The Cost of Running a Holiday Let: A Complete Guide

If you’re thinking about buying a property, or transforming an existing property into a holiday let, it’s important to understand the costs associated. Whilst it can be very profitable, there may be some costs you’re not expecting.

Some costs are fixed, whilst others vary and often increase with bookings. Making sure you have a good understanding of these costs can help you to reduce unnecessary spend and maximise your returns.

The Fixed Costs

Fixed costs are unavoidable costs that don’t tend to change from month to month. Because of this, these costs are relatively easy to budget for to ensure profitability.

Fixed costs include:

Mortgage or Rental Costs (if applicable)

If you don’t own the property you are letting outright, you will need to pay monthly mortgage payments, or in some cases, you may be using a rent-to-rent model, in which case you will have monthly rental payments to make.

Business Rates or Council Tax

On all holiday let properties in the UK, you will be required to pay either business rates or council tax. Which one you pay depends on how often the property is booked out.

To qualify for business rates in the UK (except Wales) your property must be:

• •Available for booking for 140 days or more per year
• •Actually let for 70 days or more per year

In Wales, the thresholds are higher. Your property must be:

• •Available for booking for 252 days or more per year
• •Actually let for 182 days or more per year

If your property does not meet these thresholds, it will be classified as a ‘second home’ and you will be required to pay council tax instead.

Holiday Let Insurance

Whilst holiday let insurance isn’t a legal requirement in the UK, it’s generally recommended. Standard home insurance won’t cover paying guests and your mortgage lender will usually always require buildings insurance.

Dedicated holiday let insurance helps to protect you and your property.

Most policies cover:

• •Building & Contents: protects your property, furniture and belongings against fire, flood, storm, theft etc.
• •Public Liability: covers you for legal and compensation costs if a guest is injured on your property
• •Loss of Rental Income: financial protection if your property becomes uninhabitable (e.g. due to fire or flood) and you have to cancel bookings
• •Employers’ Liability: a legal requirement if you hire any staff e.g. cleaners
• •Malicious and Accidental Damage: cover for your property and furniture if guests cause any damage, accidentally or on purpose

You will need to compare policies to make sure you have all the cover you need, but the above should be seen as the minimum requirement for your holiday let insurance policy.

Utilities

Unlike long-term rentals where utility costs can be passed on, when you’re running a short-term holiday let, you will be responsible for all utility costs.

These include:

• •Electricity
• •Gas
• •Water
• •Wifi
• •TV licenses & subscriptions

In your own home you may make more of an effort to save energy and water to reduce costs. When running a holiday let, you will have less control over the usage of paying guests.

Whilst we’ve included these as a fixed cost, there may be some variation based on the amount of bookings received. More bookings = more energy/water usage, which could cause your bills to increase.

To keep costs as low as possible, you should try to install energy efficient systems such as LED lighting. You could also leave guest instructions, such as turning off the heating when not in the property, or use timers that the guests can override when required.

Safety Certificates and Legal Compliance

When running a holiday let, you must comply with legal requirements to ensure guest safety. You will need to pay for testing and certificates including:

• •Gas safety
• •Electrical checks
• •PAT testing
• •Fire safety
• •Smoke and carbon monoxide alarms

This list is not exhaustive. Make sure you check all legal requirements.

Variable Costs That Increase With Every Booking

The fixed costs we’ve covered are probably costs you’ve already considered, but there are more costs that are often overlooked. These are the kinds of costs that tend to increase the more bookings you get. If not correctly budgeted for, they could start to eat into your profit margins.

Cleaning and Changeovers

The more bookings you get, the more cleaning and changeover costs you will incur. Not only will you need to pay for more cleaning supplies, but if you pay a professional cleaner or cleaning company, you will need to pay for additional time.

One of the best ways to reduce cleaning and changeover costs is to try and encourage longer bookings. For example, you may want to introduce a minimum stay length. Bear in mind, doing this could restrict your audience so it’s important to properly weigh up the cost vs benefit before doing so.

Linen and Laundry

Just as with cleaning and changeovers, you will spend more on linen and laundry the more bookings you get. Even if you don’t pay a professional laundry company and wash bedding and towels yourself, you may notice your water bill increase over time.

With back to back bookings, you will also need to make sure you have additional bedding and towels so your property is always guest ready. It’s always good to have extras on hand in case guests require them.

Guest Consumables

Guest consumables refers to those things that guests will use up whilst staying in your property, and therefore require replacement between stays.

Holiday lets typically provide things such as:

• •Tea
• •Coffee
• •Sugar
• •Toilet paper
• •Hand wash
• •Cleaning supplies e.g. washing up liquid & sponge

Other consumables you may want to provide include:

• •Milk
• •Cooking oil
• •Salt & pepper
• •Toiletries e.g. body wash

Some owners like to go above and beyond and also provide a welcome drink or sweet treats. This can create a great first impression but also adds on additional costs.

Maintenance and Repairs

As with any property, holiday lets will require general maintenance and repairs from time to time. When you have paying guests, it’s even more important to keep on top of these things, or risk complaints and bad reviews.

Maintenance and repairs may include anything from boiler and heating repairs, to repairing damage caused by guests.

With more guests things are likely to become worn or damaged more quickly, so maintenance is essential. However, this does not come without increased costs. Carrying out proactive maintenance, ensuring checks are up to date can help to reduce costs, helping you avoid bigger repair jobs down the line.

Replacing Furniture, Appliances and Décor

Higher occupancy generally means more revenue, but it also means more wear and tear. As a holiday let owner, it’s important to budget for replacement costs rather than treating them as unexpected expenses.

It may be useful to have a pot of money set aside for this purpose and think about how often you will carry out updates. For example, you might want to repaint every year or so to keep your property looking clean and fresh.

Larger items such as sofas and mattresses will last longer but may need replacement if accidental or malicious damage is caused. Appliances such as ovens, kettles and toasters may also need to be replaced if they become damaged, broken or fail a PAT test.

When it comes to updating your property, it’s important to remember that refurbishments could actually help you to get more bookings. So, whilst there may be an initial cost to doing this, it could actually help you to increase your revenue in the long term.

Marketing and Booking Costs

A cost that is often overlooked by holiday let owners is the cost of promoting your property to get bookings. Platforms like Airbnb and Booking.com charge commission for each booking that you get.

You will also need to factor in costs if you want to have your own direct booking website (initial build costs and ongoing maintenance and hosting costs), as well as any paid advertising, photography and software you use to manage your properties.

When you are self managing, these costs can add up but without them, your property is unlikely to get bookings.

The Cost on Your Time

So far we’ve covered fixed and variable costs, but what about your time?

Self-managing a holiday let means you’re responsible for:

• •Guest communication
• •Late-night guest issues
• •Cleaning or managing cleaners
• •Organising maintenance & repairs
• •Updating pricing
• •Calendar management

Sometimes it can feel like a full time job, so you need to make sure you have the time available to properly manage your holiday let or risk bad reviews and reduced bookings.

How to Reduce the Cost of Running a Holiday Let

Whether you already have a holiday let, or you’re thinking about investing in one, there are simple things you can do to help reduce running costs and maximise your returns.

One of the easiest ways to maximise your returns is by ensuring your property is priced correctly. Make sure you have budgeted for both your fixed and variable costs to understand how much you need to charge per night in order to make a profit. Your pricing strategy should also consider demand, seasonality and overall occupancy rates.

When it comes to day-to-day operations, there are many things you can do to reduce costs including:

• •Preventative maintenance to reduce costly repair jobs
• •Introducing a minimum stay length or long stay discounts to encourage longer stays and reduce changeovers
• •Implement smart thermostats to reduce heating costs
• •Opt for energy-efficient appliances to reduce energy costs

There are also things you can do that don’t reduce day-to-day costs, but can still improve profitability:

• •Invest in professional photography and marketing to increase occupancy rates
• •Use a dynamic pricing model to adjust nightly rates based on factors such as demand, seasonality, events and more
• •Consider using a professional holiday let management company designed to help maximise your earnings

Are Holiday Let Management Companies Expensive?

You might think that professional holiday-let management sounds more expensive than self management, but that may not always be the case.

When you are self-managing a holiday let, you are responsible for all costs. With a professional management company, many costs are included within the management fee. This can help to save you money in the long term and reduce unexpected costs you haven’t budgeted for.

With Host and Stay’s fully managed service:

Many owners find that with professional management, their property has higher occupancy and stronger nightly rates, not to mention reduced admin time and fewer mistakes that lead to unexpected costs.

What looks like an additional expense can actually help to maximise your revenue and improve profitability.

How Host & Stay Can Help

We help holiday let owners throughout the UK to make the most of their property. With a hassle-free service, we take care of everything from photography and marketing to guest communication and maintenance.

We offer market-leading rates and use a smart pricing approach that maximises your property’s nightly revenue, typically earning 30% more than traditional competitors.

With Host and Stay, we don’t just offer convenience, we offer better returns, transparent pricing and expert insights.

See how much you could earn or get in touch to learn more about how we can help.

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