Is Your Business Ready for a Catastrophic Event?

As I write this column, our neighbors to the east located in Panama City and Mexico Beach Florida have incurred probably the worst natural disaster we’ve seen along Florida’s Northwest Gulf coast in my lifetime. Numerous homes, families and businesses have suffered tremendously as result of the storm. Hurricanes, wild fires, snow storms and other catastrophic events can materially impair a vacation rental operation or force vacation rental managers to shut their doors if not properly prepared for the impending disaster.

Having operated in Florida for nearly twenty years, hurricanes are a way of life. We have disaster preparedness plans designed to decrease the impact to vacation rental operations, but during my career, I’ve never seen a formal financial plan designed to help vacation rental managers weather an extraordinary event. As we converse with companies around the country when tragedy strikes, numerous financial issues are discussed. The most notable are as follows:

  • Travel Insurance – Vacation rental managers concerned about whether to sell travel insurance should contract with a VRMA supplier member in short order. Having travel insurance is paramount. Explaining to an Owner that their revenue is not in jeopardy because your business had the forethought to protect them in the event of a disaster underscores your relationship, creating trust. Being able to explain to an arriving guest that they will receive the total amount of their reservation refunded with their purchase of travel insurance will save tremendous expense and turmoil in the business. When choosing a travel insurance provider, look for service, terms and policy details. Obtaining a market rate commission, unparalleled service and the best policy is key. Obtain numerous quotes, compare and make the best decision for your business.
  • Deposits Held in Trust – Those businesses that do not reconcile Advance Deposits on a monthly basis should expect financial issues when being forced to refund reservations, operate the business and navigate a natural disaster. A shortfall in the Advance Deposit account will only exacerbate financial issues and could lead to more serious issues. Begin by reconciling your Advance Deposit account and funding any shortfall to ensure your business has the ability to meet its financial obligations in the event of a disaster.
  • Generate a Meaningful Profit – Too many businesses are going through the motions, owners are simply taking a salary, not distributions, and all stakeholders feel as if life is good. The true measure of a vacation rental company is profit. If your business is not generating 8% to 15% of gross rental revenue as profit, it’s time to review and adjust your business model. Start by reviewing your ancillary fee structure and payroll, as revenues must be increased and expenses must be lowered. Your business must have profits banked or set aside for issues that arise.

The aforementioned discussion points represent just a few in a number of items to consider with financially preparing your business for an impending disaster. If your business needs to sharpen its focus, increase profit or operate more effectively, please feel free to contact Ben Edwards with Weatherby Consulting at (888) 304-1405 or via email at