What Do You Use to Estimate ROI on a Specific Amenity?

Question

I come from a data science background, so I'm accustomed to creating models to derive the incremental ROI of each variable.

I hear some people saying "get the $10,000 hot tub", and I get that, especially if it's a "table stake" that your property needs just to be considered by guests.

However, when thinking about less standard amenities, like putting greens, gaming rooms, billiard tables, pool toys, etc. what tools or methods do y'all use to evaluate if a given idea will deliver a positive ROI?

I have a method that I'm formulating, but it is very data intensive (requiring web-scraping and statistical models), but a "good enough" solution could save me a lot of time.

Corby Goade · Answer

Honestly, for unique amenities like you are mentioning, I'd just roll the dice and see how it changes your occupancy and how far you can push your rates. I can tell you that in every scenario where I"ve done something unique in an STR, the returns have been much better than I thought they'd be, but there was no data to support it. At least in my market, AirDna is wildly innaccurate in almost every way.

John Underwood · Answer

I see what the successful competition is doing and do that.I provide a great house, great location, great views and great amenities. This seems to do the trick. I rarely have to break out a calculator or spreadsheet to know what to do.

Michael Baum · Answer

Yeah @Jesse Turner, I don't think I would do an ROI on a lot of things. If I add a stand up arcade system or a new pool table. The costs (at least for me) are not crazy high.If I wanted to add a pool table, I could find a number of great units on Craiglist for free. Maybe needs a bit of refurb but that is pretty cheap. So in that case, ROI is a no brainer. For a stand up arcade or cool bar type, they can be had pretty reasonably if you look around. I met a manufacturer of these units and one loaded up with games is around $1900. Of course you could do your own with MAME. In the end, you want to at least match the competition. Then look at adding extras to stand out. In our case, it is hard to beat the lake. We stand out by having an awesome kitchen setup and top notch grill.

Bruce Woodruff · Answer

As the others have said, you're over-analyzing this.....a) if your competition has an amenity, you had better have it too, b) there is no way to accurately determine the ROI, and it's too easy to just take a flying guess at it anyway....In my very humble opinion, do not over think Real Estate, it's not necessary and this a a seat-of-your-pants game anyway...

James Carlson · Answer

@Jesse TurnerVacation rental investments are kind of tough for people who rely on hard data before buying. At least here in Colorado, STR and Airbnb properties are not paint-by-numbers. Demand for short-term rentals is based on emotions, the allure of this view or that amenity or this undefined "feel" or "design" of a place.I'd love a pamphlet that says simply, "Hot tubs increase gross annual revenue by $22,000." But then again, if that existed, everyone could run the numbers and do this. Not saying don't look for data, but I am saying, it's more in the comparison of successful properties, not in the cold dry numbers.

Jon Martin · Answer

Given the nuances between and within markets and listings I don't think there is a meaningful way to estimate this at a macro level. What you can do is filter for that specific amenity and see how well booked the calendars of those listings are. If it's a very average looking listing that is not in an A-grade location, and their calendar is well booked relative to other comps without that amenity, then you could reasonably assume that the amenity is making a difference.

Theresa Holl · Answer

And the answer is...ChatGPT.Seriously, my favorite AI hack lately for STRs is to compile all your reviews you've ever had from every OTA in to ChatGPT and ask it to search all the data for client sentiment analysis. If there's an amenity there that people love, you'll know. If there's one missing that people expected, you'll know.Bonus round...do the same thing with your top 5 competitors reviews and get a full market analysis, for free, based on the most valuable thing you have: your guests' opinions. Then have ChatGPT reformat the whole thing into a SWOT analysis and make some strategic decisions about what to invest into your property next.

Nathan M kiefer · Answer

Echo what some others have said- I've done it all- from high end furniture to grills etc etc. One of our most used and commented items we added was plush high end turf aka fake grass which covers every square inch of anything that resembled a yard on our properties which are side by side 2 story stilt houses. We have small lots in an ocean front community and everybody has some kind of rock(we had lava rock- I hate that stuff). Adding the fake grass allows guests to use every square inch of our property and people love that they can continue there beach trip by feeling like they are walking on grass. Its obviously going to vary by area, location etc etc, for us it was the best 12k we ever spent from the look, guest experience and overall dollar for dollar its been great. Also noticed our adjacent neighbors just hired the contractor we hired to do their "yard" :)

Andrew Steffens · Answer

It really is tough to say exactly what equals what. Early on we had two very similar houses 2 blocks from each other, one with a pool one without and we were able to see the pool house would rent roughly $100 per night and had a higher occupancy, so it was somewhat measurable. For things like pool hear we charge by the night, and people pay, but it is a little tougher to know who booked specifically because that option was offered.If you come up with a statistical model for many popular amenities I would love to see it!

James Carlson · Answer

Couldn't agree more.I tell clients, it ain't that hard. Where would you want to live? Or, where would you want to visit for an STR/Airbnb in Colorado? As long as you're not an anti-social psychopath, whatever your answer to that question is, is probably an okay place to buy.From there, we can run some numbers, make sure we're not missing anything, but in the end most decisions are actually pretty simple.