The business model for running a successful holiday let is a wide topic with many interesting sections. The two most critical are:
- how to maximise your revenue from bookings; and
- how to wow guests by fulfilling those bookings in terms of quality housekeeping and excellent customer service.
Maximising rental income
When assessing your rental income and how you can maximise your revenue opportunities, it comes down to two factors. Firstly, how you market your holiday home and secondly, how you price it.
With regards to marketing, before diving into the details of digital marketing, it’s important to get the fundamentals right. As property manager, it is vital to ensure that your holiday home is photographed and presented brilliantly. It sounds obvious, but just go online and see how many poor holiday cottage listings there are. Use nothing but high definition images and preferably produce a helpful ‘walk through’ video, alongside text that’s engaging for your audience and also accurate. The description should tell potential guests everything they need to know; location, how to get to the property and the property’s facilities, for example. The overall portrayal of your holiday let has got to be appealing and, above all, remember it’s the photographs that sell.
Once you have a great listing, you then need to plan how you get this message out to the public. Your property needs to be promoted in all the right places, so that people see it when looking for holiday homes. This process is typically search-based via the internet. For example, if someone types ‘luxury holiday cottages in the Cotswolds’, you have to ensure that your property (if that be a Cotswold cottage) is going to be found. Likewise, if you own a ‘dog-friendly cabin in the Lake District’, your property needs to be found under those search terms.
Achieving the above is very difficult if marketing the property yourself. Some holiday cottage owners will decide to build themselves a website, but the problem with this method is that nobody will find you because you won’t appear in any important national or regional keyword search results! It would also be uneconomic to pay for your own digital marketing such as via Google AdWords, and putting an advert in a newspaper is unlikely to generate much business.
Property managers can, of course, go direct to the market through a portal such as Airbnb or TripAdvisor, which have international reach and are well known. These platforms will essentially take your property’s description, photographs and details, and publish them onto the public site, where people can find them.
If you go it alone by promoting your holiday home on just one, single portal, it’s unlikely that you’ll generate sufficient exposure to really maximise your rental income. It’s more likely that you’ll have to go with multiple platforms, if not all of them simultaneously. When doing this, one important consideration is to ensure that your property is listed as ‘Instant Book’ on all platforms, otherwise you’ll get pushed to the bottom of the search results and get few bookings. Do bear in mind that if you’re listed as an ‘Instant Book’ property on a number of different portals, you may run the serious risk of double bookings. As a result, you might want to consider how to split the calendar amongst the different portals.
Alternatively, there’s the option to go with a third party, specifically a professional holiday letting agent, either national or local. The agent route tends to be the most expensive but will also typically result in the largest reach and greatest rental income. Agents have the necessary technical skills to solve the double-booking issue noted above, and typically have extensive marketing experience and budgets.
Therefore, for property managers whose objective it is to maximise marketing reach and financial return, going with an agent is normally the way forward. It also helps you get a holiday let mortgage – read more about mortgage lenders and their criteria here.
Working out a pricing strategy for your holiday let is fundamental. If you under-price the property, you’ll appear to be successful and get a larger number of bookings, but you will not generate a good profit. On the other hand, if you over-price, you’ll make a few bookings at a much higher value, but at the end of the year when you tally up your profits, you’ll realise that you’ve not made much money at all.
Pricing your holiday let is a complex subject as it’s affected by many things, including seasonality and popular local events such as festivals. It’s also affected by time, in the sense that a holiday booking slot is like a perishable item – as the start date gets closer, the potential value decreases to the point where, if no one books the property for that date, the value of the slot becomes zero.
Discounting or ‘variable pricing’ is a common strategy, which ties in with the idea of holiday homes as ‘perishable’ items. The idea is, if your property hasn’t sold by a certain date, it’s time to apply a small discount to entice someone to make a booking. You can then increase this discount with time, but this will be subject to a minimum price, as there comes a point when it’s not worth selling the booking slot.
Agents provide sophisticated pricing strategies, developed over many years of experience and with vast data sets, and so they’re the recommended advisors to go to first, in order to work out your pricing. The portals (such as Airbnb and TripAdvisor) can estimate what your pricing should be, but generally, such portals work on a nightly rate model that’s more suitable for hotels and B&Bs and does not translate very well for holiday homes.
Housekeeping and property management
Efficient housekeeping is fundamental to the success of your holiday let. If a guest arrives to a holiday cottage that’s unclean and unprepared, they’re likely to leave and never book with you again. Having a refined and controlled housekeeping function is absolutely essential.
Outsource or do it yourself:
You can undertake the task yourself if you’re so inclined and have the time, or you can pay for a professional housekeeping service to do the work for you.
When making this decision, it’s important to acknowledge the amount and frequency of the work involved. If you run a successful holiday home in a popular location, such as the Lake District or Cornwall, you could generate over 50 bookings per annum. This means over 50 times a year that your property will need to be properly cleaned, which is a large amount of work.
Thus, if you decide to do the housekeeping yourself, or appoint friends or family to help, some caution needs to be applied. It might be a substantial task that is best-suited to a professional!
The other aspect to consider is that you cannot have cancellations for housekeeping. Once you’ve taken a booking, it’s a legal obligation on you, the holiday cottage owner, to fulfil, and you have to make sure that the property is ready for your guests. What you can’t have is a housekeeper who calls you up on the day, saying they can’t work. This is not a workable solution and your holiday letting business will suffer as a result.
Another (often overlooked) dynamic is that it is very normal for people to book late, especially with the smaller properties. This could mean you get notification of a booking with only one day’s notice and you’ll have to get there and take care of the turnaround within this tight time period. This can be a very difficult task for a non-professional housekeeper.
When people think about housekeeping, they tend to think, simply, of cleaning a cottage. In reality, the turnaround on holiday homes comprises quite a bit more. You’ll need to do a quick inventory check; look for items that have been left behind by guests; put things back in their correct place; replenish supplies such as coffee and sugar; do the washing and ironing of all the linen; empty all of the bins; and so on. Essentially, you have to get the house set up for a guest, to the same high standard every time.
The recommendation is, if you can do it yourself, be prepared for the workload and be aware that you have to carry out the work to an excellent standard, for every single booking. If this isn’t feasible, it’s advisable go with a professional holiday letting housekeeper.
Providing outstanding customer service
A lot of property managers think that efficient turnaround and housekeeping is all that’s required for a successful holiday let, but this is not true. What’s also paramount is the customer service aspect, which needs to be nothing short of excellent.
If you’ve gone with a holiday letting agency, some of them will take charge of customer service, while others do not – it depends on what services the agent offers. If you’re taking care of customer service yourself, then you need to be prepared. Expect to take phone calls, potentially at unsociable hours, which could be anything from small issues such as: ‘I don’t know how to turn on the television’, to more serious matters such as: ‘the boiler has broken’.
Regardless of how the situation has come about (many issues are not the owner’s fault, there could be a power cut, for example), you need to be ready to jump into action and solve the problem. When people are on their holidays, they expect any issue to be resolved quickly and efficiently, and it is the holiday cottage owner’s responsibility to do this. If property managers are not set-up to be able to handle this part of their business, then it is recommended they ask their housekeeper to take over the role. This often costs more money, but from our experience, it is money well spent!
Looking beyond housekeeping and customer service, increasingly we are seeing more emphasis on going the extra mile to ensure that your guests not only have a nice house to stay in, but also have an exceptional experience whilst on holiday. This means, as well as a welcome gift, holiday cottage owners are offering additional perks and personalised experiences, for example, organised walks, bike rentals, providing home-cooked meals, and leaving useful information about nearby attractions and eateries.
Security or damage deposits
Holiday letting is a business in which you’re opening your doors to the general public; as a result, it’s only a matter of time before there’s some sort of problem. Whether it’s something being broken, or damage that’s done to the property intentionally or accidentally, such situations will arise. You need to plan how to manage such problems and how to protect your property.
The topic of whether or not to use a security deposit is a polarising debate. Some holiday cottage owners do not put a security or damage deposit in place, instead, they handle each event on its own merit, as and when it happens. If the amount of damage is less than a certain sum, for example £50, then they don’t pursue it in the interest of goodwill. But when it’s above that amount, owners should feel every right to engage with the customer, in order to ascertain the reason behind the damage and ask for their contribution to rectify the situation.
Other holiday cottage owners will prefer to take a security or damage deposit in advance, such that if there is a dispute about damage, the owner has a certain amount of money to offset the repair costs. If you don’t have a deposit, there’s no way to claim compensation (if the guests deny they’re to blame for the damage or refuse to pay). In that case, the only solution is to take the guests to a small claims court; an option which is decidedly unappealing!
Taking a deposit is not a ‘free option’. Normally there is a cost involved in the administrative task of taking/ returning the money. There’s also an ‘opportunity cost’, in the sense that you’re likely to lose a few bookings each year, as some guests will feel that the security deposit process is flawed and unfair, the reason being that there is no detailed check in/ check out procedure with a holiday let. The power thus lies with the property manager. If someone met the guests on arrival and departure to look around the property in detail, that would be a solution to the problem. However, in reality, there’s not enough money or time to allow that to happen.
Feedback and reviews
We live in a review-based culture and this is something that property managers should embrace, rather than being afraid of. Reviews are a very powerful marketing tool, so following a guest’s stay, it’s recommended that you provide them with a very simple feedback form, most probably sent via email for ease.
How to handle negative reviews:
If you receive a less-than-positive or downright negative review, the first thing to do is not panic! Read through the guest’s comments carefully and consider your response.
What you shouldn’t do is take an emotional or knee-jerk reaction, and then write a counter-attack response. It’s essential to remember that your comments will probably be read by all of your future guests. Speaking about how to deal with reviews, director of Holiday Cottage Mortgages, Andrew Soye, says: ‘Our advice is, always try to take the high road and don’t get into a tit-for-tat argument’.
He continues: ‘If a guest writes ‘I didn’t like your cottage and didn’t enjoy my stay’, the owner should reply with a professional response. Write something that addresses the person’s concerns, make an apology and say that you’ll get in touch with them directly. It’s also important to express that you will review your procedures to ensure they’re perfect for future guests’.
Of course, it’s critical to actually address the person’s concerns and fix any issues that may exist. By doing this, future guests reading the complaint and the management response will think: ‘that problem has been resolved professionally’. Essentially, write a positive response that will give people confidence that any issues are sure to be handled well and will be fixed.
Generally speaking, if there’s a holiday home that has no reviews, alongside a cottage that has a negative review with a good response, the latter is more likely to generate bookings. People like the fact that they’ve seen a good response, directly from the property manager or agent.
How to handle positive reviews:
If you get positive feedback that’s brilliant news, and you should aim to post that feedback across as many social media and review sites as possible, to make sure the world knows about it.
It’s also important to respond to positive reviews; acknowledging positives offers an excellent marketing opportunity and reinforces your branding. It shows that you have a level of care to your customers and pay good attention to detail. This will in turn help to generate more bookings and boost your rental income.
The information contained in this article is accurate at the time of writing, based on our research. Rules, criteria and regulations change all the time and so please speak to one of our Consultants to confirm the most accurate up to date information. Nothing in this article constitutes financial advice. Please always consult your accountant or solicitor for all financial, taxation or legal matters. Your home may be repossessed if you do not keep up repayments on your mortgage. Pure holiday let, buy to let and commercial mortgages are not regulated by the FCA.