Everything you need to know about STR real estate in hospitality

Short-term rental (STR) real estate in hospitality has seen significant growth in popularity due to the rise of platforms such as Airbnb and Vrbo. The sector has expanded rapidly, with the US STR industry reaching $64 billion in annual revenue in 2023. This surge is driven by increasing consumer preference for unique, flexible accommodation options. Travelers seek personalized experiences and STRs provide many choices, from city apartments to countryside homes.

This growing demand also offers an exciting and rewarding career path. Professionals in this sector manage a wide range of properties, ensuring exceptional guest experiences and optimizing rental income. The dynamic nature of STRs allows for creativity in marketing and operations, attracting those who enjoy innovation and customer interaction.

There is also substantial financial potential, making it appealing for those interested in combining hospitality with real estate investment.

What is STR real estate in hospitality?

Properties rented out for brief periods, typically less than 30 days, are known as short term rentals or STR. The business model of these properties, promoted by vacation rental platforms such as Airbnb, Vrbo and Booking.com, has significantly increased accommodation options for travelers.

Property types for this temporary accommodation include urban apartments, suburban homes, beachfront villas and countryside cottages. They offer flexible lodging choices that range from single rooms to entire homes, ensuring unique and personalized stays.

With 7.7 million listings worldwide, Airbnb dominates the short-term rental market, enabling property owners to earn higher rental income than traditional long-term leasing. These platforms also offer free marketing exposure, attracting customers seeking accommodation from single rooms to entire homes.

This flexibility appeals to travelers looking for unique stays that reflect local culture or offer specific amenities not found in hotels. As a result, many real estate investors have shifted from conventional leasing to STR properties, capitalizing on the growing demand for personalized and alternative lodging options worldwide.

Benefits of owning STR real estate

Being the owner of a short-term vacation rental property offers numerous advantages and can be a lucrative investment. Some of the benefits to consider include:

• Flexibility: short-term rentals provide versatility in occupancy and usage. For example, if you own a vacation home, you can stay there during off-peak seasons and rent it out during busy tourist months, maximizing personal enjoyment and rental income
• Higher-income potential: compared to a traditional long-term vacation rental property, short-term rentals often generate more revenue per booking due to being able to charge daily rates and nightly rates
• A broad range of guests: STRs attract tourists, business travellers, families and solo adventurers. This reduces dependence on a single tenant profile, ensuring a steadier stream of bookings throughout the year
• Tax benefits: owners of temporary accommodations can take advantage of various deductions on their returns related to maintenance, utilities and depreciation. For instance, expenses incurred for cleaning services between bookings and the cost of furnishings can often be deducted, reducing overall taxable income
• Personal use: unlike long-term rentals, STRs allow owners to use the property themselves for vacations or personal getaways. This flexibility can significantly boost personal enjoyment and reduce travel costs
• Demand: the market for temporary accommodation continues to grow, driven by travelers seeking unique experiences
• Short leases: with brief stays, there’s less risk of owners being stuck with problematic tenants or long-term vacancies

Challenges of STR real estate

While they offer the potential for high returns and flexibility, these properties also come with several drawbacks that potential investors should consider. For example:

• Regulatory challenges: many major travel destinations face stringent rules regarding STRs, including zoning laws, safety standards and sanitation rules. These regulations can also impose occupancy limits, which may restrict the number of guests allowed at a time
• Unstable income: seasonal fluctuations, such as the weather and holidays, can impact the demand for STRs. While high seasons can yield substantial earnings, low seasons may decrease occupancy and income
• Initial investment costs: starting an STR from scratch requires significant startup expenses to furnish and equip the property
• Ongoing maintenance expenses: unlike long-term rentals, where tenants often cover utilities, STR hosts are responsible for monthly upkeep costs such as electricity, water, internet and cleaning services
• Challenges in financing: securing investment for STRs can be more complex. Investors may need to explore alternative financing options such as personal loans or specialized lenders catering to the short-term rental market
• High turnover and maintenance costs: short-term rentals often experience increased occupancy changes, requiring frequent cleaning and upkeep
• Potential for property damage and theft: STR market properties are susceptible to higher risk than long-term rentals

A degree program that covers real estate will enable you to learn how to successfully overcome these potential challenges posed by STR hospitality real estate.

Types of roles in STR real estate in hospitality

The short-term rental sector relies on a variety of professionals to ensure properties are effectively managed and guests have a memorable experience. Each plays a distinct part in maintaining smooth operations and high standards.

Below are key positions with examples highlighting their responsibilities.

• STR owner: owns the property and may manage it themselves or hire others to handle daily operations. They are responsible for making key decisions regarding the property
• Property manager: typically working on behalf of management companies, they oversee the day-to-day operations. Responsibilities include booking management, guest communication, maintenance coordination and ensuring the property meets cleanliness and safety standards
• Guest relations manager: focuses on improving the visitor experience from booking to checkout. They handle inquiries, resolve issues and ensure guests have a pleasant stay
• Marketing and sales manager: develops and implements strategies to promote the rental property. This includes managing online listings, social media campaigns and advertising to attract guests
• Housekeeping staff: ensure the property is clean and well-maintained between guest stays. Duties include cleaning, restocking supplies and reporting any maintenance issues
• Maintenance technician: handles repairs and upkeep so the property is always in good condition. This can include plumbing, electrical work and general upkeep
• Revenue manager: analyzes market trends and sets pricing strategies to maximize occupancy and income. They adjust rates based on market demand, seasonality and competition
• Concierge services: provides additional guest services such as local recommendations, booking tours, arranging transport and other personalized services to improve the guest experience
• Financial manager/accountant: manages the finances of the rental property, including bookkeeping, budgeting and tax preparation
• Legal advisor: ensures compliance with local regulations, zoning laws and rental agreements. They provide legal guidance to protect the owner’s interests
• Interior designer: designs and furnishes the property to create an appealing and comfortable environment for guests. This role can significantly impact the property’s attractiveness and occupancy rates
• Photographer/videographer: captures high-quality images and videos of the property for marketing purposes. Professional visuals are crucial for online listings and advertising

How a hospitality school prepares you for a career in STR real estate in hospitality

A degree in real estate from a specialized educational institution will equip you with the essential skills and knowledge you need to succeed in this sector.

Hospitality degrees provide a deep understanding of property management, financial analysis and guest service excellence for managing and growing short-term rental accommodation.

A renowned hospitality school such as Glion offers rigorous academic programs, hands-on training and industry connections so you can emerge ready to tackle the complexities and opportunities of this growing industry.

Some of the benefits that a hospitality school offers are:

• Academic excellence: programs cover hospitality management, real estate finance and marketing. For instance, the right course teaches students to evaluate property investments
• Hands-on experience: hospitality internships at leading firms provide real-world insights that can demonstrate the operational intricacies of short-term rentals
• Industry connections: strong ties with hospitality leaders facilitate networking opportunities. On top of this, getting the chance to attend conferences with hotel executives can lead to job offers and mentorship
• Leadership training: courses emphasize management skills development. Group projects in these schools help teach leadership
• Innovation and technology: emphasis on the latest industry technologies keeps students at the cutting edge
• Strategic thinking: programs covering tactical management and planning teach critical thinking. For example, developing a business plan for a new short-term rental property develops strategic skills
• Customer service excellence: training in superior guest support techniques and communication skills ensures exceptional experiences. Alongside formal tuition, role-playing scenarios teach how to handle guest complaints professionally
• Financial acumen: programs equip students to manage property investments. Creating financial reports for a potential investment property is typically part of the curriculum
• Market analysis: courses in research enable students to respond to industry trends
• Entrepreneurial mindset: encouragement of innovative thinking prepares students for new ventures
• Alumni network: access to a previous students provides ongoing support and can open doors to career opportunities

Conclusion

STR real estate in the hospitality industry presents an exciting and lucrative opportunity for professionals passionate about property management and guest services. As the industry evolves, fueled by online platforms such as Airbnb and Vrbo, the demand for unique and flexible accommodation continues to rise.

Despite challenges caused by seasonal fluctuations, the continued demand for short-stay properties offers significant financial rewards, creative freedom and the satisfaction of delivering memorable experiences to a wide range of travelers.

The variety of roles in the STR sector, from property managers to financial analysts, highlights the complex nature of this industry. Hospitality schools are key to preparing aspiring hospitality professionals for this exhilarating and rewarding field.

As the STR market expands, professionals well-versed in hospitality and real estate will be uniquely positioned to capitalize on its opportunities. With the right education and experience, a rewarding and exciting hospitality career in STR real estate is well within reach.

If you aspire to work in short-term rental real estate in the hospitality sector, obtaining a specialized degree ensures you gain the necessary skills and knowledge.

Photo Credits:
Main Image: Getty Jose A. Bernat Bacete