VRS063 - I Really Want a Pool for My Vacation Rental but….Does it Sell More Chickens?
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I’ve bought and rented out seven properties in the past dozen years or so, and am getting quite adept at knowing what will please our guests and keep them coming back for more. And that is the key….if the new addition will attract more guests and repeat renters, then I’ll evaluate the decision to buy based on the income potential of it.
When we first started in the vacation rental business, we were helped on the way by a very savvy business mentor who got us to see what we were doing from a pragmatic viewpoint. If I had a dollar for every time he said ‘Does it sell more chickens?’ in response to one of my inspired ideas, we could have bought a luxury hen house and be dealing in a lot of eggs!
His view was that if we were taking this seriously as a business venture and not as a hobby, then we had to evaluate the addition of every feature and facility from a strictly business perspective. If a new purchase did not have a positive impact on the bottom line, then it should be delegated to lower priority.
Will it raise the rental rate?
Will it increase bookings?
How long will it take to pay off the investment?
I’m not talking here about the essential purchases, although he did argue that spending $130 on a coffee machine with a built-in grinder, instead of $50 on a perfectly good alternative without a grinder might not ‘sell more chickens’. The jury is out on that one. What he did get us to see was that our major decisions must be guided by solid economics and not me just saying, ‘that would be really nice and our guests would love it’.
Early on in our buying years, we decided a hot tub would be a good investment but given the cost – over $10,000 to buy and install a good model – we had to prove it would be a cost effective decision. Since the goal was to increase out of season rentals and we subsequently increased our occupancy over 60% in the low season period, it was an excellent decision. We were happy, not only because of the increased occupancy but because we did the research before taking the plunge, and were confident it was a sound investment. We subsequently installed a hot tub in every property we bought and have advised owners in our property management company to do the same if they want to increase their share of winter booking activity.
So, now we are in a completely new phase in the process of buying a waterfront lot in the Bahamas on the island of Great Exuma, and the planning is in the initial stages.
The ‘does it sell more chickens?’ question has already been voiced.
‘Should we have a swimming pool’?
This is a big one.
It’s a major addition to the budget.
We are already on the water so essentially sitting on quite a big pool anyway.
Maintenance costs in chemicals and electricity charges will add significantly to the monthly costs.
Someone needs to be on hand to deal with problems, apply the chemicals and keep it maintained in pristine condition.
On the other hand:
There are a lot of people who don’t like the idea of swimming in open water and for whom having a swimming pool might be a deal-breaker.
Our location is not on a beach thus we need to add more attractive amenities.
It will give us a competitive edge
A pool can create a stunning image and we all know that pictures sell.
We don’t have to reinvent the wheel here – all the information we need is out there on listings, on rate charts and availability calendars, and in reviews.
From those we’ll be able to determine the viability of the project from a practical and pragmatic level rather than the emotional “I really like the idea of taking a dip in the pool” perspective.
Then we’ll determine the upfront cost + the projected income and balance that against the added value we’re supplying our guests to see if it’s a wise and economic move.
Application of this principle doesn’t take away the subjective element in wanting to create the best possible experience for our guests but does get us thinking in more depth about the economics of each purchasing decision
This episode covers the thinking on this question as well as several others that we explored on the way to buying the lot, and are still mulling over.
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