Is now the best time to sell your vacation rental business?
I must admit, sometimes I indulge myself in stock trading. One thing I’ve learned is I’m never going to sell a stock at its highest point; however, it’s always good practice to sell when it’s trending up, as opposed to watching it peak, then reverse.
Right now, the short-term vacation rental market is . There are more buyers and more money than ever before. A few years ago, sometimes it took several months to receive an offer on your company. Today, we are seeing multiple offers in just a few days. While the buyer demand is certainly there, vacation rental operators will need to contemplate a few things before they decide to sell.
UP AND TO THE RIGHT
I must admit, sometimes I indulge myself in stock trading. One thing I’ve learned is I’m never going to sell a stock at its highest point; however, it’s always good practice to sell when it’s trending up, as opposed to watching it peak, then reverse.
Right now, the short-term vacation rental market is . There are more buyers and more money than ever before. A few years ago, sometimes it took several months to receive an offer on your company. Today, we are seeing multiple offers in just a few days. While the buyer demand is certainly there, vacation rental operators will need to contemplate a few things before they decide to sell.
TYPES OF BUYERS
The amount of interest in the short-term vacation rental industry is at an all-time high. We’re seeing several types of buyers and each one looks at different company metrics, including EBITDA, Net Revenue, and Price per Unit
> Venture capital-backed: Focused on net revenue, price per unit, and EBITDA> Private equity/family offices: Focused on EBITDA over $1M and over 100 units> Strategic operators: Companies in complementary markets or market competitors looking to expand for cash flow & diversity. Focused on EBITDA
SEASON
Most vacation rental markets have seasonality, and peak season is when operating accounts are overflowing. There are pros and cons to consider when selling pre-season and post-season.
PRE-SEASON
Pro: Typically buyers will put a higher price and less contingencies on the deal structure, for two reasons:
- Buyers get to retain the profits from peak season and come into season with a padded trust account
- Homeowners are less likely to leave the program when they have a full calendar of bookings
Con: The seller doesn’t get to keep the profits from the season. Also, it can be difficult to manage your company selling while preparing the business for the peak season.
POST-SEASON (THE PROS AND CONS ARE BASICALLY REVERSED)
Pro: The seller gets to retain the profits from peak season.Con: Typically buyers will place more contingencies when closing after peak season because that is the time when homeowners consider leaving the program. Less bookings = less sticky homeowner contracts.