What is a Holiday Rental Business
Tourism is the fastest-growing industry in the UK and is expected to keep on growing. In fact, by 2025, the tourism industry in the UK is expected to be worth nearly £260 billion.
The number of holiday rental homes in the UK is also rising, with the number of holiday homes increasing by 40% in the last three years. When you include the number of holiday rental businesses in the rest of Europe and the popularity of these homes, it is easy to understand why more and more people are choosing to set up a holiday rental business.
A holiday rental is the renting out of a furnished property on a short-term basis to tourists, visitors and holidaymakers. The property is usually privately owned and is rented to guests for a per day, per week or per month fee.
Many different types of furnished properties can be used for holiday rentals, including:
- Apartments.
- Villas.
- Cottages.
- Houses.
- Farms.
- Lodges.
- Log cabins.
- Townhouses.
- Converted barns.
- Manor houses.
- Bungalows.
Usually, holiday rental properties are located in desirable areas that are popular with tourists. These could include:
- Cities, such as London, Edinburgh, Manchester or Dublin.
- Beach or coastal locations.
- Countryside locations.
- Locations close to an area of interest, e.g. Snowdon or Hadrian’s Wall.
- Locations close to an event, such as Glastonbury Festival or the Grand National.
- Mountain locations (e.g. for skiing).
- Lakeside locations.
A holiday rental property is usually designed to be a home-from-home for guests. It will be fully furnished, meaning it will feature appropriate furnishings and equipment to be functional as a home and for guests to stay at the property comfortably. Holiday lets usually don’t function in the same way as hotels and other types of properties in the tourism industry. Not only will a holiday rental be significantly more spacious compared to a hotel, but there are usually no staff onsite and guests will stay at the property without outside intrusion.
If you are thinking of setting up a holiday rental business, you must consider the location of your property. To qualify as a holiday letting in the UK, your property must be located in the UK or the European Economic Area (EEA). The EEA includes countries in the EU, as well as Iceland, Liechtenstein and Norway.
If you are thinking of starting up a holiday rental business, there are several different ways you can choose to run and manage your business including:
- Manage the property yourself, including all bookings, payments and check-ins.
- Advertise your property on a third-party website, such as Booking.com or Airbnb.
- Hire a holiday letting agency to advertise and manage the property for you, including handling bookings, payments, check-ins, guest questions and cleaning and maintaining the property.
- Run a holiday rental business with multiple properties in the same or different locations.
There are many different responsibilities associated with running a holiday rental business. Your responsibilities can vary, depending on how involved you are in managing and running your business.
Some of the responsibilities you can expect include:
- Cleaning the entire property in preparation for each booking.
- Changing bed sheets, making the beds and washing towels and other linens.
- Advertising and marketing the property.
- Running your business website.
- Taking high-quality photographs and providing accurate descriptions and important information.
- Creating a pricing strategy.
- Managing bookings and payments and handling receipts and invoices.
- Manage the property yourself, including all bookings, payments and check-ins.
- Providing advice and recommendations to guests.
- Purchasing, cleaning and maintaining equipment and furniture.
- Complying with all legal guidelines and health and safety requirements.
- Maintaining accurate records.
- Completing business and administrative tasks.
Starting up a holiday rental business can be both financially lucrative and personally rewarding. You won’t need any formal qualifications and training to run a holiday let; however, certain personal qualities can be beneficial and can help you to make your business a success. This can include good organisational skills, strong business and property management skills and a good knowledge and understanding of the tourism industry and how to make your property attractive to potential guests. An understanding of the relevant health, safety and hygiene guidelines is also recommended. To help encourage the success of your business, you will need a detailed and well-prepared business plan.
Types of Customers
Identifying your target market and the typical customers that your business is likely to attract is a key step when creating your business plan and setting up your business.
Although anyone looking to book a holiday can be a potential customer, certain factors can have a significant impact on your typical customer base and the types of guests that are most likely to book your property.
These can include:
Your pricing
This is one of the most significant factors in determining your typical customer base. Holiday rentals are priced differently, depending on the location, space, amenities, furnishings, décor and the overall quality of the accommodation. Because of this, you will likely focus on one specific pricing market.
Guests can typically be separated into three pricing categories:
- Budget: Price is the most important factor for this type of customer. They will likely choose the cheapest property and will be happy with more basic facilities and accommodation, less space and lower overall quality. Budget customers usually want to spend as little money as possible while still staying in decent accommodation. To account for lower income per guest, you will need to cut costs elsewhere. For example, your accommodation may have a lower market value, it may be smaller, and the furnishings and décor may be simpler.
- Mid-market: Mid-market customers are usually looking for a combination of quality and affordability. Although price is important to them, it won’t be the only factor they consider. If you operate a mid-market holiday let, your property will likely have more space and higher-quality furnishings and facilities. You may also offer extra features, such as free parking and TVs.
- Luxury: This type of customer is willing to pay higher prices for the best possible accommodation. Luxury accommodation is usually the highest-price accommodation with more spacious rooms and luxury furnishings and décor. You may also have additional amenities, such as a swimming pool or hot tub, which allows you to compete with hotels. Your property should also feature premium facilities (e.g. luxury garden furniture, premium bathing facilities and a superior kitchen). Your property should also be stylish and feel luxurious to your customers.
As well as the quality of your accommodation, your pricing strategy can also be dependent on other factors, such as your location, the demand, your direct competition, and your booking platform.
Your location
This is one of the most important factors in determining your typical customer base. Are you located in a city, a town, a village, the countryside or near the coast? Are you close to a landmark, an area of interest or another popular location? Does your property have good transportation links, for example, are you close to a train station? Many guests may have a location or area in mind when searching for a holiday rental and certain locations are likely to be more popular with certain guests. For example, a holiday rental close to a beach may be more popular with families, whereas a property located close to Snowdon may be more popular with nature lovers and hikers.
Your guest reviews
This is an important factor that will persuade potential guests to book your property. Holiday rentals with a higher review score and a high number of reviews are more likely to attract mid-market and luxury customers who are willing to spend extra money.
Your advertising
Advertising includes the advertisement platform you choose and whether you have your own website. Most potential guests will look at many different properties before choosing which one to stay in and your property description and the photographs you choose will be key factors in their decision. Holiday rental advertisements that feature professional photographs, a thorough description and a professionally designed website may be more likely to appeal to higher-end guests.
Equipment You Will Need
Your equipment needs can vary, depending on the type of holiday let accommodation you set up. Your required equipment can include furniture, accessories and other equipment that is essential to the running of your business. The amount of equipment you require will depend on the size of your holiday let.
Holiday rental properties typically offer guests a home-from-home experience. Unlike hotels where guests usually only have a private bedroom and bathroom, holiday rentals offer an entire home (e.g. a house, apartment, cottage or villa) that is fully furnished and offers guests similar equipment and amenities that they would expect to find in a home.
An important factor you will need to consider when planning your furnishings and equipment is your flooring. Different rooms in your property may require different flooring, for example, the kitchen and bathrooms will likely require tiles, whereas, for other areas of your property, you may choose carpet or wooden flooring. Wooden flooring can be more practical and easy to clean whereas carpets can provide a cosier feel, particularly in bedrooms and the living area. When planning your flooring, consider what you want the overall aesthetic of your property to be.
The equipment typically required by a holiday rental business can include:
Living Room
The living area will likely be the main communal area for your guests. The living room should be decorated to fit the aesthetic of your business and make it attractive to your guests. It should also be functional and comfortable. The type of furniture and accessories you purchase will depend on the size of your lounge area.
Some items you could choose include:
Sofas, armchairs and other seats
This should be one of your biggest priorities when furnishing your holiday let. You will want comfortable seating that looks stylish and attractive. It is also recommended that you choose seating that is easy to clean (for example, removable, washable sofa covers).
Lounge furniture
There are several different furnishings you could opt for, depending on the style of your property and the available space.
Your options include:
- A table or coffee table.
- Cabinets.
- A TV stand.
- Side tables.
- A mantlepiece.
- A bookshelf and books.
A television and a radio or music system
With the weather being so unpredictable (if your holiday let is located in the UK), providing entertainment for your guests is recommended. Choose an appropriately sized TV for the size of your room. You may also offer your guests access to subscription services, such as Netflix, Prime and Disney+, or the option to sign into their own services.
Lamps and other appropriate lighting
Appropriate and attractive lighting is recommended to create the desired ambience in your lounge area and ensure your guests can use the area at night time. You may opt for overhead lights and several lamps.
Other equipment
Some of the other equipment you could opt for in your living room includes:
- Board games.
- Artwork, e.g. paintings, photographs and pictures.
- Decorative accessories, e.g. candles, plants and ornaments.
- Pillows and cushions.
- Rugs.
Kitchen
Most holiday lets offer a complete functioning kitchen to allow guests to prepare and cook food themselves. The number of appliances and equipment you purchase will depend on the size of the kitchen area and the available storage space.
Some of the equipment you may require in the kitchen includes:
Kitchen appliances
Some of the kitchen appliances you will likely need could include:
- A fridge and freezer.
- An oven, hob and a grill.
- A microwave.
- A toaster.
- A food processor and/or blender.
- A kettle.
- A dishwasher.
- A washing machine and tumble dryer.
- A sink with hot and cold running water.
- A ventilation system (e.g. exhaust fans and a ventilation hood).
- A splashback.
Seating areas
Although you may have a separate dining room, if your property has the space, you could also opt to add seating areas so that families and groups of friends can socialise in the kitchen.
You could opt for:
- A kitchen island with chairs.
- A breakfast table and chairs.
- A sofa.
Storage areas
Your kitchen will need storage areas to store kitchen equipment and utensils and so that your guests have somewhere to store their food and beverages. Storage areas also help to minimise clutter.
Some of the storage you could opt for includes:
- Built-in kitchen units with cupboards, cabinets and drawers.
- Shelves.
- Wine racks.
- Food storage containers.
- A spice rack.
Cookware
Depending on your available storage space, there are several different pots and pans and other cookware you could purchase, including:
- Saucepans.
- Frying pans.
- Woks.
- Grill pans.
- Sauté pans.
- Baking trays.
- Roasting pans.
- Skillets.
Bakeware
Although bakeware is not an essential purchase, you could opt to supply baking items if you have the available storage space.
Some pieces of bakeware you could purchase include:
- Bread pans.
- Baking trays.
- Moulds.
- Muffin tins.
- Cake pans.
- Pie pans.
Eating utensils and accessories
You will need to provide enough eating utensils for the number of people your holiday rental can accommodate.
Some of the items you will need to purchase include:
- Glasses, including different-sized tumblers, a variety of wine glasses and cocktail glasses.
- A variety of cups and mugs, e.g. for tea, cappuccinos and lattes.
- Different-sized bowls.
- Different-sized plates.
- Eating utensils, e.g. forks, knives, spoons and serving utensils in different sizes.
Cooking utensils and accessories
Some items you will need to provide for food preparation and cooking could include:
- Chopping boards.
- Kitchen knives.
- Mixing bowls.
- Temperature gauges.
- A strainer and colander.
- A timer.
- Weighing scales, measuring cups and a measuring jug.
- Oven gloves.
- Baking paper, greaseproof paper and aluminium foil.
- Spatulas.
- Tongs.
- Stirring spoons.
- Whisks.
- Ladles.
- Peelers and graters.
- Tin openers.
Tea and coffee-making facilities
Some of the facilities you may offer are:
- A coffee machine.
- Coffee accessories (e.g. coffee beans, flavoured syrups and coffee spoons).
- A kettle.
- A teapot and cups and saucers.
- Milk jugs.
- Tea, coffee and sugar.
Rubbish bins and recycling bins
You will need rubbish bins and recycling bins in your kitchen. You should also provide a food bin, so any food is disposed of properly. It is also recommended that you provide bin bags so that guests have the option to change the bins themselves.
Dining Area
Depending on the size of your holiday rental, you may provide a separate dining area where guests can eat their meals and socialise.
Some of the furniture and equipment you may require for your dining area includes:
- Dining table and chairs.
- Table cloths.
- Table settings, including mats and coasters.
- Serving platters and trays.
- A speaker, music player or radio.
- Decorative accessories, e.g. candles, plants, picture frames, rugs and decorative lights.
Hallway or Property Entrance
This will be the first impression your guests get of your property. Your entrance or hallway should be both functional and attractive.
Some of the items you may require include:
- A coat rack or cloakroom.
- A shoe rack.
- An umbrella stand.
- Lamps and appropriate lighting.
- A side table or cabinet.
- Decorative items, e.g. plants and artwork.
- A hat stand.
- A welcome pack.
- A mirror.
Bedrooms
If your property has multiple bedrooms, you will likely style each bedroom differently – particularly if you are setting up a family-friendly property where children are likely to stay. Your bedrooms should be stylish, comfortable, cosy and easy to clean. Your guests will want a good night’s sleep so keep this in mind when planning your bedroom furniture.
Some of the items you may require include:
- Beds of different styles and sizes (e.g. King beds, Queen beds, double beds, twin beds and bunk beds).
- High-quality mattresses.
- Mattress toppers.
- High-quality duvets and pillows with (preferably white or cream) sheets and covers.
- Thick, full-length curtains or blinds.
- Additional blankets (for winter).
- Cushions and throws.
- Wardrobes and drawers so guests can store their personal belongings.
- Bedside tables.
- Ceiling lights and lamps.
- A dressing table.
- Mirrors (you may opt for multiple mirrors of different sizes, e.g. full-length mirrors and beauty mirrors).
- Televisions.
- A kettle and/or coffee machine.
- Coat hooks.
- Desks and desk chairs.
- Armchairs or other seating (if you have the necessary space).
- Slippers and dressing gowns.
- Rubbish bins.
- Hair dryers.
- Plenty of plug sockets.
- Décor items, e.g. artwork, candles and plants.
Bathrooms
You will need to equip each bathroom with its own equipment and accessories.
Some of the items you may require include:
- Toilets.
- Baths with hot and cold running water.
- A power shower.
- Guest towels (you may need multiple sizes, e.g. bath towels, hair towels and hand towels).
- Towel racks.
- Plungers.
- Mirrors.
- Toothbrush holders.
- Soap dispensers.
- Toilet roll holders.
- Extractor fans and other ventilation systems.
- Door locks.
- Toilet paper.
- Toiletries, such as hand soap, shampoo, conditioner and shower gel.
- Rubbish bins.
- Window blinds.
- Adequate lighting.
- Storage for guests’ toiletries (e.g. shelves or cabinets).
Outdoor Areas
If you have outdoor space, having a well-designed, attractive and functional outdoor space can make your business more attractive to potential guests and can allow you to charge higher prices. When planning your outdoor area, consider the space you have available.
The front of the property
This will be the first thing your guests see when they enter your property. You will also likely use pictures of the front of your property for advertising purposes.
Some of the equipment you could install or purchase includes:
- A well-maintained, wide path.
- A ramp (to make your property more wheelchair accessible).
- Automatic outdoor lighting.
- Parking spaces or a parking garage.
- Grass, flowers and plants.
- Hanging baskets.
- A welcome mat.
The back of the property
The garden at the back of your property is where your guests are more likely to spend most of their outdoor time. The outdoor area may feature a patio or decking area and a garden.
Some outdoor furniture and equipment you could purchase include:
- A fire pit.
- A BBQ.
- Outdoor furniture (e.g. dining table and chairs, lounge chairs, a swing seat, an egg chair).
- Outdoor lighting (e.g. fairy lights).
- A hot tub.
- A swimming pool.
- Water features, such as a pond or water fountain.
- Flowers and plants.
General Equipment Requirements
A computer or laptop and a booking management system
A computer or laptop can be used for marketing and advertising your property, making bookings, arranging equipment replenishment orders and any business and administrative tasks. You will also need a booking management system that automatically inputs bookings into a calendar and shows customers accurate information regarding the availability of your property.
A website
A website is useful for advertising your business and could also act as your primary booking strategy. It should contain photographs and descriptions of your property, your location (and information about the local area), the available amenities and equipment and your customer reviews. Your website could also feature an option to make a booking online. Design your website to reflect your branding and ensure it is functional, easy to use and attractive.
Wi-Fi
Your guests will expect you to provide Wi-Fi. Because multiple devices will be connecting at one time, you will need a Wi-Fi system that is reliable, fast and can handle a higher capacity. Depending on the size of your property, you may require multiple routers or Wi-Fi boosters.
A payment system
The type of payment system you require will depend on your primary payment strategy. For example, if you accept online payments, you may require an online payment system or a way to track payments to your business bank account. If you offer bookings through third-party sites or a holiday letting agency, they will likely handle payments on your behalf.
A fully stocked first aid kit
You should keep a first aid kit on your property that your guests can use in the event of an accident or injury.
Some items you could put in your first aid kit are:
- Plasters of different sizes.
- Bandages and dressings of different sizes.
- Safety pins.
- Sticky tape.
- Disposable gloves.
- Antiseptic wipes.
- Antiseptic cream.
- Distilled water.
- Eyewash.
Cleaning equipment
Some of the cleaning supplies you may require are a vacuum cleaner, a sweeping brush, a mop and bucket, bleach, window cleaner, sanitiser, cloths, sponges and other cleaning supplies. All cleaning equipment should be clearly labelled and stored safely.
Typical Pricing
When you are creating your business plan, an important consideration you will need to make is your expected start-up costs and running costs. Calculating your expected costs allows you to determine your initial investment requirements, your pricing strategy and your profit goals.
There are multiple costs associated with setting up and running a holiday rental business. Some of these costs will be one-off initial costs that you will need to pay when you are setting up your business. Other costs will be ongoing costs you will need to pay regularly – usually weekly, monthly, quarterly or annually.
Some of the typical costs associated with a holiday rental business are:
Your holiday rental property
Unless you already have an appropriate property to use as a holiday rental, this will likely be your biggest expenditure. You will likely need to purchase or build a property, or you could opt to purchase an existing holiday rental business. There are multiple types of properties you could choose including apartments, cottages, lodges, houses and villas. The costs associated with purchasing your holiday let can vary based on several factors, such as the size of the land, the size of the property and the number of bedrooms. The location will also be a significant factor in determining the price of the property (coastal locations, city centre properties and properties close to an area or landmark of interest are likely to be significantly more expensive).
Renovation, refurbishment and installation costs
You may need to convert or refurbish your property to make it suitable for guests. For example, you may want to extend your property to add more bedrooms, convert existing rooms or install ensuite bathrooms. You may also need to install appliances, add plumbing and electricity and decorate your property to fit the aesthetic of your business and make it more attractive to potential guests. Renovation and refurbishment costs can vary depending on the level and scale of work required, from £500 for more basic work to £200,000 for more extensive work. Prices can also vary depending on the types and number of contractors and tradespeople you require.
Exterior renovations
You may need to renovate the exterior of your property to ensure it complies with safety and legal requirements. For example, you will need to make sure your exterior is safe and hazard free and you may need to make the necessary changes to ensure your property is accessible. For example, installing a ramp and widening pathways. You may also want to landscape your property or pay a gardener to make your grounds more attractive from the outside. You may also choose to install outdoor features, such as a swimming pool, a hot tub, a fire pit or a pond. You can expect to pay between £1,000 and £50,000 for exterior renovations, depending on the scale of work required.
Equipment and furniture
The type and amount of equipment you require (and the associated costs) will vary depending on the size of your holiday let and the type of business you want to set up. For example, a luxury holiday rental with higher rental prices will have more equipment requirements than a budget property. If you purchase an existing holiday rental business, you may be able to use some of the existing equipment and furnishings. However, if you are setting up your business from scratch, you will likely have more equipment requirements. You can expect to spend between £5,000 and £50,000 on equipment.
Maintaining, repairing and replacing equipment
Repairs, maintenance and replacements are ongoing costs you will need to factor into your budget. Cleaning and maintaining equipment and ensuring it is used correctly can extend its life, but repairs and replacements are still inevitable, as using unsafe equipment could be dangerous and could result in non-compliance with health and safety legislation. You will also need to replace items such as towels and bed sheets periodically (or if they become damaged or stained).
Running costs
These are the day-to-day costs associated with running your holiday let. Some running costs are paid monthly, and others are paid quarterly or annually. Your running costs can include electricity, gas, water, council tax and insurance. To maximise your profits, try to keep your running costs as low as possible.
Rental platform fees
If you advertise your business on a holiday rental site, such as booking.com or Airbnb, you will need to account for the fees associated with using this service. The fees can vary, depending on the booking site you choose, but you can expect to pay between 3% and 15% per booking. For example, if guests rent your property for a week for a cost of £700, you will likely pay between £21 and £105 in fees.
Letting agency fees
If a letting agent manages your holiday let on your behalf, you can expect to pay a commission for each booking that is made. On average, holiday letting agents charge between 15% and 25% in commission fees. For example, if your property is let out for £700, you can expect to pay between £105 and £175 in letting fees. However, for this price, the letting agency will market the property, manage bookings and offer guest support. Some letting agents also handle the cleaning and maintenance of the property and guest check-in.
A business website
Your business website is an essential advertising tool as it allows potential customers to find your property online and view pictures, descriptions and additional information. Your website may also have a booking system, allowing guests to make a booking or view your availability. Your website will need regular monitoring, updating and upgrading. You also need to make sure your website is secure, particularly if you will be collecting any customer information or banking details. You may also want to pay someone for search engine optimisation (SEO) to ensure your website ranks highly on search engines. You may choose to set up and run your website yourself or hire someone to do this for you. You can expect to pay between £20 and £100 per hour for someone to set up your website.
Branding
When creating your brand identity, consider how you want your business to be perceived by potential customers. When creating your brand, consider the type of holiday rental you are setting up and your typical customer base. Branding creates your business’s visual identity and aesthetic, your business name and your business website. You could hire a professional to help you with branding or do some or all of the work yourself. Branding can cost between £500 and £10,000, depending on the level of work required.
Advertising and marketing
To ensure your business attracts customers and creates maximum profits, you will need to spend money on advertising and marketing. It is recommended that you spend between 1%-3% of your annual turnover on marketing. For example, if your annual turnover (or your desired annual turnover) is £150,000, you should spend between £1,500 and £4,500 on advertising and marketing. You may need to invest more money when you initially set up your business or when you are trying to grow your business. To reduce your costs, capitalise on free marketing strategies, such as on social media.
Cleaning fees
Unless you use a letting agent that handles cleaning for you, you will need to ensure your property is thoroughly cleaned between guests, including washing towels and linens and remaking beds. You can expect to pay between £10 and £25 per hour for a cleaning service.
Business insurance
There are multiple coverage options available for a holiday rental business. Some types of coverage are optional, whereas others are mandatory.
Your coverage options include:
- Public Liability Insurance.
- Product Liability Insurance.
- Building and Contents Insurance.
- Malicious Damage Cover.
- Key Loss Cover.
- Guest Effects Cover.
- Business Interruption.
- Legal Expenses.
Prices can vary depending on your insurance provider and the level of coverage you choose. Prices typically start at £15 per month.
Typical Costs for Customers
Once you have calculated the typical costs associated with setting up and running a holiday let, you can then create your pricing strategy.
Your pricing will depend on multiple factors, including:
- Your location.
- The quality and size of your accommodation.
- Your facilities, amenities, equipment, furnishings and décor.
- The time of the year (prices will be higher during peak times).
- Your direct competition and the pricing of your competition.
- Your booking platform.
- Your set up costs and running costs.
- The length of time the customer makes a booking for (you may offer discounts for longer stays).
The best way to determine your pricing is to examine your target market. Focus on the typical guests you hope to attract and look at similar holiday lets that offer a similar standard of accommodation and similar amenities. Your prices will likely vary significantly depending on the season, for example, you may charge significantly more during the high season (such as school holidays and Christmas or if a local event is occurring).
The cost of a holiday rental can vary significantly, with some properties costing as little as £50 a night and others costing thousands of pounds for one night.
Safely Running a Holiday Rental Business
Implementing safety practices in your holiday rental is an important responsibility. Safety practices help to protect the health, safety and well-being of you, your staff and your guests.
Some safety practices you should employ in your holiday rental business are:
Childproof your property
If your holiday rental is marketed as a family-friendly property, you should childproof your property. This not only protects any young guests staying at your property, but it also can reduce your liability if an accident was to happen.
Some ways you can childproof your property include:
- Use plug covers.
- Avoid cords on blinds and curtains.
- Anchor furniture.
- Cover sharp corners.
- Provide a screen for fireplaces.
- Use pool and hot tub covers.
Focus on improving health and safety
Ensuring a safe environment for the guests is an important task for holiday rental owners. Ensuring your business has proper health and safety measures in place can protect you, your business and your guests.
Some safety measures you could implement include:
- Install secure handrails on staircases.
- Provide warnings for known hazards, e.g. low ceilings or uncovered ponds.
- Avoid trailing wires and cables.
- Perform risk assessments for swimming pools and hot tubs.
- Control the risks relating to legionella disease and other infectious agents if your property has a swimming pool or hot tub.
Implement pest prevention and control methods
Pests can be a major issue for holiday rental businesses, as you are not always in control of how hygienic your guests are and how well they store and dispose of food during their stay.
Some ways you can prevent pests are:
- Fill any gaps or holes in your building.
- Keep your external areas free from food, rubbish or vegetation.
- Encourage guests to dispose of food properly in closed bins.
- Keep your premises clean and tidy (i.e. offer a weekly or bi-weekly cleaning service and clean thoroughly between guests).
- Provide guests with sealed containers to store food.
- Use fly screens on open windows or doors.
Conduct risk assessments
Although not a legal requirement for businesses with fewer than five employees, risk assessments can help to eliminate risks and ensure safe practices in your holiday let. Risk assessments are particularly recommended if your business has any high-risk features, such as a swimming pool, hot tub, pond or steep stairs.
As part of your risk assessments, you should:
- Identify hazards.
- Determine who could be at risk.
- Evaluate any potential risks.
- Implement relevant safety measures.
- Record the results of the risk assessment.
- Review the risk assessment regularly.
You should keep physical records of your risk assessments as evidence of your commitment to safe practices.
Install security measures
Security measures should be implemented to protect your holiday rental from potential break-ins, thefts and damages. Security measures can also help your guests to feel safer.
Some security measures you can implement include:
- A CCTV system.
- Secure and reliable locks.
- An alarm system.
Properly maintain and set up equipment
Any furniture and facilities (such as beds, chairs and tables) in your holiday let and any equipment you supply for your guests to use (such as TVs, ovens and kettles) will need to be properly maintained, correctly set up and safe to use. You must protect your clients from accidents or injuries caused by equipment. You should also perform regular equipment inspections to ensure your equipment’s safety and help extend the lifespan of your equipment.
Check and maintain electricals, electrical outlets and plumbing
Not only can this save you money by avoiding damage, repairs and replacements, but checking and maintaining electricals and plumbing can help to protect your guests from harm. Implement a system for regularly checking outlets and plumbing and ensuring they are up to code.
Keep a fully stocked first aid kit
If a guest or employee has an accident or injury, it may not be serious enough to warrant medical intervention. Having a first aid kit that is checked and replenished regularly and is easily accessible to all guests is recommended.
Implement cleaning procedures
Having effective cleaning procedures is essential for your business. A cleaning schedule and cleaning policies should be in place that cover the cleaning of equipment, surfaces and indoor and outdoor areas. All furnishings and equipment should be inspected regularly, and you should document your cleaning and disinfection procedures. Your property will need to be thoroughly cleaned between guests and towels and linens will need to be washed.
Legal Requirements
Complying with legal requirements is essential when setting up and running a holiday rental business.
Failure to comply with legal requirements could not only result in an accident or injury, but you could also face consequences such as a warning, a fine, the forced closure of your business or, in serious circumstances, prosecution.
If your holiday rental is not located in the UK, the legal guidelines will likely differ. You will need to consider the laws and regulations of the country your business is located in. The legal guidelines listed below apply primarily to holiday rentals located in the UK.
Some of the legal guidelines you should be aware of include:
Comply with Furnished Holiday Lettings (FHLs) regulations
In order to qualify as an FHL, there are specific guidelines you must comply with:
- The property must feature sufficient furniture that visitors are entitled to use.
- The property must be available for letting for at least 210 days in the year.
- The total of all lettings that exceed 31 continuous days should not be more than 155 days in the year.
- The property must be let to the public for at least 105 days in the year (not including longer terms of more than 31 continuous days).
- The property must be situated in the UK or the EEA.
Ensure you have an appropriate mortgage
If your holiday let property currently has a mortgage, you must ensure your mortgage lender and the conditions of your current mortgage allow you to let the property out. If your mortgage does not allow this, you may need to apply for a new mortgage, such as a buy-to-let mortgage.
Apply for planning permission
If you want to alter the layout of your holiday let property, make any structural changes, build an extension or create a new building, you may need to apply for planning permission from your Local Planning Authority (LPA). You will need to contact the LPA at your local council to apply for planning permission. Keep in mind that approval can take several months, so ensure you apply for planning permission in advance.
Apply for a television licence
If you use any televisions in your property, you will need to apply for a TV licence. Because you are operating a holiday rental business, if any TVs are accessible to your guests, you will need to apply for a specific TV licence (a Hotel and Mobile Units Television Licence).
Install carbon monoxide detectors
If your holiday let has any solid fuel-burning appliances, such as log burners or open fires, you are legally required to fit a carbon monoxide detector in any room where these appliances are located. You are also required to fit carbon monoxide detectors in any rooms that have gas or oil appliances (e.g. a gas oven).
Install smoke detectors
Smoke detectors should be installed throughout your holiday let and should be checked regularly to ensure they are working. Smoke detectors should be installed on every floor of your property.
Comply with the Equality Act 2010
The Equality Act requires all holiday properties in the UK to have a written accessibility statement that outlines the facilities and services in and around the property. This document must be clearly displayed on the property and shared with all guests before their arrival. You also need to make any reasonable adjustments to your property to make it more accessible to people with disabilities, for example:
- Fitting ramps.
- Widening doorways.
- Upgrading your lighting.
- Making your website more accessible to people with disabilities, e.g. having text-only versions of each page.
Comply with the Furniture and Furnishings (Fire) (Safety) Regulations 1988
These regulations apply to all upholstered furniture in your holiday rental, including furniture, beds, garden furniture, cushions and pillows. You must ensure all furniture (whether purchased new or second-hand) meets the specified ignition resistance levels and commercial fire safety standards. The regulations do not apply to furniture made before 1950 (unless significant reworking or upholstering has taken place).
Ensure your water supply is fit for human consumption
Under the Private Water Supplies (England) Regulations 2018, you must ensure that the water and filter system on your property is safe and fit for human consumption and use. You will need to have your water supply tested every five years to ensure compliance. Contact your local authority for specific regulations relating to your property.
Apply for a Short-Term Let Licence (Scotland)
If your holiday let property is located in Scotland, you will need to apply for a Short-Term Let Licence.
There are four different types of licences:
- Secondary Letting: Letting accommodation that isn’t your principal home.
- Home Letting: Letting your principal home when you are not there.
- Home Sharing: Letting part of your principal home when you are not there.
- Home Letting and Home Sharing: Letting all or part of your principal home when you are living there and when you are not living there.
Comply with receipt or invoice requirements
You will likely make it standard that you provide all customers with a receipt or invoice. Even if you do not make this standard practice, many of your customers will request a receipt.
There are certain pieces of information you should include:
- The word ‘invoice’ or ‘receipt’ and a unique invoice number.
- Your business name and address.
- The client’s name and address.
- A brief description of your work.
- The total you are charging the client and when the payment is due.
- The payment method.
Comply with fire regulations
As the business owner, you are responsible for fire safety measures on your property. There are multiple fire regulations you must ensure you comply with.
For example:
- Perform a fire risk assessment.
- Inform your local fire authority that you will be operating a holiday rental.
- Comply with the Regulatory Reform (Fire Safety) Order 2005.
- Implement any necessary fire safety measures.
- Implement emergency procedures and ensure these are clearly displayed on the property.
Comply with gas safety regulations
If you have a gas boiler you will need to have it inspected by a gas-safe engineer. If your equipment is deemed safe to use and complies with government requirements, you will be issued a Gas Safety Certificate. You will need to display your gas certificate clearly for your guests and other visitors to your business to see. As a holiday rental business, you will require an annual gas safety certification.
Comply with the Electricity at Work Regulations 1989
The Electricity at Work Regulations state that any workplaces that use electricals must construct electrical systems in a way that prevents danger, maintain electrical systems to ensure they are safe, ensure electrical equipment is checked by a competent person annually and conduct Portable Appliance Tests (PAT). This includes any electrical equipment inside and outside your property.
Comply with the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR) 2013
RIDDOR states that you must report all injuries, diseases and dangerous events that occur in your business. Reports must be made to the Health and Safety Executive (HSE) using an appropriate recording document. These regulations apply to any incidents that involve guests and staff.
Prepare a health and safety policy
The law states that every business in the UK must have a specific policy for managing health and safety. Your policy should state exactly how you will manage health and safety in your business, who is responsible for specific tasks and how and when these tasks are completed. Follow the recommended tips from the Health and Safety Executive when creating your health and safety policy. You should make your policy easily visible to any guests.
Implement safety measures
Safety measures can help to protect your business, your employees, your customers and your equipment.
Some safety measures you should implement include:
- Suitable fire prevention, fire detection and firefighting equipment should be provided and maintained.
- Entrances and fire exits must be kept clear of obstructions.
- A first aid kit should be kept on site.
- An emergency contact name and number should be displayed.
Comply with the General Data Protection Regulations (GDPR) and the Data Protection Act (DPA)
If you accept online bookings, you must comply with both pieces of legislation when storing or sharing personal information, such as your customers’ personal information, contact details and banking information. You must also apply for a Notification to Process Personal Data Licence. You will also need to apply for a licence with the Information Commissioner’s Office and renew your registration every year.
Comply with employment legislation
If you employ any staff (such as cleaners or check-in staff), you must ensure you follow employment legislation, including the Employment Rights Act (1996) and the National Minimum Wage Act (1998). You must also comply with legislation relating to recruitment, working hours, sickness, discrimination, dismissals, and maternity or paternity pay.
Register your business
Your business must be registered with HMRC before you begin operating. You can choose to register as a sole trader or as a limited company. You will also need to register your business name and any other relevant information.
Register for self-assessment tax
This allows you to calculate and pay your own taxes each year. You will need to track your finances every month and submit any expenses as part of your tax assessment.
As part of your tax responsibilities, you must:
- Record all forms of income and expenses.
- Complete an annual self-assessment tax return.
- Register for VAT if you earn above the threshold (currently £85,000).
- Pay National Insurance contributions.
- Keep a record of your business accounts for the previous five years.
Positives of Owning a Holiday Rental Business
Starting up a holiday rental business can be rewarding in many ways.
Some of the main pros associated with this type of business include:
Design your perfect holiday rental
The majority of people who set up a holiday rental are passionate about the tourism industry, have dreamed about working in it for years or enjoy staying at holiday rentals, B&Bs and hotels themselves. Opening your own holiday rental business allows you to design your dream business, from the atmosphere, décor and feel of your holiday rental, to your facilities, your advertising strategy and any additional services you offer.
Choose your target customers
As you are designing your business yourself, you can create your business plan with your desired market in mind. This could be the customers you feel will maximise your profits, the customers you are most comfortable with or those that are most likely to fit your brand and aesthetic. Choosing your own target customers also allows you to design your accommodation with them in mind and set your pricing accordingly.
Potentially low start-up costs
If you already own a suitable property, a holiday rental business requires minimal investment. You may only need to pay for décor and furnishings, any permits and legal requirements and your advertising costs. Low start-up costs, particularly compared to other businesses in the tourism industry, allow you to begin turning a profit more quickly and can make your first year in business lucrative, even though many other tourism businesses don’t begin to make a profit until after the first year.
It can be rewarding
A holiday rental business can be personally and financially rewarding. It can help you to take a step back from the traditional 9-5 working hours and, once your business is established, allows you to run your business with minimal input. You can also build positive relationships with your guests and get to know people from all over the UK and the world. If you are passionate about what you do, your business will likely not feel like work. For people who enjoy face-to-face interaction and spending time with other people, a holiday rental business can be very rewarding.
Low time investment
Once you have set up your holiday rental, you can run your business with minimal input. Guests will not expect any staff to be onsite, meaning all you will need to do is prepare the property for your guests. You could even use a holiday letting agent who will arrange listing your property online for rental, handle bookings and payments and arrange cleaning and maintenance. You can be as involved as you want with the day-to-day running of your business and can earn an income with very little work.
It can be lucrative
As your business grows and your holiday rental gains exposure and becomes more highly reviewed, you will have the potential to earn a higher income. Your holiday rental can begin making a good profit almost immediately. As your business grows in popularity, you can also raise your prices and scale up your business. A holiday rental business has a high-income potential and, with a solid business plan, can be extremely lucrative.
A scalable business
A holiday rental business can have a simple business model, making it easy to set up this type of business. If you want to grow your business, this type of business is highly scalable, as you will already have a solid business plan that is easily transferrable to other properties. You can open additional holiday lets in the same area or other locations and significantly increase your profits. High demand for your business and high scalability gives you great opportunities for growth.
Choose your advertising and selling strategy
You can choose whether to set up your own website, advertise on booking sites, such as Airbnb or Booking.com, or use the services of a holiday letting agency. Having the ability to advertise your property on multiple platforms can increase your customer reach and increase your revenue streams. You can even change your selling strategy as your business grows and evolves.
Easily gain exposure
The rise of social media and holiday accommodation sites makes it easier than ever for you to gain exposure. Particularly if you are able to take good photographs or are tech-savvy. Gaining exposure online is an easy and effective way of growing your business and increasing your profits with minimal or no costs.
High demand
People in the UK take on average 3.4 holidays per year, including holidays abroad, staycations in the UK and weekend breaks. With holidays being so popular and people willing to spend on booking holidays, the demand for holiday rentals is higher than ever. High demand makes it more likely that your business will succeed and will allow you to earn a higher profit margin.
Guest loyalty and recommendations
Holiday rental properties in the UK are particularly popular for staycations. This makes it more likely that people will return to the same property multiple times (if they had a positive experience) or will recommend your holiday rental to their friends and family. Guest loyalty is an effective way to grow your business and maximise your profits.
Be part of the local community
Setting up a holiday rental is a great way of connecting with the local community, particularly as you will be bringing increased business to the local area. You can partner with local businesses, including pubs, restaurants and shops, to advertise each other’s businesses and offer discounts and can create positive personal and business relationships with fellow business owners and people living in the local community.
Pick and choose your guests
You will have the option to choose which bookings to accept and decline any guests you do not want staying at your property. For example, some holiday rentals refuse to accommodate hen and stag parties. Other properties operate as adults only or have a minimum age requirement (for example, they do not accept bookings from guests younger than 25).
Be your own boss
You can make all key decisions yourself and steer your business in whichever direction you choose. You can choose how involved you want to be, the type of holiday rental you want to set up, and your property’s location. You can make the best decisions for you and your business.
Negatives of Owning a Holiday Rental Business
Although owning a holiday rental business can be rewarding in many ways, there are some potentially negative aspects to this type of business, for example:
Demanding guests
Some guests can be extremely demanding and may not understand that holiday rentals operate differently than hotels. They may expect you to always be available to help them and may expect your property to have the same amenities that they have experienced in hotels they have stayed in. To avoid negative reviews, you may feel like you have to adhere to the demands of difficult guests, which can impact your own personal life.
Bookings can be inconsistent
It can be difficult to plan your finances and predict your profits when you work in the tourism industry because bookings can be very inconsistent, with some times of the year being significantly more popular than others (for example, summer and Christmas). There could be certain times of the year when you have no or very few bookings and this can make it difficult to make your business a success long term. Although you can charge higher prices at peak times, this may still not be enough to make up for a lack of bookings at other times.
Negative reviews
Although the majority of customers leave honest reviews, some customers are difficult to please and will leave a negative review because of the smallest complaint (even if it is something outside of your control). Some customers even leave negative reviews because they didn’t read the property description properly (for example, complaining about the distance from the local town even though that is clearly stated). It’s also possible for people to leave fake reviews, which can be extremely damaging to a business and can be very difficult to remove, even if you know they are fake. Negative reviews can also result in customers avoiding your business.
Complying with legislation
There are many different pieces of legislation and legal guidelines you will need to comply with. Not only can this be complicated and time-consuming, but any non-compliance (even if this is accidental) can be heavily punished with a fine, the forced closure of your business or even a prison sentence. A holiday rental business can have high liability which can be a lot of stress and pressure on a business owner.
Potentially high start-up costs
If you already own the perfect property that already has the correct facilities installed, start-up costs can be low. However, if you need to purchase a new property or make extensive renovations to your existing property, this can be extremely expensive and time-consuming. It can make setting up your business a long process and result in you needing to take out expensive business loans, which can lengthen the time before you begin turning a profit. You will also need to account for furnishing your property and purchasing equipment.
If there’s a problem, you need to fix it
Unless you work with a letting agent, if there is an issue, no matter what time of the day or night it is, you will be responsible for fixing it. If your property has a water leak, the electricity stops working or there is another major issue late at night, you will be responsible for fixing it to avoid a negative review from the guests or to avoid needing to give them a refund. It can be difficult to manage stressful situations and solve major issues yourself, especially if they occur at inconvenient times.
It can be competitive
Not only are you competing with other holiday rentals, but you are also competing with hotels, B&Bs, caravan parks, holiday parks and other holiday properties. Having multiple businesses to compete with can make it difficult to establish your business and earn an acceptable profit margin.
It can be difficult to make your business succeed
If there are already established holiday rentals and hotels operating in your area, this can make it extremely difficult to grow your own business and make a success of it. Potential guests are more likely to choose a holiday property that is highly rated, that they have used previously or that has been recommended to them. Setting up a holiday rental business and making it succeed can be more difficult than people realise.
High responsibility
As the business owner, you will have a lot of responsibility, including ensuring the financial success of your business, ensuring the health, safety and hygiene of your property and advertising and marketing. Although you may have few responsibilities regarding the day-to-day running of your business, you will still be responsible for the success of your business and for ensuring the safety of your guests, which can be stressful.
Issues out of your control
This can be one of the most frustrating aspects of running a business, as things that are outside of your control can have a negative impact on your business and your profits. For example, a flood in the local area, local train strikes, or an electricity outage can prevent you from properly running your business, which could not only affect your profits but also result in negative reviews from customers or the cancellation of bookings.
No benefits
As you are self-employed, you won’t receive benefits such as pension contributions. You will also be responsible for doing your own taxes and organising your National Insurance contributions. You will also have a lack of job security.
Planning Your Holiday Rental Business
An effective and well-designed business plan is essential to the success of your holiday rental business. A business plan can help you to focus on the specific steps that will help your business succeed, plan your short-term and long-term goals, determine your financial needs and help your business to grow.
When creating your business plan, ensure it contains information such as:
- Your company information.
- Your company description.
- The services you will provide.
- Your branding, marketing and advertising plan.
- The structure of your business.
- The operational plan for your business.
- The financial plan for your business.
Some of the factors you will need to consider when creating your business plan are:
The type of holiday rental you are going to set up
This is one of the most important considerations you will need to make. There are many different types of holiday rentals and you will need to consider the type of business you want to set up.
- Will you set up a budget, mid-market or luxury holiday let?
- What type of property will you choose (e.g. apartment, townhouse or villa)?
- How many guests will your property cater for?
- What will the bed configuration be (e.g. double, twin, bunk beds, king-sized beds)?
- What type of check-in experience will you offer?
You will also need to decide whether to use a property you already own as a holiday rental or whether to purchase a new property with the intention of renting it out.
Your location
This is another important consideration, as many people searching for a holiday let will have a specific location in mind (e.g. Cornwall) or an idea of the type of location (e.g. coastal). Your location will have a significant impact on the types of guests you are likely to attract. It will also impact the purchase cost of the property and the rental value (i.e. how much you can charge your guests).
Your primary booking strategy
This is a key consideration and can have a significant impact on the types of customers you attract and the success of your business. On what platforms and websites will you list your property? How can potential guests make a booking? Will you use a holiday rental agency? Will you list your property on third-party websites, such as Booking.com? Will you have your own website? Whichever options you choose require forward thinking before you begin setting up your business. You could choose to utilise a combination of different selling approaches in order to increase your sales. Your primary booking strategy could also change as your business grows.
Your target market
Determining your target market is a key step in helping your business succeed. You can choose to target budget, mid-market or luxury customers. There are multiple factors that can influence your target market, including the quality of your accommodation and the facilities and amenities, your price points and your advertising. Once you have identified your target market, you can then focus on how to attract these customers to your business.
Your competition
When analysing your competition, you shouldn’t just focus on holiday rentals that operate in your area, but also similar holiday lets that operate in similar locations around the country (e.g. other properties that are located near the coast in different areas of the country). Analysing your competition allows you to look at what they do well and what you think can be improved upon. Look at your competitors’ facilities and equipment, the services they offer, their pricing, their target market and the number of employees they have. Analysing your competition also identifies whether there is space in the market for your business.
Your brand and your unique selling point (USP)
Creating your brand is a key way to ensure you stand out from your competition. Branding can help you to focus your target audience, attract customers and concentrate your marketing and advertising strategies. Some ways you can create your brand are by focusing on your business’s visual identity, designing your premises and website and creating a brand story. Your USP can also be part of your brand and can help your business stand out from your competitors. Consider what makes your business special and how this fits into what defines your business.
Your marketing and advertising strategies
Marketing and advertising are especially important when you first open your holiday rental business. Your marketing strategy needs to be effective and budget friendly. Consider your target customers and the best way to reach them.
Some ways you can market and advertise your business are:
- Build a functional and attractive website.
- Advertise on multiple platforms and forums.
- Partner with local businesses and local events.
- Offer discounts to returning customers.
The equipment and amenities you will offer
This is an important consideration as the furnishings, equipment, amenities and facilities available to your customers can have a significant impact on your typical customer base and your start-up costs. Consult the list above to determine your equipment requirements. The equipment you require will depend on the type of holiday rental business you set up and how big your premises is. Once you have determined your equipment requirements, you can then calculate the initial costs of purchasing the equipment.
Your start-up costs and running costs
Consult the list above to help you calculate the approximate costs of setting up and running your business. Determine what equipment you need and the amount of equipment, as well as the cost of your property, to help you determine your start-up costs and what your initial investment requirements will be. You can then calculate whether you can finance your business yourself or whether you need to source outside investment, for example, from a bank. Determining your start-up costs and running costs can also help you to create a budget and predict when you will begin to turn a profit.
Financing your business
Consult the list of start-up costs and running costs above to determine what capital you will require. Can you finance the business yourself or will you need to source outside investment? You will also need to calculate when you are likely to begin turning a profit. If you require outside investment, consider whether getting a mortgage from a bank or another financial institution would be beneficial.
Your pricing policy
How will you price your property? Will you charge per day or per week? Will certain times of the year be more expensive (e.g. school holidays and bank holidays)? Will you offer any discounts or special offers? As your property grows in popularity, your pricing policy may change. Consider the pricing of your competitors and your running costs when setting your own prices.
Your sales forecast
How many bookings are you realistically likely to get? Are there certain times of the year that are likely to be busier than others? What are your weekly, monthly and annual sales forecasts? You can analyse the booking forecasts of similar businesses and look at how bookings vary throughout the year to estimate demand. As your business grows, your sales forecast is likely to change.
Your strategy for growth
Your strategy for growth is the actions you will take to realise your goals for expansion and any potential challenges your business could face and how you will avoid or overcome them. This can help to make your business more successful.
Potential challenges could include:
- Lack of bookings during the off-peak season.
- High cleaning and maintenance costs.
- A lack of returning guests.
Some potential strategies for growth include:
- Offer special discounts during off-peak times.
- Raise your prices during the peak season.
- Increase your marketing and advertising.
Your business summary
Your business plan should include a detailed overview of your business, including the type of holiday rental you are setting up, your typical customer base, your equipment requirements and your business goals.
Your business goals
Your business goals or objectives are an essential part of creating your business plan. Your business objectives highlight the targets and goals of your holiday rental business and help you to create a one-year, three-year and five-year business plan.
Your business objectives should be SMART:
- S = Specific
- M = Measurable
- A = Achievable
- R = Realistic
- T = Time-bound
Check you have complied with all legal requirements
Consult the list of legal requirements above to check you have complied with all requirements and regulations and that all your paperwork is accurate. Failure to comply with legal requirements could have a detrimental effect on your business or could result in a fine, the forced closure of your business or, in serious cases, prosecution.
