Optimizing Space and Efficiency in Short-Term Rentals
Short-Term Rental Space Optimization & Efficiency
- Optimizing a space—whether in a building or residential structure—is simply defined as eliminating dead spaces. This is both an art and a science. It takes vision and creativity to reimagine possible uses for a given space, and it also requires technical knowledge or research to explore alternative layouts and functionalities.
What Is Dead Space?
- Dead space refers to areas within a building or residential structure that serve no significant functional purpose. It can also include hard-to-reach areas—nooks, crannies, or spaces between or behind furniture. Common examples include hallways, stairwells, entryways, and transitional spaces such as doorways and foyers.
Dead Space in Hotels
- An older concept still common in hotels is the large, grandiose reception area. While visually appealing, it serves a limited purpose for the actual guest. In essence, these spaces are glorified zones for reception staff to process check-ins. They may also support secondary functions, like baggage storage or office space, but most high-end hotels dedicate excessive space to reception areas that remain underutilized.
- A hotel could downsize or even eliminate the traditional reception space through self-check-in technology, reallocating that square footage to create more rooms or enhance guest facilities. Another option would be to convert oversized reception areas into larger, more luxurious guest suites.
- A further strategy involves combining rooms at the end of hallways. Dead-end hallway spaces where two or three units share a foyer could be redesigned by merging those units. This is especially worthwhile if one of the rooms has a premium view. By combining it with adjacent, lower-value rooms, the average daily rate per square meter can increase—essentially boosting the value of inferior rooms by pairing them with a superior one.
Maximizing Residential STR ROI Through Space Efficiency
- From my experience managing, renovating, and improving STR properties, the key to ROI lies in maximizing functionality. However, the approach varies based on location and market.
- For high-end locations like Santorini or the Maldives, the focus should be on enhancing views and private amenities. If a property lacks a sea view, investing in private indoor luxury—like a Jacuzzi—can still yield high returns. For properties with great views, the goal should be to maximize enjoyment of that view through well-designed seating or luxury amenities.
- In contrast, STR properties in large cities see greater ROI from maximizing internal utility—more bedrooms generally equal more income. A city apartment is unlikely to benefit from sacrificing a bedroom to create a private Jacuzzi space. Instead, keeping or increasing the number of bedrooms while upgrading furnishings is more profitable.
Market Relevance Is Key
- Understanding the target market is essential. Guests in metropolitan areas usually stay for access to city amenities—business, entertainment, dining. Larger groups may prefer a three-bedroom apartment over multiple hotel rooms, offering better value per person.
- Knowing your competitors—including local hotels—lets you identify what guests are missing. If implemented effectively, this can lead to above-average guest yields, which is why the "luxury economy" STR model works so well in urban centers.
Best Uses of Dead Space in Residential STRs
- The “luxury economy” segment focuses on maximizing guest utility by combining high-end finishes with functional layouts. For example, converting a two-bedroom, one-bathroom unit into a three-bedroom, two-bathroom unit with renovated amenities can significantly improve ROI.
- Challenges arise in spaces without natural light. A bedroom without windows may be considered a “den” in many regions. Still, if a den cannot be repurposed for a living room or office, converting it into a luxurious sleeping area (with proper ventilation and a king bed) could be worthwhile.
- Dedicated office rooms in STRs tend to be underutilized. A better alternative is placing a desk within a bedroom or shared living space. Generally, adding an extra bedroom—when there are sufficient bathrooms—is the most reliable ROI enhancer.
General Rule: Bathroom-to-Guest Ratio
- A good rule of thumb is one full bathroom per 3–4 guests. Typically, each double, queen, or king bed sleeps two guests. So:
- A 2-bedroom unit (up to 4 guests) needs at least 1 bathroom.
- A 3-bedroom unit (up to 6 guests) should have 2 bathrooms.
- A 4-bedroom unit (up to 8 guests) ideally has 3 bathrooms.
- Following this formula reveals flaws in many older STRs and hotels trying to fit too many beds in too little space. For instance, a 2-bedroom apartment with a pullout couch and only one bathroom might sleep six but would not qualify as luxury. Instead of using a pullout couch, investing in premium seating and entertainment offers better long-term returns.
Key Takeaways:
- Bathroom-to-guest ratio: 1 full bathroom per 3–4 guests is ideal.
- Luxury ROI: Views and amenities drive returns in vacation markets; bedrooms and functionality dominate in cities.
- Space strategy: Renovation plans must align with local guest expectations and competition.
- Common dead spaces: Reception areas, hallways, and foyers are the most underutilized zones.
- Residential STRs: Share similar dead space issues—minus the reception area—making space optimization critical.
