The right tools help property managers handle compliance challenges

Short-term rentals in the United States have become a $67 billion dollar market, representing close to 20% of the overall accommodation sector. The industry has grown steadily over the past decade, notwithstanding a recent dip, and property managers are experiencing some of the strongest growth.

Between April 2022 and April 2023, property managers with more than 1,000 units grew exponentially more than other property managers. According to the State of Travel 2023 report by Skift Research:

• Property managers overseeing more than 1,000 properties grew by 27% 
• Property managers overseeing 501–1,000 properties grew by 5% 
• Property managers overseeing 101–500 properties grew by 7% 
• Property managers overseeing 1–100 properties grew by 7%

Furthermore, Skift Research notes that professional managers make more money. Properties managed by professional property managers generated 27% more revenue per available night in 2019 than those managed by individual hosts. Today, that figure has jumped to 34%, a strong argument for using a property management company.

That’s not to say there aren’t challenges. AirDNA expects short-term occupancy to decline in 2023 and 2024. Average daily rates (ADRs) are forecast to increase by just 2.1% in 2023 and 1.7% in 2024, down from 5.7% in 2022 and 12.1% (!) in 2021. Revenue per available rental (RevPAR) is expected to be -1.1% in 2023.

Given these factors, it’s more important than ever for property managers to:

• Analyze and respond to market fluctuations 
• Protect margins
• Stay on top of tax compliance

Technology can help you do all three.

Given AirDNA’s predictions that “strong supply growth will create a second year of declining occupancy,” it’s essential for property managers to keep a finger on the pulse of the market. But that’s just part of the equation. You also need to be nimble enough to respond to changing conditions.

Fixed pricing is becoming an oxymoron: Consumers expect vacation rental rates to vary, and the savviest travelers know how to jump on good deals. Likewise, hosts and property managers who understand their markets know how to offer deals to fill vacancies, and they know when properties are most likely to command top dollar. 

Artificial intelligence (AI) technology can help forecast demand and booking trends. And by monitoring rates throughout the day, dynamic pricing tools help ensure you offer competitive rates minute by minute, year-round. Leaning into available technology can help streamline your business.

Reducing operating costs is one way to protect your margins and maximize profits, but it may not be easy; some operating costs have increased in recent years. Cleaning fees alone have increased 28% since 2019, according to AirDNA, due to factors such as higher labor costs, stricter cleaning protocols, and a preference for large properties that take more time to clean. 

But there are other ways to cut costs, especially for large property managers, that can scale solutions. Rather than potentially reducing profits by adding head count, property managers should consider turning to property management software to streamline bookings, communications, and payment processing. AI-powered chatbots can answer common, recurring questions. Elsewhere, AI technology can be used to verify guests.

Automating lodging tax compliance can help reduce costly errors and oversights. 

Lodging tax compliance is a major pain point for short-term rental hosts. After all, people generally don’t go into the vacation rental business because they like dealing with taxes. 

Hosts who rely on property managers increasingly expect their property managers to take care of tax compliance for them. Yet managing tax compliance can be even more burdensome for property managers responsible for dozens, hundreds, or thousands of properties across dozens, hundreds, or thousands of tax jurisdictions.

Unfortunately, extracting tax information from a property management system, compiling it into spreadsheets, and manually transferring it to various tax forms is time-consuming, tedious, and error prone. Fortunately, there’s another way.

Avalara MyLodgeTax Pro automates the calculation and remittance of applicable occupancy taxes, mitigating tax compliance risk. To further simplify compliance for our property management clients, we’ve partnered with Streamline Vacation Rental Software, an all-in-one vacation rental software provider. 

Our API establishes a direct integration between MyLodgeTax Pro and Streamline, automating ongoing tax compliance. It enables users to add, delete, and update properties with ease, then prepares and files lodging tax returns based on monthly transaction data fed from Streamline. 

Hiring a dedicated resource to maintain lodging tax compliance is expensive and unrealistic for many property management companies. Foisting tax compliance on existing employees pulls them away from their core responsibilities and may put taxes into the hands of people who are not tax experts. It’s risky.

With the MyLodgeTax Pro and Streamline integration, property managers can now automate essential tax compliance tasks without adding head count, gaining a competitive edge over property managers who don’t handle tax. MyLodgeTax Pro and Streamline also assist accounting providers that specialize in the short-term rental space. We remove the burden of registration and licensing and help ensure tax rates are correct and filing is done on time. 

Interested in learning more about the partnership between MyLodgeTax Pro and Streamline? Get in touch.