‘Success is not measured by what you do compared to what somebody else does. Success is measured by what you do compared to what you are capable of doing.’ Zig Ziglar
How do you tell if your company is doing well? How do you measure the success of your business? How do you work out if you are on the right track and have not lost focus on your goals?
These are the critical questions all property managers must have crystal clear answers for. Key Performance Indicators are the golden formulas, which can help you find the answers to such questions, have a vivid perspective of where your business is headed and manage your company’s performance effectively towards its objectives. So, you need to know the most effective KPIs for property management companies.
What Are Key Performance Indicators KPIs?
Key Performance Indicators (KPIs) are fundamental measures and metrics that demonstrate how well a business is performing.
KPIs can enhance your business’s efficiency by clarifying and communicating your goals and focus points to everyone in the company and closing the spaces for misunderstandings and incongruencies.
Why Do Key Performance Indicators (KPIs) Matter for Property Management Companies?
KPIs for property management companies determine the most profitable areas of the business, for example, the properties that are making the most profits. They also find where your profit is leaking away.
KPIs come in handy when it comes to preparing homeowners reports.
Being aware of your strengths and weaknesses helps your property management company stay viable in the highly competitive hospitality market.
- Problem Spotting
KPIs help you cut inefficiencies, get rid of cumbersome procedures and discover areas of improvement.
- Tracking Progress
You can measure your progress towards achieving your goals and examine the outcomes of your business plans with the quantitative proof that KPIs provide.
- Decision Making
To make informed decisions, you need accurate information. KPIs can indicate when is the right time to grow and build more revenue.
The communication of the business goals and performance expectations at all company levels will close learning gaps and keep all the crew on the same page.
As KPIs engage employees with the company objectives, they will show better performance due to measurable performance standards.
Which Key Performance Indicators (KPIs) Matter the Most for Property Management Companies?
With countless KPIs out there, it can get overwhelming for property management companies to decide on the KPIs they should track.
All property management companies do a similar job. However, no two short–term rental businesses are the same. They have different operations, goals and benchmarks for measuring their success. As a result, they must pick different KPIs and track them as a part of their routine.
Based on their business’s size, type of guests, niche market, the amenities and services they offer and their vision, property management companies must create a list of specific KPIs of their own and keep track of them regularly.
Short-term rental managers must ensure that their chosen KPIs are achievable, measurable, realistic, relevant and time-bound.
We have compiled a rundown of the most common KPIs for property management companies as a starting point for you to tailor design your own KPIs and success metrics.
1. Occupancy Rates
Calculating your occupancy rate and comparing it with the average occupancy rate in the market can help you find out where you are standing.
Suppose your occupancy rate is not much satisfying compared to the market you are serving. In that case, you must pinpoint the inefficiencies in your strategies and ensure you have done everything to maximise the occupancy rate across all your properties.
2. Revenue Growth
Set a revenue growth target and try to achieve it. Figure out if your revenue is rising sufficiently yearly as an increased revenue translates to business growth and prosperity.
If your revenue curve is flat over a few years, you need to scrutinise your company’s operations and make some minor or tremendous changes in your business strategy.
On the other hand, this KPI can also depict the areas where your best revenue is coming and can help you carefully analyse these sources and reinforce and duplicate their success.
3. Guest Turnover
Retaining existing customers is simpler than searching for new ones. So, the guest turnover rate is of high importance for property management companies.
Compare the new guests you have hosted over a year and differentiate those who have returned to your property for another stay. Find out the percentage of your repeat guests and compare it with your guest retention goals.
The guest turnover KPI helps you benchmark the outcome of both your guest acquisition and guest retention efforts. A low guest turnover rate can result from too much focus on attracting new clients and the underperformance of your guest retention programmes.
Going through your guest reviews more closely can help you identify improvement areas and tell you how to fix them before losing more guests.
4. Net Operating Income (NOI)
This KPI comes from subtracting the operational expenses like housekeeping, maintenance, OTA commissions, marketing and advertising costs of a property from its revenue.
Net income is a significant KPI for property management companies. It indicates a business’s actual profit and enables rental property managers to optimise their business’s performance by minimising costs.
Moreover, it can tell property management companies which properties are performing better and how much they make from each of their properties. This KPI helps vacation rental managers eliminate the unprofitable properties from their portfolios and free up space to add new ones.
Net operating income helps you spot the aspects of your business, which can be optimised for more efficient performance.
5. Customer Service
Vacation rental management is all about providing an exceptional guest experience for people staying with you. Therefore, it is certain that this KPI can play a significant role in evaluating a property management company’s performance.
On average, how long does it take to fix a leaking tap or respond to your guests’ requests during their stay? The faster you reply and act on your guests’ requests, the better your guest experience and therefore the higher your customer service KPI would be.
However, it is easier said than done to measure your performance on handling customer inquiries and figure out the satisfaction of your guests.
To work out this KPI, you can design a customer satisfaction survey and hand it out to the guests who have stayed with you to retain a score to assess your performance.
The reviews you receive through different channels can also determine the quality of your customer service and the level of the guest experience.
Moreover, keeping track of your average response time will show how responsible you are as a property manager. To figure out this criteria, measure the time gap between each guest ticket and the time your staff solve their issue.
6. Conversion Rate
This KPI is calculated by dividing the total number of bookings of a particular property by the total number of inquiries the property has received over a specific period, like a year.
By tracking this KPI, you can evaluate your company’s inquiry-to-booking process. If a considerable number of your potential guests have turned down your listing, then there might be some severe issues in some aspects of your operation.
Maybe the problem is with your response time, and you take too long to respond to inquiries. Your property and its amenities might not meet your prospects’ expectations, or your prices need further optimisation.
Property management KPIs are practical evaluation metrics, which can help you ensure you’re headed in the right direction. Not only do they highlight the areas of good performance and underperformance in your vacation rental business operations but they also facilitate transparency and the flow of information across all stages of a property management company, educate all teams on your vision and goals and harmonise workflows.
It is of utmost importance to hold on to your property management KPIs if you are determined to achieve your goals. They keep you on track and help you pivot when needed.