There are 3 common types of structures:
- Lease Model: A Holiday Home Operator will lease the property, at or below residential market rates, providing secured income from a corporate entity. Service charge is still payable by the landlord but all other costs are usually the responsibility of the HH Operator. The cost and installation of furniture, fixtures and equipment (FF&E) can be the responsibility of either party and will be subject to contract.
Worth noting, if the HH Operator has brand standards to adhere to, the FF&E cost may be substantially higher than market rates.
- Management Agreement: A Holiday Home Operator will agree to manage your unit for an agreed percentage of Gross Income, typically between 15% – 20%. This structure has the potential to generate greater net income to you as the landlord but there is also greater risk and income is not guaranteed as with a lease. Annual income is derived from the average daily rate (ADR) and occupancy, also known in hotel terms as the revenue per available room (RevPAR). When identifying a HH Operator, it is key to understand the number of units they manage, their past performance, roles and responsibilities, (setup, furnishing, cleaning, toiletries etc), the channels they use to generate bookings (Airbnb, online travel agencies, they’re own platform) and so on. Keep in mind that online travel agent fees are in addition to the HH Operator’s fee and range between 3% to 25% of gross income.
- Self Manage: Fees are still payable if online travel agencies are used, with Airbnb typically charging 3%. While this has the potential to generate greater income than the former two structures, a considerable amount of time and money will need to be spent converting the unit. This can include but is not limited to, replacing old units, maintenance, painting, shopping for FF&E, furnishing, cleaning, ensuring the unit meets DTCM requirements, setting up a profile, managing the profile, check-ins, check-outs, disputes, cleaning again…
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