Understanding the intricacies of property management fees is key to maximizing profitability while delivering exceptional guest experiences. Whether you’re managing a single property or a large real estate portfolio, setting the right fee structure is crucial to staying competitive in today’s dynamic market.

At Breezeway, we know that managing vacation rentals goes beyond maintaining a high booking and occupancy rate. Our operations management software is designed to help vacation rental property management companies run their businesses more efficiently, and understanding the nuances of management fees is an important step toward that goal.

In this guide, we’ll break down the different types of vacation rental property management fees, what services are typically included, how to calculate your fees, and what you should consider when setting your rates. By the end of this guide, you’ll have the insights you need to establish a fair and competitive fee structure that reflects the quality and scope of the services you provide.

Property management fee types

Understanding the various fee structures is the first step in determining the right approach for your vacation rental business. Here are the three most common types of management fees in the vacation rental industry:

1. Fixed-Rate Fees: Fixed fees are a straightforward option where property managers charge a flat fee regardless of the property's performance. This fee structure is typically appealing to homeowners who prefer predictable expenses and to managers who want to guarantee a steady income. However, this fixed-rate model may limit your earnings if your properties consistently perform well.
   
2. Commission-Based Fees: Commission-based fees are the most popular model in the vacation rental industry. Here, the property manager charges a percentage of the rental income. This commission model aligns the interests of both the property owner and property management company because your earnings increase with the property’s performance. The typical commission rate ranges from 10% to 30%, depending on factors such as property location, size, and the range of services provided.
3. Guaranteed Income: Guaranteed income models involve the property manager guaranteeing a certain amount of income to the property owner, regardless of actual bookings. In this arrangement, the property manager takes on more risk but can benefit from higher profits if they exceed the guaranteed threshold. This model is less common but can be an attractive option for vacation rental owners looking for a guaranteed way to have stability in passive income and rental revenue.

What services are included in short-term rental (STR) management?

Your management fee must reflect the range of property management services you provide. Short-term rental property management is much more than just booking and cleaning properties—it’s about ensuring a seamless guest experience from start to finish. Here are the key vacation rental management services that are typically included:

1. Cleaning: One of the most critical aspects of property management is ensuring that your properties are clean and guest-ready. This service usually includes sourcing and training cleaners, scheduling and managing regular cleaning services between stays, deep cleaning as needed, and restocking essential supplies. High-quality cleaning is vital for maintaining positive guest reviews, wowing guests at check-in, and generating repeat bookings.
   
2. Maintenance: This includes everything from fixing minor repairs to managing major issues like plumbing or electrical problems as they occur. Preventative maintenance efforts will limit the amount of reactive work required, but inevitably, appliances will break or need to be repaired due to wear and tear. Creating relationships with local vendors and handymen who can quickly respond is essential. A well-maintained property not only attracts more bookings but also helps avoid costly emergencies down the line.
3. Safety and Security: Safety is paramount in short-term rental management. Services under this umbrella include noise monitoring, guest screening, accident prevention, and access management. These measures ensure that guests respect the property, and neighbors’ peace is maintained, which is particularly important in communities with strict short-term rental regulations. Take Breezeway's safety course to implement property safety measures to keep guests safe.
4. Guest Communication: Effective communication is key to a successful guest experience. From initial inquiries to post-stay follow-ups, property managers are responsible for providing timely and helpful responses to guests. Breezeway Messaging makes automating and managing messages sent through SMS, WhatsApp, and Airbnb easy, all from one dashboard. Resolve any issues that arise during a stay by assigning a task directly from the message view, ensuring guests have a smooth and enjoyable experience.
5. Hospitality: Delivering outstanding hospitality goes beyond just a warm welcome—it’s about anticipating and meeting your guests’ needs throughout their stay. One way to enhance the guest experience is by providing a digital guest guidebook, like Breezeway Guide. This tool offers guests instant access to important information about the property, local attractions, dining options, and house rules. By equipping guests with this resource, property managers can reduce the number of direct inquiries, increase guest satisfaction, and ensure a smooth and enjoyable stay.
6. Marketing: To keep your properties booked, a robust marketing strategy is essential. This includes listing optimization, professional photography, dynamic pricing, and distribution across multiple booking platforms. The goal is to maximize visibility and occupancy, ensuring that your properties stand out in a crowded market.
7. Inquiry Management and Reservations: Managing reservations efficiently is crucial for maximizing occupancy rates and revenue. This service includes handling booking inquiries across multiple channels, syncing calendars to avoid double bookings, managing cancellations and refunds, and ensuring a smooth check-in and check-out process. A reliable reservation management system helps maintain high occupancy and enhances the guest experience.

Key factors to include in property management fee calculation

Several factors come into play when determining your property management fee. Understanding these variables will help you set a fair rate that reflects the value of your services while remaining competitive in your local market.

• Property Size, Type, and Location: The type of property will play a large role in determining average property management fees. For example, larger properties or those with unique features (e.g., a hot tub, pool, or beachfront location) often require more management effort, additional services, and extra fees. Additionally, properties in high-demand locations can command higher fees. For example, a luxury vacation home in a prime location might justify a 25% commission, while a smaller, budget-friendly property might be closer to 10%.
  
• Property Condition: The condition of the property also influences your management fee. Well-maintained properties typically require less hands-on management, allowing for a lower fee. Conversely, older properties or those requiring frequent repairs with high maintenance costs may necessitate a higher commission or additional fees to cover the additional workload.
• Local Market: Your local market’s competitive landscape will significantly impact your fee model and structure. Research what other property managers in your area are charging, and consider the level of service you provide relative to your competitors. This insight will help you establish an industry average and position your services and fees accordingly.

What’s the typical range of vacation rental management fees

The range of management fees in the vacation rental industry varies, but here’s a general breakdown:

• Basic Property Management (10-15%):Typically includes cleaning and basic maintenance.
  
• Comprehensive Property Management (15-25%): Adds advanced marketing, dynamic pricing, and enhanced guest services.
• Premium Property Management (25-30%): Full-service management, which covers all services plus luxury amenities, personalized guest experiences, and additional property care.

Calculating your short-term rental management fee

To calculate your management fee, consider the following formula:

Management Fee (%) = (Estimated Annual Costs + Desired Profit) / Estimated Annual Revenue

For example, let’s say you manage a property that generates $50,000 annually. If your costs (cleaning, maintenance, marketing, etc.) total $10,000, and you aim for a profit of $5,000, your management fee would be:

Management Fee (%) = ($10,000 + $5,000) / $50,000 = 30%

Alternatively, if you prefer a commission-based fee, you could set a rate based on the services you offer and the market rate, adjusting as necessary to align with your revenue and profit goals.

Mastering vacation rental property management fees

Setting the right management fee is about balancing your property management costs, the value of your services, and the expectations of your clients. By considering factors such as property size, location, condition, and your local market, you can establish a service fee structure that ensures profitability while remaining competitive.

At Breezeway, we’re committed to helping property managers succeed by providing the tools and insights needed to run your business efficiently and deliver exceptional guest experiences. With the right fee structure in place, you’ll be well-positioned to grow your portfolio and enhance your reputation as a top-notch property manager.

This guide should serve as a starting point for refining your management fee structure, ultimately leading to more successful property management and satisfied clients.