Unlocking the Best Booking Strategy: Short-Term vs. Long-Term Booking

img Chinta bukitvista | January 12, 2024

Hi, I’m Chinta a business data scientist at Bukit Vista. I leverage data analytics to identify and implement revenue-generation opportunities across our 100+ vacation rental businesses in Bali. By analyzing large datasets and uncovering insights, I have seen how data-driven booking strategy can optimize pricing, occupancy rates, and guest satisfaction.

Table of Contents

In the dynamic world of vacation rentals and hospitality, hosts often grapple with a fundamental decision: which booking strategy should they focus on short-term bookings, which offer higher nightly rates but frequent turnovers, or opt for the stability of long-term bookings with a potentially lower per-night income? This dilemma is a crucial one, and understanding the pros and cons of each approach is essential for success in the industry.

As an owner of a villa in Bali, optimizing revenue requires strategic decision-making regarding the frequency and duration of rentals. Evaluating the profitability of daily, monthly, and yearly rental options is pivotal to ensuring the financial success of your property. Let’s delve into the business aspects of each option to guide your choice.

Rental Durations

Daily Rentals

Capitalizing on the popularity of Bali as a vacation destination, daily rentals emerge as a great option. The ability to accommodate multiple guests within a month allows for a consistent income stream. Furthermore, the demand for this booking strategy enables pricing flexibility, contributing to enhanced revenue potential.

Monthly Rentals

Securing long-term tenants through monthly rentals provides stability, but it necessitates a careful balance. While offering the benefit of a more predictable income, attracting tenants for extended periods may require competitive pricing. Additionally, the trade-off involves a reduced frequency of property turnover compared to daily rentals.

Yearly Rentals

Yearly rentals may pose challenges in maximizing revenue for Bali properties. Attracting a single tenant for an extended period often demands significant rate reductions, limiting the potential for revenue growth. Furthermore, the infrequent turnover restricts opportunities for income optimization.

 

The duration of short-term rentals typically ranges from a few days to a few weeks, catering to travelers and temporary stays. Long-term rentals, on the other hand, generally extend for several months to years, providing more permanent housing solutions for tenants. When evaluating between these two booking strategies; short-term and long-term rentals, it’s crucial to recognize that each option comes with its distinct set of pros and cons.

Short-Term Bookings

Pros:

1. Higher Earnings Per Night:
Short-term guests typically pay more per night, which can lead to higher overall income, especially in peak seasons. As shown on the graph below, you can have a higher daily rate per night for shorter stay compare to longer nights. 
lower daily rate for longer night stay

2. Flexibility: Short-term rentals offer hosts the flexibility to adjust pricing and availability quickly, allowing them to maximize revenue during high-demand periods.

adjusting price through dynamic pricing

3. Meet Diverse Guests: Hosting short-term guests provides an opportunity to meet people from various backgrounds and cultures, enhancing the host’s social experience.

booking strategy
4. Boosting Listing Performance: Short-term bookings accumulate a higher number of bookings compared to long-term bookings. This accumulation of bookings makes the listing highly active (due to frequent transactions). Furthermore, it increases the likelihood of receiving positive reviews, which are crucial for the listing’s credibility in the eyes of potential guests.
Bukit Vista - listing - cover photo

Cons:

1. Higher Turnover:
Frequent turnovers demand increased efforts in terms of cleaning, maintenance, and coordination, which can be time-consuming.
room inspection in hospitality and maitnenance services
2. Income Variability: Income may be inconsistent, fluctuating with seasonal changes and demand patterns.
monthly revenue chart
3. More Work: Managing short-term rentals can be more labor-intensive, requiring prompt responses to inquiries, efficient check-ins, and check-outs.
girl-office-guest-support

Long-Term Bookings

Pros:

1. Stable Income: Long-term rentals offer hosts a steady and predictable income stream, aiding in effective budgeting.

2. Less Management: With fewer turnovers, long-term rentals require less frequent cleaning and communication, allowing for a more hands-off management approach.

3. Lower Wear and Tear: Long-term guests tend to treat the property with more care, leading to reduced wear and tear compared to short-term stays.

Cons:

1. Lower Nightly Rates: Despite stability, long-term guests typically pay lower nightly rates, potentially resulting in lower overall earnings.

2. Less Flexibility: Longer leases limit the host’s flexibility in adjusting prices or using the property for personal use, reducing adaptability to market changes.

3. Extended Vacancies: Dealing with problematic long-term guests can lead to extended vacancies and income loss for hosts.
4. Diminishing Listing Performance: Long-term bookings create extended booking blocks that render the listing inactive in Airbnb’s algorithm, resulting in a gradual decline in the listing’s ranking. Additionally, the limited number of bookings that occur throughout the year results in fewer reviews being collected.

Finding the Right Balance

In conclusion, when asked whether the booking strategy is better, the answer is that short-term booking is preferred because it offers more benefits to listing performance and bookings. However, even though short-term booking is recommended, a long-term booking strategy is not ruled out and can be implemented if there is a significant risk associated with daily rentals.

 This is something that Bukit Vista experienced during the pandemic. The strategy employed was a long-term approach due to low turnover and lockdown measures in place. Here is sample of property that transforming from “both long-term and short term” strategy to “only short-term” strategy during the pandemic.

short term vs long term graph
One of our partners revenue using different strategy

Hope you have a better understanding of which booking strategy to employ now. If you want to learn more about the optimal rental property strategy, we provide a business plan for property owners who want hassle-free management from Bukit Vista.

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