covering such unforeseen damages. And with systems that manage claims within unified dashboards, these coverage plans become operational saviors. Plus, a property that flaunts such protection is bound to attract repeat, careful guests. In fact, properties with such protection see up to a 100% increase in returning guests.

  • Hidden cost 6

    Over-reliance on third-party booking platforms

    Relying too heavily on third-party booking platforms can pose several challenges and risks for property managers. While these platforms can offer valuable exposure and a streamlined booking process, depending on them too much can create limits for property management companies. Many companies that rely heavily on these platforms become dependent on platform algorithm changes and have limited control over pricing, branding, and guest relationships. Not to mention, it can also cut into your profit margins.

    Example:

    Take Karen, a dedicated property manager who leans significantly on a single booking platform for most of her property’s bookings. This reliance has led to dramatic revenue fluctuations. For instance, in June, she might witness a surge in reservations, resulting in a comfortable revenue. However, by July, a slight tweak in the platform’s algorithm could see her property relegated to the third page of listings, leading to a drastic 70% dip in her bookings and revenue.

    Solution:
    To mitigate this risk, Karen should diversify her booking channels. Integrating multiple booking platforms helps spread the risk and ensures a steadier income stream, reducing the impact of fluctuations on her revenue.

  • Hidden cost 7

    Guest communication gaps

    When it comes to any business, but especially hospitality, effective communication with your guests is vital. With proper communication strategies in place, guests will feel supported if something goes wrong, while you’ll be aware of any potential issues they are facing.

    Example:

    Picture Jack, a diligent property manager. Jack is deeply committed to his work, but like any human, he can’t be glued to his devices 24/7 awaiting guest communications. While he tries his best to be responsive, there are instances where messages slip through the cracks due to the sheer volume or timing. Regrettably, some guests perceive these lapses as a sign of indifference and or lack of care, denting their overall experience.The consequence? Discontented guests pen down less-than-stellar reviews, which inevitably dampen the flow of future bookings.

    Solution:
    Jack can overcome this issue by adopting a centralized messaging platform. These tools keep all guest communications organized and accessible, ensuring guests receive clear and consistent information throughout their stay.

    With centralized messaging, Jack can easily view and address all messages, no matter the channel they came through. Better yet, automated replies and preset templates can be at the ready for standard queries, allowing swift, efficient responses.

    The icing on the cake? Some of these messaging platforms even compile detailed guest profiles—capturing everything from booking specifics to personal preferences. So, every interaction isn’t just a reply; it’s a personalized touchpoint. And in the world of vacation rentals, those touchpoints can make all the difference.

  • Hidden cost 8

    Limited after-hours support

    Often, property managers mistakenly believe they can get by without round-the-clock guest support. A bulk of issues, as you can guess, don’t stick to a 9-5 schedule. Rather than leaving guests fumbling in the dark, a different approach is warranted.

    Example:

    Maria’s vacation rental saw a decline in repeat business, all because a late-night hiccup had no immediate solution. The result? A disappointed guest and a hit to her online reputation. Stories like Maria’s are not isolated instances.

    Solution:
    Here’s the game-changer: had Maria embraced 24/7 guest communication, that night would’ve had a different narrative. With these services, there’s always a helping hand, regardless of the hour or day. It’s not just about being available; it’s about optimizing the guest journey every step of the way. By keeping communication channels always open, you’re not just appeasing current guests, but you’re setting the stage for future positive reviews. The ripple effect? Enhanced guest loyalty and an uptick in your revenue streams.

    You might like: How Tangy Mgmt saved the cost of 6 employees

  • Hidden cost 9

    Manual payment processes

    Ever been bogged down with clunky, manual payment methods for your vacation rentals? Ever toyed with the idea of adding more hands on deck just to keep up with the payment demands? Here’s the catch:

    • Your current system doesn’t swiftly cater to real-time booking payments.
    • Your payment gateway isn’t tailored for the specific demands of short-term and vacation rentals.
    • There’s no built-in mechanism to smoothly handle a surge in booking payments.

    Lag in payment collection isn’t just a delay; it’s a drag on your entire business cycle. If you’re not securing payments promptly, you’re leaving potential revenue on the table.

    Solution:
    When considering a system overhaul, ensure your chosen solution addresses the above pain points. Shift to a model that champions swift, automated payment processes, empowering both you and your guests.

    Related: Payment processing for the hospitality industry

  • Hidden cost 10

    Overbooking or double booking errors

    Think you’ve saved a few bucks with that old reservation system? Consider the cost of a double-booking fiasco. A single overbooked property can spiral into hours of frantic coordination and damage control — time that could have been better invested elsewhere.

    Example:

    Picture this: Sam, a property manager, faces a scenario where two families arrive at his cottage due to an overbooking mistake. This leaves him between a rock and a hard place – for which family does he honor the booking? No matter who he chooses, this will lead to guest unhappiness and bad reviews.

    Solution: Modern property management demands more. Real-time availability syncing isn’t just a ‘nice-to-have’, it’s essential. This isn’t about just updating a calendar. It’s about seamlessly aligning your property’s availability across all platforms instantly. Top hospitality operations systems today have this baked in, ensuring you avoid those embarrassing (and costly) overbooked scenarios.

Hidden compliance costs

Navigating regulatory minefields and enhancing guest experience

Being savvy about the world of hospitality operations goes beyond just knowing your properties. The landscape is littered with regulatory pitfalls that, when overlooked, can prove to be costly speed bumps on the road to success.

  • Hidden cost 11

    Local rental regulations and licensing

    One wrong turn in the maze of local rental laws, and you might find yourself paying more than just a hefty fine. From intricate zoning protocols to nuanced safety standards, the rules governing short-term rentals are vast and varied. Even if you’re well-intentioned, ignorance isn’t an excuse when the stakes are this high.

    Example:

    Consider Derek’s story: A well-meaning property manager caught unaware by local short-term rental regulations, is now grappling with penalties that are eating into his profits. An oversight? Yes. Costly? Absolutely.

    Solution:

    Derek’s redemption lies in tools like Granicus or GovOS, platforms that not only provide a deep dive into rental regulations but also arm you with market insights. It’s like having a roadmap that not only shows you the best route but also points out attractions along the way. Being compliant isn’t just about avoiding pitfalls; it’s about optimizing your journey in the world of property management. Stay informed, stay ahead.

  • Hidden cost 12

    Under-investing in property security

    Your reputation is only as strong as the security of your properties. Inadequate security can expose guests to risks, damaging your brand and hitting your bottom line.

    Example:

    Think of Nancy’s predicament: A break-in at one of her properties led not only to stolen assets but also shook the confidence of her guests. Their stay was marred, their belongings compromised, and their trust in Nancy’s service eroded, culminating in a negative review.

    Solution:
    Instead of piecemeal security systems, consider leaning into vetted partner integrations. These are collaborative ventures with trusted security entities, ensuring you have top-notch, consistent security across all your rental properties.

    Not only do these partnerships often come with economies of scale—like discounted rates for bulk security installations—but they also amplify the guest experience by ensuring peace of mind. Invest right, protect your assets, and cement your brand’s trustworthiness. In this business, safety isn’t just a feature; it’s a promise.

  • Hidden cost 13

    Skimping on guest amenities

    In the short-term rental market, amenities are a top factor for guest satisfaction. With vacation rentals especially, guests want perks like onsite swimming pools, beautiful outdoor spaces, hot tubs, and entertainment options like board games and TVs.

    However, essential amenities are even more important – your property should have WiFi, heating and air conditioning, and kitchen basics.

    Example:

    Paul faced backlash and subpar reviews due to absent WiFi. Guests arriving with the intent to juggle leisure and remote work found themselves in a bind, putting a dent in their stay, work commitments, and ultimately, their feedback on the property.

    Solution:
    Feedback monitoring tools like Revinate, TrustYou, and Medallia can help property managers pinpoint and address amenity gaps, helping property management companies collect, analyze, and respond effectively to guest feedback and reviews. These tools often categorize feedback as positive, negative, or neutral, helping property managers quickly identify areas that need attention.

    Moreover, with the analytics and trend-spotting capabilities these tools offer, managers can gauge evolving guest expectations, pinpoint recurring issues, and assess the fruits of their improvement endeavors. By keeping a finger on the pulse of guest feedback, you position yourself to deliver top-notch stays, enhancing guest contentment and catalyzing positive endorsements. In this industry, the guest’s voice is gold; it’s worth listening to.

  • Hidden cost 14

    Ignoring online reviews and feedback

    When you get bad reviews, you may think it’s beneficial to ignore them completely, but you’ll actually want to do the opposite. Publicly addressing these bad reviews will help future guests understand your side of the story and see that you care about guest satisfaction.

    Example:

    Take, for instance, the case of Carla’s urban rental. With mounting negative reviews, potential guests are left with the impression of a property manager that’s indifferent to their concerns and has a lack of care about guest satisfaction.

    Solution:
    For property management companies, it’s imperative to not only monitor guest reviews but to also respond to them in a timely and professional manner. This not only showcases a commitment to guest satisfaction but also strengthens your online reputation. By leveraging tools like Trustpilot, ReviewTrackers, and Google My Business, property managers can effectively oversee, address, and utilize guest feedback to make data-driven enhancements to their services.

    Actively engaging with these reviews helps in building trust, fostering positive guest relations, and securing new bookings. For instance, Carla’s urban rental might see a boost in bookings if she actively addressed the concerns laid out in negative reviews, showing potential guests that their satisfaction is a top priority.

  • Hidden cost 15

    Fragmented guest experience due to multiple interfaces

    How do you present your property’s functionalities to your guests? Is your guest’s experience broken up by juggling multiple applications to access the home’s features? Picture this: a guest’s stay is continually interrupted by having to swap between apps to control temperature, access, and entertainment. A seemingly posh townhouse could quickly descend into a tech labyrinth.

    Example:

    Consider Alex’s townhouse, where guests grapple with disparate applications for myriad features, from door access to setting the thermostat. This disjointed approach doesn’t just inconvenience guests – it can mar their overall experience, making them second-guess returning.

    Solution:
    Luckily, you can use technology platforms that consolidate various aspects of property management into a unified, user-friendly experience for everyone involved, including property managers, guests, and property owners. These integrated systems simplify operations, enhance guest experiences, and improve efficiency for property management companies.

    Property managers should consider an integrated CRM solution that consolidates guest-facing technology. A unified, user-friendly experience enhances guest satisfaction and can lead to repeat bookings and positive word-of-mouth referrals.

Guesty: The new competitive advantage

The solution? One tool to replace them all.

An all-in-one hospitality operations platform: the new competitive advantage

As a property management company catering to short-term rentals and vacation homes, an all-in-one platform tailored for the hospitality industry is an investment you simply cannot overlook—especially in a market teeming with properties, where standout guest experiences can be scarce.

At the very least, such a platform unveils the hidden costs, putting you in a position of understanding and awareness. And, at best, it positions you to counteract these costs preemptively. This empowers you to carve out a competitive edge like never before, outpacing those businesses juggling various disjointed tools and decidedly outstripping those still ensnared in cumbersome manual operations.

Guesty’s purpose-built technology can help you optimize every aspect of your hospitality operations–get started today to save time, maximize revenue, and stay ahead of the curve. The era of integration beckons; where do you stand?

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