How Do You Manage Risk?

risk management

Organizations that manage short-term rentals at scale live and breathe risk management.  And so do the insurance companies that underwrite policies that protect those properties.  In an expanding and increasingly competitive industry with shrinking margins, successful risk management can tilt the income statement from loss to profit.

But what about small operators who might own one or a few rental properties?  Their perception of risk, and their need to manage it, may not be the same as of larger players.

How people perceive risk has been studied intensively over the last few decades.  Any search engine will return millions of hits if you enter “risk perception” as keywords.  As usual, our friends at Wikipedia provide a concise summary of current thought.  Everyone is different.

A reasonable person might assume that any property owner directly managing short-term rentals would focus on all important details, especially those concerning risk.  Oddly, that’s not always the case.  This author personally experienced short-term rentals where it was obvious that the owner’s sole objective was to minimize expenditures without regard for property safety or tenant comfort.

It’s difficult to understand how this kind of owner perceives risk.  That person may not worry or care about over-occupancy, wild parties, property damage, or possible sanctions from civil authorities.  And, of course, there is the hassle factor:  Do such people want to bother with high-tech services that alert them to possible risks?  For a few, ignorance might be bliss.  Such a property owner may skate by for many years without experiencing losses from adverse events.

In contrast, large property operators do the opposite:  They evolve continually to lower risk and increase efficiency.  They cannot scale without that focus.  Party Squasher has been widely embraced by the industry for that reason.

Nonetheless, we believe Party Squasher is also an ideal investment for small (or smaller) operators.  It’s a relatively inexpensive, low-overhead service that reduces risk in a short-term rental property. Some of our customers were able to avoid big parties with large damage costs with Party Squasher! The big operators recognized that value a long time ago.  Although we expect that small operators will also recognize that value, all operators should think carefully about risk and what might be lost if it’s not managed properly.

Photo by John Schnobrich on Unsplash

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