Property Owners

A Word About The Market At Sun Peaks -- And Our Competition

Compared to rates you might find in big city markets or places like Whistler or Banff, our rate of 40% might seem quite high. This is because while Sun Peaks fashions itself as a four season resort, the reality is that there is really at best only about 4 - 6 months of viable demand to generate revenue. That means the other 6-8 months of the year, we're all running heavily in the red. You can count on bookings from mid-December through to the end of March. This is 3.5 months. Then you can typically expect a few bookings in the summer/shoulder season depending on the fire season in the province and how much smoke we're subjected to. But if you add up all the income you might make from non-winter bookings, if you're lucky, they add up to a mediocre January income. So this is why I tell owners they can count on about 4.5 months of solid income a year but nothing for the remainder.

Every property managment company in Sun Peaks has this same challenge. We all have to remain stable and properly staffed 12 months a year in order to provide professional services for the 4-6 months when guests are booking. This means that while all our competitors have their own "flavour" for pricing their services, we each need to be sufficiently profitable to be a stable partner for you all year round.

I mention this specifically because we've had some owners ask us why we charge 40% when one of our competitors only charges 25%. The short answer is that they don't only charge 25%. They have several fees the guests pay directly to the property manager that effectively flip the 60/40 we offer around so an owner earns around 40% of the total price a guest pays on many bookings.

This is because their "Check Out Clean" fee is very high and goes directly to the property manager. In fact, this fee is so high that in order to remain competitive during summer/shoulder booking periods, the nightly rate that owners get to keep 75% of has to be set very low. I just ran some comparisons for one of their properties and the owner of that property will earn between 40.57% on a two night booking and on a week booking (rare during summer) will earn only 58.19%.

But to be fair to this competitor, their owners will do better when the nightly rates are higher AND when the booking is for a longer period because then the "Check Out Clean" fee represents a smaller portion of the total booking price on long bookings. But on stays of fewer than 7 nights through most of the year (based on 10,000+ bookings over the past decade our average has been under 6 nights), their rates are much higher than ours.

Before you choose any property manager, be sure to "run the numbers" to confirm that there's no free lunch. All property managers need to remain stable and profitable to properly care for your home.

RETURNING CUSTOMER NET RATE (RCNR)
We increase your commmissions above 60% under a variety of common booking situations

First off, our owners agree that we're best positioned to set the pricing for their home in the market. We spend the most time comparing ourselves to our competitors and actually tracking the volume and pace of sales so we can adjust as needed.

In order to explain what the RCNR is and how it ensures there's a floor to the amount you will retain based on our published Rack-Rates, you need to understand how we handle bookings based on the three most common booking scenarios: 1) new guests who find us on the net, 2) returning guests who rebook, 3) and guests booking through sites like Airbnb, VRBO or travel agents/wholesalers who get deeper discounts.

What Would You Earn on a $1000 Booking with TOTM in the three most common booking scenarios?

The rates we publish on our website are called the "Rack-Rates" and lets imagine that someone finds un on a google search and books your home for a Rack-Rate of $1,000 pretax. On this booking, you'd retain $600 and we'd earn $400.

• 1) - 60% of $1,000 Random Google Guest = $600 Owner / $400 TOTM

Then lets imagine that same guest chose to come back and book another stay with a pretax Rack-Rate value of $1000. Now, we'd offer that guest, as our competitors do, a returning customer discount of 10%. This guest would now pay only $900 and you'd earn 60% of that which is $540.

• 2) - 60% of $900 Returning Customer = $540 Owner / $360 TOTM

Our owners understand that the first 10% off the published Rack-Rates is ours to use for any promotional purposes such as returning customer discounts or for relationships with travel wholesalers etc with whom we do a huge amount of volume annually. This amount of $540 on a Rack-Rate of $1,000 with a 10% discount is what we call the RCNR. It's the lowest you'll virtually ever earn on a booking and amounts to 54% of the published rate regardless of the discount we offer.**

This is a very important concept to understand because it provides you with a level of transparency and certainty regarding bookings that no other company offers. For instance, companies our size at Sun Peaks (and there are very few) get a huge number of our bookings from travel wholesalers who typically get discounts equal to 20% off the published Rack-Rate. Travel wholesalers might represent as much as 10-20% of our total booking volume and almost always for long stays of 7 nights or longer.

So on that same $1,000 Rack-Rate booking, with a 20% discount, TOTM will only receive $800 in payment. In order to ensure our owners earn the RCNR, we need to increase our owner's commission in this situation up until they earn $540. As it turns out, this turns out to be 67.5% exactly. This results in a revenue share of $540 for our owner and $260 for TOTM. As you can see, this extra 10% discount represents a loss of $100 from TOTM's earnings while yours stays the same.

• 3) - 67.5% of $800 Travel Wholesaler = $540 Owner / $260 TOTM

Obviously, earning only $260 on this booking is not as profitable as the other situations, but we operate our business efficiently enough that it's still profitable and if doing this provides several other benefits which are good for our company this transaction would be profitable in the long term. First, we ensure the owner earns the most they can while we are still profitable. Second, we support the travel wholesalers who help us generate longer stay bookings over the prime periods of winter and can be the difference makers in down market cycles. We'd rather earn a smaller profit in the short term in order to preserve healthy relationships over the long term.

At the time of this writing, none of our competitors offer any kind of commission increases for owners regardless of the pretax discounts offered on bookings. In many cases, travel wholesalers actually get their 20% discount plus a 10% returning discount off the top for a total of 30% discounted off nightly rates before your revenue share is even considered.

Maximum Transparency Generates Trust And Promotes Long Term Relationships

Our owners trust us to care for their homes and the equitable management of the revenue earned from renting their homes in the marketplace. They trust us to do our best and have systems to protect their home from harm and to do our best to ensure the revenue generated is divided fairly based on our agreement. However, while trust is implied, transparency provides owners the tools they need to double check our math on earnings payouts. Without that transparency, repeat financial errors can seem intentional and even larcenous when relationships get strained.

When we first came to Sun Peaks in 2010 and took over an existing but failing company with 16 properties, we discovered that the market at Sun Peaks was a little like the wild west. For instance, one, now defunct, property manager actually told me he created a special booking company that he ran every booking through and thereby kept between 15%-20% off the top of the majority of bookings before dividing the rest 60/40. He indicated the other company was a private entity and therefore it wasn't really "cheating". He suggested I follow his example. I made a mental note not to do business with him thereafter.

When we instituted the policy of increasing owner commissions to ensure they earned the RCNR, we did it partially to address this kind of concern some owners leaving our competitors had. I find it disheartening this kind of behaviour existed at all, but we've learned that transparency protects trust. Errors happen. Help us find them and correct them using the tools we provide that allow you to fully audit all the sales we generate.

If you are interested in talking with us about your property, your needs or your experience as a Property Owner, contact us now to discuss your property management needs.

How about a 70/30 share when you refer a guest?

While we don't generally publish our marketing techniques and strategies, it's no secret that we have implemented an Affiliate Program to allow our business to grow through word-of-mouth referrals. This same Affiliate software allows us to automatically track and pay out an additional 10% referral fee to an Owner who refers a guest. So when you send us someone who books your property, your retained earnings increase by 10% (to 70% or 75%).

Paying you a commission for a referral has several tangible benefits to us which make it one of our more exciting policies that is mutually beneficial:

1. We don't have to pay for the advertising and marketing costs to attract that guest ourselves.
2. Guests referred by owners always take good care of the properties and are usually the easiest to clean up after .
3. When you earn more money our relationship is strengthened as is our reputation.
4. You'll refer guests to us even when your own property is already booked.

In fact, we'll pay you a 10% referral commission even if the person you send us doesn't stay in your property! Contact Us Now to discuss your property management needs.

 

EXPENSES
We use a "just over breakeven" pricing strategy when you're paying us!

Which way is the money flowing?

One of the principle complaints we have repeatedly heard from Property Owners looking for new management was that Owners felt like they were getting "nickeled and dimed to death." The potential for this exists because as property Owners, sometimes you share a source of income and sometimes you ARE the source of income.

1. When renting your property, the vacationer is the source of income for you and your property manager.
2. When you need property management services such as repairs, owner use cleaning, hot tub maintenance, or purchases, then you become a source of income for your property manager.

When you pay a management company to maintain, clean, or improve your unit, the management company also gains the benefit of making your unit more suitable for renting. Since most owners are effectively a "captive audience" with regard to property management services (such as the costs of cleaning after an owner has used their own property), if the management company sets these services to maximize profitability when you, the owner, are paying them, we consider that practice predatory and not in the spirit of a long term relationship.

When we must perform property management services to maintain your homes in good condition and ensure they are rentable, we price our services at "just over breakeven." Our pricing for property management services allow us to offer them without losing money but also without profiting unreasonably. Your costs are minimized and our business remains focused on the mutually beneficial activity of renting your vacation home to others.

Our Pricing Philosophy in Action - How much should you pay to have your unit cleaned after you use it?

Our "Owner-Use" cleaning pricing is a concrete example of our "just over breakeven" policy in action. As a result, we pass the cleaning costs directly on to the owner without any markup. Our software tracks the wages we pay each staff member and the time they clean at every property is recorded for projecting averages, estimating cleaning times and for scheduling. It also allows us to pass through the actual cleaning time costs directly to you without markup.

We do the same for the actual laundering costs of linens sent to our laundry service (by using a formula to calculate laundry costs based on the cleaning time as a ratio of an average cleaning). For instance, if it takes 50% of the average time to clean your home after you depart, we charge 50% of the full linen laundry service. And finally, we add a small surcharge based on the number of hours the cleanings take place to cover our CPP and EI payments on staff wages, cleaning product costs, restocking of supplies and our vehicle and gas costs. To be honest, we likely lose money on owner cleanings overall, but prefer that over charging too much so our owners rarely, if ever, feel "nickeled and dimed to death."

Final Thoughts on How we Reduce Your Costs

Because we view the relationship to our Property Owners as a joint venture in which success can only be measured collectively, we are very sensitive to any action which profits one at the expense of the other. Because we set our property management services at just over breakeven, there is no incentive for us to focus undue energy on that part of the business.

By no means does this imply we neglect property management because we are home owners ourselves and understand how valuable your investment is to you, not to mention that if your property is unrentable due to lack of care, we all lose out (including the potential renter!). However, with the profit motive removed from our actions, we work diligently and efficiently to care for your investment so our attention can be returned to actions which are mutually beneficial.

If a company intends to make a profit from a given activity such as the property management aspects of their service, you can be sure they will focus their attention on that part of their business as often and as profitably as they can, especially when the rental market slows or enters a recession.

If you choose Top of the Mountain to manage your Sun Peaks rental property, we will manage your property as cost effectively as we can so that the majority of our time will be spent on those activities which generate revenue for us both! Contact Us Now to discuss your property management needs.

 

 

*If you own a standalone chalet home which therefore requires a special Temporary Use Permit (TUP) in order to offer nightly rentals, we use a 65/35 Owner/TOTM pricing model in part due to the significantly increased costs associated with offering your private home for rent. If you're unsure of what a TUP is or need help applying for one, we can help you with your application or provide guidance and insights as required.

**In some negotiations with a guest, particularly for a very long stay the guest may make an offer that turns out to produce a return for you of less than the RCNR. However, in these bookings we will have communicated to you in advance and you'll have the opportunity to accept or decline the offer. Typically, you'd accept a booking like this for low demand periods where your home might otherwise sit empty so that taking this discounted rate is a benefit to you and our normal 60/40 revenue share would typically apply. In otherwords, this is a situation where everyone wins and we all shake hands with a smile.