The Ultimate Guide to Launching and Growing Your Successful Short-Term Rental Business

STEP 1: Research and Understand
the Vacation Rental Market

'It's a business'
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This page is part 1 of a step-by-step guide to get your business up and running. 

There’s no fluff here - just information, help, and suggestions for doing it right - the first time!

Everything in this guide comes from experience.

Not a mere 6 months of experience in running an Airbnb, nor a year of co-hosting.

This is from 25 years of being in the vacation rental business, owning 7 properties and owning a seriously successful property management company with over 180 properties.

Our team have attended and presented at countless conferences and we continue our education by sitting in on hundreds of educational presentations, and still do to this day.  So, we can bring you the learning from all those experts as well.

So, sit back and enjoy the ride…or the read!

Contents of this step:

This step of 'The Ultimate Guide to Launching and Growing your Successful Short-Term Rental Business' is written by Vacation Rental Formula Business School's own Director of Education & Training, Heather Bayer.
When I started out in this business in the last century (I can’t believe I just wrote that!!), it was a challenge.

There wasn’t much in the way of research tools; no one wanted to help me out in case ‘I stole their secrets,’ and the online world was nothing like it is today.

So, when I first started looking at investment opportunities in Ontario, Canada, it was a great leap of faith.

If you are interested in why I chose Ontario in the first place, bought seven properties, and created a successful property management business, check out my origin story.

With no idea of what would work in the market, no data on occupancy or rates, and nothing in the way of networking or peer support, I worked on hunches and gut feelings.

Ontario’s cottage country has thousands of lakes and meandering rivers, many of which are not navigable by motorboat but make great canoeing and kayaking destinations.

I figured that wouldn’t matter to rental guests because it was unlikely they would be bringing a powered boat, so a river would work for them. And because property on rivers or no-motor lakes was half the price of a lakefront home, that is where I’d start looking.

The first realtor thought I was crazy.

“No one wants to rent a place where they can’t dock a power boat,”

He said, showing me the third overpriced lakefront house.

The fifth property that day was on a small lake that did not permit motorboats, and it became mine.

I flew out from the UK six weeks later to close on the deal, furnish it, and get it ready for the first guests.  

My hunches proved right, and the next five properties were all on rivers and became solid earners from day one. In fact, as data became more available and my property management company grew, I advised investors to consider rivers and smaller lakes, as occupancy was higher and they were more in demand from our target market.

Thankfully, much has changed in the past two decades, and research has become a lot easier to do.  


While today's short-term rental market is markedly different and mostly an improvement on the systems and processes of the past, these changes have made entry into the business more complicated and sometimes even more challenging, so it's important to do all the research at the beginning before embarking on what can be a very rewarding, if occasionally frustrating, experience.

In this guide, I want to make this journey more rewarding and less frustrating. I'll teach you how to get started in this business, find the right location, and truly understand the rental market within it.

Instead of relying on your gut or emotions to pick out a place, as I did, you'll learn practical and data-driven ways of researching and identifying what the market offers.

It’s Not All About Airbnb

The Airbnb machine would have you believe it is all about them, and you need do nothing more than invest and list.  

The Airbnb, 'Get Rich Quick Experts', will have you believe that you can just take a few courses that will teach you how to make millions on Airbnb without having to lift a finger.

Sure, there are some investors who have made a lot of money through rental arbitrage and other investment schemes, using co-hosting arrangements for property management, and have stayed completely hands-off.  But most find out early on that they have been sold a dream that can quickly turn into a nightmare.

It reminds me of a time in my past where I got caught up in the Amway MLM scheme.  

A friend had got involved and was excited about some videos and training she’d seen.  I watched them.

It all sounded amazing as they emphasized the potential for financial success and a luxurious lifestyle for those who joined the program. They used images and videos of wealthy and successful members to entice recruits. We got super excited that we could do this and that it would become a passive income vehicle.

What the training didn’t explain was that, according to a study conducted by the Federal Trade Commission (FTC), most people who joined MLMs like Amway didn’t make significant profits. More than 99% ended up losing money. 

I was one of those in the 99%, and it taught me a lot about buying into hype and excitement about ‘easy money.’

The Airbnb ‘wealth’ courses will have you believe it’s easy too....that all you have to do is use some, often questionable, data to find a good location, provide the bare minimum of facilities and amenities, list on the platform, and your vacancies will fill overnight.  Income will roll in, and you’ll invest in the following property before you know it.


But there is way more than that if you want a sustainable business founded on hospitality, responsibility and building trust with your guests to deliver a great guest experience.

Just think about it for a moment!

Airbnb didn’t exist until 2007, and the vacation rental industry had been around for decades before then.

The accumulated knowledge of hundreds of thousands of hosts operating before Airbnb is still valid and relevant. Yet, we are led to believe the world of short-term rentals began when the platform was launched.

I’ve been in the industry for over 25 years as an owner, manager, educator, and consultant. I stand by the viewpoint that it’s not all about Airbnb!

Putting all of your eggs in one basket is not the best strategy. Once you fully understand the business, you’ll see all the other opportunities available to you.

Now, let’s get started...

Knowing the Inbound Traveler
Why would anyone want to visit Midland, Texas?

I ask this question a lot about different towns and villages in our travels across the US. 

Driving through Destin or Panama City, it would be easy to answer the why: sugar sand beaches, turquoise blue water, dolphins, and a lot to do even if the weather doesn’t play nice.

But understanding inbound visitors in a small town in the Permian Basin might be more of a challenge.

A couple of years ago, on a road trip to Arizona, we traveled I-20 across Texas. The vast plains, known for their abundant oil and natural gas reserves, have been a major driver of the Texas economy for decades. 
Mile after mile of flat land stretches out to the horizon, dotted with oil derricks, pumpjacks, and storage tanks.

Midland is a hub for the oil and gas industry in the heart of all this.

The many high-rise buildings are home to some of the most influential companies in the industry, housing their headquarters or major operations.

It’s not a vacation destination.

Instead, it draws a multitude of businesspeople year-round. And, if you read the reviews from Airbnb listings, another source of occupancy is families of workers in the oil fields, who come down to celebrate birthdays and anniversaries with their loved ones working nearby.

Knowing who comes to a location cannot be understated.

It’s the vital knowledge that drives marketing and promotion, helps create content on a website, and informs how to deliver the right features in a property.

Before STR entrepreneur Tyann Marcink bought and renovated an old bank in the small town of Marthasville, Missouri, she researched what might bring travelers to the area.

She found:
  • The town is located in the heart of Missouri wine country with multiple vineyards some of which are offered as wedding venues.

  • The 240-mile Katy Trail that runs along the Missouri River passes through Marthasville. The trail is open to hikers and bikers, and it offers beautiful views of the surrounding countryside.

  • About a 20-minute drive from Marthasville is Purina Farms -  a 300-acre working farm that is owned by the Nestle Purina Pet Care Company. The farm is open to the public and offers a variety of activities and events, including dog shows, animal demonstrations, and educational exhibits.  These take place throughout the year.

When this was backed up with in-bound traveler statistics from the local chamber of commerce, it became a viable opportunity.

Today, the Bankhaus is a popular accommodation choice for hikers and bikers travelling the Katy Trail; wedding guests going to events at nearby wineries, and it’s pet-friendly status attracts many people attending dog shows at Purina Farms. 

Once you have your avatars established, based on this research, decision making, marketing and promotion all fall into place.

Inbound traveler information

Check the official statistics provided by the government or tourism board of the location to understand the number of visitors, their origin, and the seasonality of tourism. You can also use online databases like Statista or Google Trends to gather information.

Just because a place looks popular at a certain time doesn’t mean this will extrapolate over all seasons. Tourism offices will often be able to provide data on inbound travel; whether they mostly arrive by air or road; how long they stay, and other information that can play a part in an investment decision. A property in Orlando near Disney is likely to rent year-round. However, one further south in Florida may struggle to get summer rentals. The snowbird market in Gulf Shores, Alabama, is not as guaranteed as other areas, but it may have a solid tourist market from March through September.

Conduct surveys:

Surveys are great to help you understand inbound traveler preferences, motivations, and experiences. Just about every location has a Facebook group like this one for St. George Island, Florida. The island has a full-time population of less than 1,000 people. Yet, there are 59K members of the FB group—probably all visitors to the multitude of short-term rentals on the island. What a great resource to collect information!

Examine Facebook groups

Just about every location has a Facebook group like this one for St George Island, Florida.  

The island has a full-time population of less than 1000 people yet there are 59K members of the FB group – probably all visitors to the multitude of short-term rentals on the island.  

What a great resource to collect information and find out more about the visitor demographic,

Use Social Media:

Social media platforms like Instagram and Twitter can provide insights into tourists' activities and experiences. You can use tools like social listening to monitor mentions of the location and analyze user-generated content.

Monitor Online Reviews:

Read reviews of accommodations, restaurants, and attractions on platforms like TripAdvisor and Yelp. These reviews can provide a wealth of information and help you understand what tourists like and dislike about the location. 

Attend tourism conferences:

Attend industry conferences and trade shows to network with industry professionals and learn about the latest trends and best practices in tourism research.

Conduct competitor analysis:

Analyze the tourism statistics and trends of other locations that compete with the location you are researching. This will help you understand the strengths and weaknesses of the location and how to position it in the market.  

Persona Creation

This is the foundation of much of your marketing as you’ll find out in the section on Create a Vacation Rental Marketing Strategy. Inbound traveler statistics can help to build your personas or avatar.  

These refer to the detailed character descriptions that represent a specific group of users or customers, so understanding the nature of the people who will come to stay in your place 

What to Research and Why

When I first decided to buy a property in Ontario while I was still living in UK, it was pretty much on a whim.

I did little to no research, mainly because there were no statistics on cottage rental in that part of the world.  

It was before Home Away, before Airbnb, and before AirDNA offered data on occupancy and rates.

We did it all on a wing and a prayer, and happily it worked.  But it could so easily have gone wrong.

I had no clue whether it would be profitable and sustainable over the long-term. Nor did I have information on supply and demand.  I could have got that by looking at occupancy rates and average daily rates for similar properties in the area.

Data like that wasn’t available in the late 90’s, at least not in Ontario.
It is now.

There is no excuse for not carrying out thorough research and due diligence.
There are a few key components to the research. Once you have these nailed down, the information you've collected will guide you in the right direction.

Understand Market Demand

You need to know if there is sufficient demand for short-term rentals in the area you're considering. This can be assessed by looking at occupancy rates and average daily rates for similar properties in the area. You can also look at trends in tourism and business travel to get a sense of whether demand is likely to grow or shrink in the future.

Identify competition

It’s unlikely you’ll be operating in a vacuum wherever you are, so It's important to know who your competitors are and what they offer. 

Your area might be home to different property types – condos, townhouses, single family homes, dedicated rental areas, HOA – governed communities. Researching the types of properties that are available for short-term rental in the area and the rates they charge is a good start. This can help you determine what you need to offer in order to be competitive.

Understand legal and regulatory requirements: Depending on where you're investing, there may be legal and regulatory requirements that you need to comply with in order to operate your rental business.

You should research local laws and regulations to make sure you understand what's required of you.

Listen to Rent Responsibly's Dana Lubner talk about Short-Term Rental Advocacy.

Assess potential risks: Researching an area can also help you identify potential risks to your investment. For example, you may discover that the area is prone to natural disasters or that there are security concerns that could impact the safety of your guests.

A SWOT analysis is a really useful tool to analyze the potential of a business and identify the opportunities and threats that may impact its growth and development.

7 Things You Need to Know Before Investing in a Short-Term Rental Property

Analyze existing data

While this is a relationship business, it all starts with data.  After all, if you cannot attract the people in the first place, how can you create a relationship with them?

When Tyann started researching for the Bank Haus, there was little in the way of existing data.  There were no other rentals in the area, and other accommodation was hard to come by.  It was pretty much a blank slate, which was great for being the first and paving the way, but like my entry into the Ontario market, there was a high degree of risk.

There were questions….

  • Would people come?  

  • What would they pay?

  • How long would they stay?  

  • What were they planning on doing while on vacation?

  • Were they family groups, couples or singles?

  • What amenities appealed to them?

  • Did they have pets?

Without a source for the answers beyond the anecdotal type it was like fishing without knowing what fish are in the water, what bait to use, and where to find the best fishing spots.

In some ways it was great to be in at the start of the rental boom, but way more of a risk than most people would like.

These days, there are few areas that have been untouched by the march of short-term rental, and there are benefits to this.  There is plenty of data available, and it’s a much more scientific process.

Companies such as AirDNA, Mashvisor and KeyData and many others coming on board to offer data services, can deliver vast amounts of information. They aggregate and organize vacation rental data and present it in ways that are easy to understand.

You can subscribe to these platforms for less than $50 per month – some have free trials - and it’s worthwhile signing up for a month to extract as much data as you can for the purposes of location analysis.

Be cautious about relying on any single source of data.

When looking at the data analysis platforms, ensure they do not rely solely on data from one online platform, such as Airbnb, to determine which type of property to invest in. 

Based on that data alone, it could be easy to conclude, for example, that there is a high demand for small apartments in a particular neighborhood and decide to invest in a studio apartment in that area.

However, the data from Airbnb only captures a portion of the short-term rental market in the area and may not be representative of the broader market.

Additionally, the data from Airbnb doesn't take into account factors such as local zoning laws, competition from other short-term rental platforms, or seasonal fluctuations in demand.

As a result, you could find your property is not generating as much income as you had hoped because you missed other sources of data or factors that could impact the market for rentals in the area. 
There could actually be a high demand for a variety of other types of short-term rental properties, and you would need to adjust your pricing strategy to better meet the needs of their target customers.

In short, relying on just one form of data, such as data from a single short-term rental platform, can be risky because it may not provide a complete picture of the market or may be biased in some way.

To make informed investment decisions in the short-term rental business, it's important to gather data from multiple sources, consider a variety of factors that could impact the market, and analyze the data in a thoughtful and rigorous way.

In a way, I am glad I didn't have the data for my part of the world because it may not have told me what my gut discovered. Guests wanted to vacation by the water, and as long as there was swimming and some non-motorized boating, it didn't matter where that water was.

My success came from buying river properties that were significantly less pricey than those on big lakes… yet still commanded good rental rates.

Analyze the Competition

The type of data collected allows you to see what your competition is charging, check their amenities and features, and get an idea of how your properties stack up against them.

But before you think about relying on AI analysis, which can do a lot with quantitative data, remember that it doesn't capture feelings and emotions.

Knowing how your competition is making their guests feel can deliver a huge amount of qualitative information, so you'll need to spend some time researching their reviews.

These will tell you what other owners are doing to contribute to the guest experience.

Data Collection

First off, create a spreadsheet where you can record what is being said about other properties.

You can build as many fields as you want to aid in your comparison but at least have these:

  • Property location – address if possible

  • Property Type: apartments, houses, condo, townhouse, villa etc

  • Number of Bedrooms

  • Number of Bathrooms

  • Property Amenities: such as a pool, parking, hot tub, games room, AC etc

  • Average daily rates (ADR)

  • Distance from Attractions

  • Reviews: For comments on what makes a place great according to guests

  • Property Owner/Manager information

The review section is important because in areas where there is a density of accommodation, you may have to search hard to find out what makes one place stand out over the rest.

Your job, of course, is to be so much better than your competition.

Here’s a couple of examples that show it doesn’t take much to create a sought-after property.

Location Factors

The owner of this condo in Destin has over 100 reviews and most of them mention the beach gear and wagon to take it there.

“This was the perfect spot for a 4-night trip! The condo was clean and quiet, and the provided beach gear (chairs, umbrella, cooler, towels) was a game changer! There was a public beach within walking distance and many more access points by car. The snacks and wine were such a nice touch. One of our favorite Airbnb stays so far!”

“Loved the special touches to make our stay welcoming! The location was the perfect setup and well-stocked for a great beach day! Chairs, umbrella, towels, spray, cooler, and a wagon to cart it all if you choose the relatively short walk.”

Other condos in the same building and nearby, mentioned that chairs and umbrellas were available to rent on the beach, at an additional cost.   Their reviews were also 5-star but didn’t have the enthusiastic response of the one that provided those little extras.

In this case, you’d add chairs, umbrella, towels, cooler, and a wagon/cart to your spreadsheet in the column on reviews.

It’s not hard to imagine how a family with small children would enjoy having those things provided…particularly the wagon.

In different locations, other amenities may be cited as important.  For example, I’ve stayed at a couple of properties on visits to Costa Rica.  I’ve chosen them based on the reviews that mentioned safety, ease of access to the property and 24-hour connection with the property manager if necessary.

While all the places I looked at mentioned the wildlife, the range of activities on offer, and had photos of the swimming pool and spectacular views, a new visitor to a country wants to feel secure and not have to worry about getting into the place or finding someone to fix a problem.

Reviews are a goldmine of information on what makes guests happy….and in some cases, deeply unhappy!  

Set aside a good amount of time to scroll through as many reviews as you can, making notes on all the ones that cite specifics that made the stay special.

Location, Location, Location

Earlier I talked about Marthasville, Missouri, and Midland, Texas – both relatively obscure places you may not have on your bucket list.

But…each in their own way attracts inbound travelers.  Not necessarily tourists as is the case in Midland where business travelers are more likely to snag the smaller properties.

Sue Allen is the founder of East Ruston Cottages in Norfolk, on the east coast of England.  It’s a very dog-friendly area, with many restaurants, cafes, and tourist attractions accepting pets.

The area has many beaches where dogs are welcome to run free.  

Sue knew that travelers would come to her part of the country, specifically because their pets could run along the beach, sit beside them in a pub garden, and be accepted in many of the places they wanted to visit. 

This prompted her to create a company that only rented properties that would accept multiple dogs.

It’s a hugely successful niche that would not have worked as well in other parts of the country where there are more restrictive policies.

The nature of the inbound market could certainly define the type of property that is going to do the best in your location, and your research on existing data is likely to back that up.

Some locations may give year-round occupancy potential, while others will have seasonal variations.

However, what may have been standard in the past is open to change, and the last few years have shown seasons widening, and the potential for low & shoulder period occupancy to rise.

Savvy operators are seeking out reasons for people to visit they may not have considered, and this is creating marketing opportunities where none existed before.

When we started our property management company in Ontario, we were told it was a two-month market.  July and August would be the only times to expect near 100% occupancy.

Traditionally, visiting what is known as ‘cottage country’ in the summer was a rite of passage for the domestic market i.e. the majority of guests coming out of the southern cities including Toronto.

The location was strictly seasonal.

We went on a mission to change that and to share the benefits of experiencing the location in other seasons, and over time saw a shift in traveler behaviour and booking patterns.

The pandemic delivered some of those opportunities and those that jumped at the prospect of creating ‘work-from-the-cottage’ promotions saw an uptick in out of season occupancy.

The key here is to look at any location creatively, like Tyann Marcink did in Marthasville and Sue Allen did in the UK.

Having said that, as the market becomes more crowded, it makes it even more important to be comfortable with the income that is likely to be generated in the popular season.  Don’t rely on capturing additional reservations until you are certain you can achieve them.

Regulations & Legislation

The history of vacation rental legislation in the US over the past 20 years has been marked by a trend towards increased regulation, particularly at the local level. As the industry continues to grow and evolve, this trend will likely continue, with governments seeking to strike a balance between promoting tourism and protecting the interests of residents and neighborhoods.

This regulatory activity is certainly not confined to the US; practically every country where vacation rentals are established has seen legislative activity, either planned or enacted.

So, if you plan on starting up in a new area or growing an existing business in other locations, don't ignore the potential of regulation and how you may be impacted by it.

Just for interest, type "short-term rental regulations' + news into Google and see just how many news pieces pop up.  

Zoning laws

Ensure that the property is located in a zone that permits short-term rentals. Some cities and municipalities have zoning regulations that prohibit short-term rentals in residential areas. 

HOA restrictions

If the property is located in a community with an HOA, you should review the HOA rules and regulations to ensure that short-term rentals are allowed.  It’s not unusual for someone to buy a property within an HOA and have their realtor tell them rentals are permitted, only to find this is not the case on closing.  Due diligence is essential.

Licensing and permits

Some cities and states require short-term rental property owners to obtain a license or permit before they can rent out their property. Be sure to check if this is required in the area you're interested in.

Noise and disturbance regulations

Some cities and municipalities have regulations in place to limit noise and disturbance from short-term rentals. You should check if these regulations exist in the area if you are considering buying a property.

Health and safety regulations

Short-term rental properties may be subject to health and safety regulations such as fire safety codes, building codes, and occupancy limits. You should familiarize yourself with these regulations to ensure that the property is compliant.

Tax laws

You will need to be familiar with the tax laws that apply to short-term rentals in the area where you are considering buying a property. This may include occupancy taxes, sales taxes, and income taxes.

Liability insurance

Consider purchasing liability insurance to protect yourself against potential legal claims from guests or neighbors.