If you are contemplating the purchase of a Vacation Rental property, location is a prime consideration. Demand is strongest in highly populated cities that attract plenty of tourists and are homes for major companies and universities. Rentals in these cities benefit from their ability to attract both business and recreational travelers and demand is especially high near convention centers, sports stadiums and major shopping districts.

At present, the top US Vacation Rental property markets are Los Angeles, New York City, San Francisco, San Diego, Miami and Austin, but there are also plenty of secondary cities supporting robust Vacation Rental property returns. The Mashvisor website provides Vacation Rental property occupancy rates and rental rates for many cities.

With Vacation Rental property occupancy rates estimated at 55%, Los Angeles is the country’s top Vacation Rental property market. The strength of the LA market reflects the city’s status as a top tourist destination. LA set a tourism record for its 6th consecutive year in 2016 with more than 47 million visitors. Tourists come to shop on Rodeo Drive, tour Beverly Hills and the Hollywood Walk of Fame, and visit Universal Studios and Disneyland.

Another consideration for Vacation Rental property owners is pricing short-term rentals. Vacation Rental properties compete directly with hotels, especially in larger cities, and almost always charge less while still making a respectable profit. In markets where hotel occupancy rates are high such as Los Angeles, San Francisco and New York City, Vacation Rental properties also have high occupancy rates and can price competitively. In high demand markets, price is less important than reviews in determining occupancy rates.

Guest reviews are the single most important factor affecting Vacation Rental property occupancy rates. In San Francisco, where occupancy rates average 44%, the number of guest reviews has a 27% impact on occupancy rates, according to Mashvisor. Each additional review resulted in a 0.3% increase in occupancy rates. In San Jose, the number of reviews had a 34% impact on occupancy rates, with each additional review boosting occupancy rates by 0.5%.

Given the importance of ratings, how can Vacation Rental property owners encourage guests to leave reviews? One approach is to post reviews of your guests as soon as the option becomes available. This increases the odds that guests will return the favor by writing reviews. Another strategy involves being pro-active in soliciting reviews. This begins with sending guests a thank-you note after checkout along with a request for a review, sending an additional reminder two weeks later, and following up with a final request before the review option expires (i.e. 30 days after checkout).

Setting up a Vacation Rental property requires time and attention to detail. Plan on allocating several hours per week for managing reservations, responding to inquiries and making sure the property is ready for guest arrivals. Services such as Pillow can help you manage the property and Rented.com can help you find a property manager. Owners can further reduce workload and expenses by selling weeks to a property management company. On-line businesses such as Guesty and Handy can be hired to provide cleaning services. Owners who work full-time or travel frequently may also want to invest in Lockitron, which can lock and unlock doors via a smart phone app. Lockitron also allows owners to add or delete guests or give guests access for a limited time.