No matter what business you operate, there are always risks. To run your business well, you need to possess the essential knowledge for the industry you are in. Running a homestay is attractive and competitive in the accommodation sector, but you should research it well before jumping into it. Addressing possible risks and knowing how to mitigate them are important considerations when investing in the business.
What are the risks of running a homestay business?
Homestay is a popular accommodation category, particularly for younger travelers who love to immerse themselves in local experiences. Homestay locations which have a perfect mergence with nature such as forests, mountains, beaches are attractive to these travelers. As demand for homestays continues to grow, this accommodation type is popping up everywhere.
As a result of this growth, competition among homestays is increasing, so risks are unavoidable. Some problems faced by homestay owners which increase risks for them are:
- Lack of financial knowledge: It is challenging to manage the financial situation of homestay, especially the incurred costs if the owners have limited financial knowledge.
- Legal barriers (explained below): The legislation in the homestay business is not always clear; therefore, owners must be careful and learn as much as possible about this type of business.
- Vague homestay regulations: Some customers with low awareness may cause damage to your homestay’s facilities unless you have clear rules and regulations.
Things to know for risk mitigation.
Following are things to know before starting your own homestay business.
Equip yourself with the financial management knowledge
You need to take a close look at the homestay’s cash flow through operations, such as cash in from new sales from the room and extra services and cash out from spending on housekeeping, employees, or maintenance activity. The strict follow-up process and a good understanding of financial management can help you analyse expense, revenue and profit effectively and build a good financing plan for your business. Some expenses that you will incur for your homestay, include decoration, employees salary, room-cleaning, food/beverages purchase, maintenance etc. Depending on the scale of your business, you can use professional accounting software to control your finances or manage them manually. However, regardless of the scale of the homestay, you need to strictly manage finances to avoid any loss.
Understand the legislation well before starting the business
Legislation is imperative in any line of work. While homestay regulations are well established in some developed countries such as the United States, it is still vague in others. Therefore, owners should always keep updated on the current legal requirements in their countries such as license required, tax, legal standards of hygiene or public health and commit to these practices.
It would be useful to join a community of similar business owners like you. For instance, Airbnb is a leading digital booking platform in the apartment, homestay, property service sector and it has a large community of listed homestay owners, where they can exchange ideas, hosting experiences and ask for advice.
State clear homestay regulations to be adhered by guests
A clear list of “Do & Don’t” for your homestay will restrict possible damages by guests to your homestay. A clear list of some of these can be provided to your guests upon arrival, as follows:
- Homestay owners are not responsible for customers’ losses.
- Guests are responsible for damage caused to the homestay facilities, amenities and appliances and will be required to pay for any such damage.
- Restrictions about safety, fire prevention, smoking, use of drugs.
Above are a few suggestions that may help reduce risks while running a homestay business. Hopefully, with all the information shared, Hotel Link would give you a few hints to deliver the most effective marketing and business strategy. Moreover, we do provide the necessary digital tools for new homestays to start running, contact us for a free consultation.