How to Invest in Homestay effectively?

As one of the hottest accommodation service business models today, don't ignore the homestay investment experience if you really want to try.

Investments like real estate are always attractive to investors because of their diversity and attractiveness in profits.  In the past, when it comes to real estate, we often think of land investment, townhouse investment.  Currently when the market and the needs of buyers grew, more choices began to appear, such as: shophouse investment, hotel investment, apartment investment, suburban land investment, ..

Homestay is a new model, which can be seen as a trend, a travel trend of young people.  This model has quickly received great attention and acceptance since its appearance.  Therefore, many individuals boldly change direction and choose to be a profitable tool.  The potential from homestay is real, in terms of future, there are still many opportunities for breakthrough. However, how to make an effective and stable profit from homestay, not everyone has enough experience and understanding of the market to confidently assert.

If you are looking to learn about the homestay investment model, the below information will definitely be useful for your upcoming business plan.

I- Advantages of investing in homestay

Homestay is the choice of many opportunities in the future.

The appearance and popularity of homestays in the past few years shows that the attraction of this Investment model is not small, based on young people's backpacking trend.  Talking about the need for travel experiences, it is certainly difficult for any type of accommodation to usurp the homestay.  Because of its uniqueness, difference and keeping up with the trend well, so homestay is highly appreciated for its long-term development potential.  

In the future, people will tend to choose services associated with nature, culture and living environment, combining learning, experience and rest and relaxation.

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According to experts, homestay has now blossomed in many regions, localities strong in tourism and emerging localities.  The homestay business does not attract professional units, but mainly those with little capital, local people, and investors who want more tools to make money; 

Because this market is although potential but small.  Although the profit when compared to hotels and resorts will not be equal, but the costs are reasonable, the source of income can be improved when taking advantage of other services.

1- Small investment capital and easy to mobilize

Among the types of accommodation business, homestay is a model that requires relatively little initial capital, which is much more advantageous, depending on available Investors’ conditions. Therefore, it is not difficult to mobilize capital, use loans from relatives, friends, banks, or accumulate, capital contribution, etc.

2- Fast payback time

The time for the process from homestay renovation to homestay operation is very quick, about 2 weeks to 1 month, unless new construction on a large scale, it will need more time.  Investment is quick, generating revenue is equally fast, this is a big plus for the homestay Investment model.

3- Financial freedom

When the homestay comes into operation with a stable number of guests, familiar with the way of operation, the business will follow the flow and bring a steady and attractive passive income.  Many people fall in love with homestay investment as an extra income but then become to stick with it for a long time.

II- Challenges when investing in homestay

1- The market is becoming more and more competitive

Although the demand for homestay accommodation is currently very large, but before the appeal of this model, more and more individuals and businesses are participating in the market, pushing up the competition rate.  This is an inevitable consequence when investment trends become prevalent, placing stricter requirements on quality, uniqueness and price suitability.

2- Old customers are hard to keep

The target audience and choice of homestay are very diverse, but most of them are young people, their characteristics are love to explore and experience, like new and different things.  Therefore, when choosing a homestay, this group of customers rarely comeback many times but will give priority to other homestays.  This means that, in order to keep customers, homestay owners must make great efforts in improving quality and service, creating their own mark in the hearts of customers.  Not coming back but if the homestay is good, they are still willing to recommend to friends and relatives.

3- Remote management can cause loss of revenue

Not all homestay owners have the time to monitor the entire business process, be directly present for regular management, not to mention the case where the homestay is located in a locality different from the host’s residence or working places. Therefore, it is imperative to hire others to replace themselves when necessary, and often the priority of the locals.

It sounds simple, but in reality, this remote management way is very risky.  It will be difficult for you to know if manager and staffs at the homestay are honest in the matter of collecting room fees or not.  However, you can still overcome it by using smart management forms such as magnetic locks.  Customers can only enter the room when there is a key generated and monitored by the software; The receptionist is required to enter information into the software, so it is difficult to cheat.  This is not only an effective solution to avoid loss of revenue but also brings a professional image to the homestay in the eyes of customers, especially foreign tourists.

4- Trouble comes from the landlord

This situation is very likely to happen when you are not the owner of the house but invest in the form of a leaseback.  If in the process of signing and agreeing to a lease contract, the parties are not clear, you may cope with risk as landlord reclaims the house. 

5- Guest reviews are inaccurate at the homestay

Guest reviews for homestays are very important and have a significant influence on the brand and reputation of the homestay.  The fact that tourists leave bad reviews, low star rates really cause a headache for homestay owners;  The following customers will rely on this to decide whether to book or not.  Certainly, the efficiency of homestay business will be significantly reduced.

6- Risks from tenants

Not always tenants have conscious to use homestay for tourism and experience purposes.  In many cases, groups of guests rented for the purpose of using stimulants.  If this is detected, the homestay owner will have to bear a large responsibility.

Homestay owners share a few experiences to avoid this risk:

- You should avoid groups of guests booking 1-2 days

- Need to declare temporary residence and sign a rental agreement for the purpose of staying (avoid prosecution of harboring crimes)

- Refuse if there are suspicious characteristics that need censorship (fake things, check rooms, ...)

- Monitor booking blacklist to identify risky guest groups 

Moreover, another group of unwanted guests that homestay owners must be wary of is virtual guests, horizontal cancellations, and irresponsibility.

Not only homestays, but many other accommodation services are very easy to encounter these cases, which both take time and effort and cause loss of revenue:

- Guests book and cancel continuously to reduce prices,

- Guests cancel the room before check-in time,

- Guests who book without payment but do not come... is the combo that makes the hosts the most frustrated which have just wasted time and effort and lost revenue.

III- What to prepare before Investing in Homestay?

1- Choose Land to Invest 

Apply for investors to build new homestay or choose other business locations where they live, not taking advantage of existing houses.  The choice of land for homestay investment is also based on the basic principles in real estate in general, and meets the specific characteristics of this type.

2- Identify your own abilities and needs

Before you want to start looking for land to invest in, you need to clearly define issues related to your ability including your strengths, desires, financial limits;  then consider the proposed homestay model.  From these bases, begin to geographically define and set the appropriate selection criteria.

Each model will need a different area, land terrain as well as different personal abilities, for example:

- Homestay combines with health care will be suitable for those who have knowledge about medicinal herbs, health, spa, …

- Homestay combines meditation/yoga need fresh air, large area to create landscape, quiet, privacy

- Farmstay combines with education should choose a place not too far from the center because most of guests are families with small children, groups of students, etc. need convenient transportation.

3- Good location 

The trend of current tenants is to prefer places with beautiful, airy and convenient spaces. 

Homestay location should near residential areas, urban centers, city centers.

This factor refers to convenience and comfort because when close to the center, access to amenities such as shopping mall, health care, education, culture, entertainment will be easy and convenient.  

Most of the homestay's guests work in cities and want to choose a place to rest on weekends and holidays, so the short distance to densely populated places will be of interest to them.  If following the farm model, investors will reduce the cost of storage and transportation.

If you choose the land near the water source, it will be ideal to exploit the resort value and the landscape. 

Homestay should close to the road.  This is understood as the location near the main roads, inter-provincial roads, national highways.  Furthermore, you should consider the following factors: the entrance is not too far and twisty;  enough width to let cars in and out;  roads with hard or upgradeable foundations, avoiding dangerous muddy roads in the rainy season, etc.

Along with that, the homestay model is an experience together.  Therefore, in addition to the terrain from the perspective of feng shui, it is also necessary to meet the purely indigenous element.

4- Legal issues

In order for the investment and operation of the homestay to be smooth, from the very beginning, the legality of the land needs to be ensured.  Usually large areas of land, enough to build homestays, landscape systems, gardens, etc., are agricultural land.  If people are staying, it's okay to do a few more rooms for rent.  However, if you want to increase the room size, you must change the land use purpose, environmental impact assessment, construction permit, etc.

Legally land is land that meets the following requirements:

- Have a certificate of land use right 

- No dispute, still within the land use term.

- Eligibility to be able to permit construction of works on land (land for planting trees, forest land and agricultural land according to the provisions of the Law is not allowed to build).

- Possibility of converting land use purposes (in line with local land use plans).

Regarding legal matters, homestay investors should research carefully, ask for information at local land management agencies, reputable sources, should not be too dependent on brokers, realtors, etc.  …

5- Consider the land zone’s natural competitive potential

A land plot worth considering for homestay investment should have available natural elements that can develop into competitive advantages, factors that not only bring landscape to the land but can also create different experience activities for homestay.

Moreover, it is necessary to consider the harmony of the homestay model with the general scene in the area, keeping the natural features of the landscape but still ensuring the comfort factor;  there are enough places to sleep, eat, play and experience with local people.

Some natural factors can be exploited into accompanying services for homestay:

- Natural forest: biodiversity model, camping in the forest.

- Natural lake: fishing, boating services.

- Indigenous cultural elements: experience cooking, making handicrafts, learning folk art forms,..

- Land area size, quiet and fresh space: combining meditation, yoga,...

- Planting medicinal plants: medicinal sauna massage services, herbal leaf baths, etc.

The competitive potential of the land plot plays an important role in the homestay investment plan.  Not only creating an initial impression, but also determining the ability to develop further for the model, because the later, the needs and requirements of customers are set higher.

6- Local human resources to support the operation

There are many misconceptions that homestay investment can start from a small scale, so there is little focus on preparation and selection of foundational factors.  This inadvertently puts investors at risk, having to quit halfway or even sell the project cheaply.  Running a homestay project is not only about enthusiasm, but also needs to be qualified, knowledgeable about the locality, have foreign languages, as well as understand the travel trends of guests.

The investor can arrange about the capital but cannot manage and ensure the landscape elements and the property is always in the best state.  Therefore, using local human resources is the first option worth considering, maintaining homestay activities with the most optimal personnel costs.  Indigenous people will have advantage of local knowledge and ability for long-term commitment.

7- Choosing Homestay design idea

Why is it the same homestay, but there are places that attract guests and others that don't?  In addition to a beautiful location, many tourists accept going further for what reason?  Sure, it depends on homestay design.  The common psychology of tenants, homestays with unique, new and different features is always prioritized to choose.

There are many design ideas today for investors to choose from, depending on the budget, target model and landscape factors, local culture.  Here are some popular homestay styles today.

- Classic Vintage Style

Perhaps in today's modern life, finding traditional values ​​and old colors is a popular trend, reflecting the sophisticated aesthetic taste as well as the depth of the soul of tourists.  As the name suggests, this style homestay in every corner carries the breath of the old days, with a bit of classic mixed with romance, warmth, and rustic.

- Natural style 

Natural or green living is a concept that refers to a green homestay design style, close to nature.  What this style brings to guests is the familiar, comfortable, fresh and green color, helping to relieve stress and fatigue after tiring working days.  Homestay in a natural style will prioritize materials such as wood, bamboo, palm leaves, etc. to design and decorate the space.

Some popular natural homestay models today can be mentioned as: tree house, capsule, sea view leaf roof, stilt house...

- Unique blend of retro style

As a seemingly improvised yet subtle mix of modern and classic elements, in a lively, slightly quiet, nostalgic;  never feels boring.  This is definitely a style that brings an unique and unforgettable experience to young travelers.  This style has a variety of decoration and placement ideas, creating a multi-dimensional interior space effect.

- Exquisite with delicate Scandinavian style

Scandinavian is a style with white as the main color, with an unique blend of minimalism - convenient functionality, modern beauty and closeness to nature.  Because of the uniform color scheme from the walls to blankets, sheets, pillows, mattresses or curtains, wardrobes, etc., this homestay style evokes a feeling of purity, lightness and sophistication.  Scandinavian style is not only popular with young people but also middle-aged and older customers.

- Cozy Rustic style

Rustic style is one of the design styles with bold simplicity, rustic, bringing warmth, comfort, elegance to the living space.  This model is simple but highly applicable, suitable for spaces that are not too large.  With limited area but still want to have its own highlight, Rustic style is the perfect choice for homestays.

Common features are simple pallet beds, wooden bunk beds, ... combined with raw stone, fabric, large window frames and natural colors.  There will be many impressive check-in background for visitors.

- Brilliant and personality Bohemian style 

This style always stands out thanks to the appearance of sophisticated decorative motifs such as brocade patterns or tassels;  especially on pillowcases, blankets, walls, floors, stairs or even familiar hammocks.  This style evokes a liberal, free and creative lifestyle.  However, when designing, you should consider and choose accent details to avoid creating a confusing feeling.

- Fresh with Minimalist style

Minimalist is a style that follows minimalism, but by using the dominant white tone, it brings a fresh, neat, modern and optimal feeling in terms of space.  This style will eliminate almost all unnecessary items, the room seems to be monotonous but in fact, it has a scientific layout, returning the liberality and freedom.  This style favors natural colors and light source..

- Industrial style 

Just like the name of this style, Industrial homestays are buildings with a design that simulates the image of factories, workshops or production areas, but in an artistic perspective, featuring strong, definitive lines, exuding simplicity and dynamism, modernity.

The main color tone of this style is white - gray - black - brown ... or more innovative with unfinished walls, unique and strange decor, although it looks messy and dilapidated, but it's actually a deliberate, bold and alluring arrangement.

Furthermore, homestays can also combine many design styles to add an impression, but it is necessary to consider the harmony factor, such as Industrial with Rustic, Scandinavian or Minimalism;  Should avoid combining with Vintage or Bohemian.

IV- Other important notes when investing in homestay

For the most effective plan, do not ignore the homestay investment experiences drawn from the following practices.  Although it may be small details in the whole, it has a great influence on the image, quality, and revenue for the homestay model.

1- Efficient use of capital

Depending on the business purpose, the capital invested can range from low to high.  In the process of operation, there will certainly be many costs incurred, investors need a loss compensation at the beginning.

2- Take the time to do market research

Not only homestay investment, to be successful with any business, investors also need to research the market thoroughly. Particularly, the homestay market is becoming more and more competitive.

Researching the homestay market basically requires data on:

- Target customers: who are they, how old are they, what are their interests, where they live, what are their needs, etc.

- The number of existing homestays in the deployment area, how does it work, and what is the competitive rate?

- How is the overall trend of the market changing?

- Survey of guests’ expected price level

- Have there been any changes in the policies and regulations on homestays, ..?

- Effective homestay management tools,…

- Investors with enough information will know how to choose a design plan as well as complete the legal documents, manage and operate the homestay in the best way.

3- Recruiting quality manager and staff team for Homestay 

Whether small or large, homestays must have a manager and support staff, especially for those who do not have much time. The staff team will be an integral part of the reputation and quality of the homestay.  Priority should be given to hiring people with experience, expertise, enthusiasm and long-term commitment to the job.  In the service industry, the attitude of employees is extremely important.

4- Respect credibility and integrity in business

Experts in the field of real estate said that nowadays, many homestay owners often post on advertising channels pictures of homestays that are too shimmering, different from what they actually own.  Maybe the homestay owner has not thought too far, just thinks that this way will attract more customers.  However, this will lead to loss of trust and not very positive feedback, making old customers not want to visit again and new customers are also hesitant.

For long-term investment, investors should not do seasonal things.

5- Find customers from many different channels

To increase business efficiency, homestay investors can take advantage of many customer sources in many channels such as from travel companies;  source of old customers, community living together... This way helps to increase the number of guests as well as maintain a stable customer source. Particularly, must retain guests by the difference in the case there are many similar investment models in the same area.

6- Constantly upgrading uniqueness of experience

Many investors put money into homestay because of the trend, following the trend but forgetting the features of this Investment model.  Why do many tourists refuse hotels and resorts to find homestays?  Certainly because they want to have an authentic, true experience with travel and discover new things, closer to the local culture.  Many homestay owners pay attention to reducing prices to attract guests but are not interested in upgrading the things that customers really care about.

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The principle for an effective and sustainable homestay business is to provide visitors with new and unique experiences, always learning and changing accordingly.  Models such as picking fruits or cooking with the ingredients they have harvested by hand have helped many homestays make a profit.

7- Always appreciate the human factor

Homestay is not only an environment, but also a bridge between people and people.  According to longtime experts, it must always be remembered that people are the most important factor in homestay investment.  Therefore, personnel with good foreign languages ​​is an advantage, no matter how much automation is, it cannot replace practical cohesion. Besides, homestay service staffs also need to have their own talents, so as to create a feeling of familiarity and closeness like a family.  This is also a factor to consider when hiring managers and employees.

8- Invest in the kitchen

Unlike luxury hotels and resorts, homestays have a cozy space thanks to comfortable experiences like at home, most notably cooking by yourself.  Therefore, a beautiful and fully equipped kitchen is also a way to score points with guests.  The kitchen is a place that clearly shows the family atmosphere as well as the typical culture of the region.  Do not hesitate to invest in the kitchen of the homestay.

9- Use management software

Usually, small-scale homestay owners (about a few rooms) often do not think that it is necessary to use management software.  However, this is the wrong view and makes the model difficult to be professional.

First of all, using software helps to optimize the efficiency of remote management for homestays that cannot be available 24/24 and have to hire a manager.  Second, using software helps save time, improve synchronization and create a professional image in the eyes of guests. With large-scale homestays, this is even more indispensable.

Do not ignore the useful homestay investment experiences above to get success in this market.