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Holiday lets, worth Running the Business Yourself or better using a Letting Agency?
The pros and cons of running your own holiday accommodation letting business, in comparison to using a letting agency.
The majority of holiday lets use a letting agency mainly because such an agency will undertake the marketing of the holiday accommodation for the owners.
The commission they take can vary depending on the level of their involvement in the business.
The highest rates of commission by letting agencies are for provision of a full management service and this is when they literally undertake all aspects of the business for the accommodation owner.
At this higher level of service, the letting company will undertake all the marketing of the property through various mediums, such as magazine advertising and their own website. The latter is usually positioned high on search engine listings and so receives good volumes of traffic of potential customers looking for holiday accommodation.
The agencies usually maintain the properties they represent, making sure each one is up to standard before a new customer arrives. If damage occurs to the holiday lets, they will organise the repairs and will also have an inventory of each accommodation's facilities, replacing anything which has been damaged or gone missing.
Most letting agencies will take a bond from holiday bookings in advance, so if any damage to the property or its possessions occurs, the cost of repairs or replacement will be removed from the bond before the remainder is returned to the customers after their holiday.
A representative of the letting company should inspect all properties after each occupancy and this is often undertaken by the cleaner they have organised to look after that particular property.
This level of representation means they are basically taking the holiday property completely out of the owner’s hands and conducting all aspects of the business. For this amount of work they usually require somewhere in the region of 40% to 50% of the gross money paid by the holidaymakers for the accommodation.
It is often the case that the actual owners of the holiday accommodation property are allowed only a small number of weeks each year when they can use the property themselves, especially during the peak holiday season, and these owner bookings usually have to be pre-arranged in advance. This is to make sure that the holiday letting agency can receive sufficient income for their holiday accommodation properties, to cover the expenses of their marketing campaigns and maintain their own profit margins.
The next lower level of letting agency contract tends to only involve the marketing of properties to obtain customers and usually that is where their responsibilities finish. All other aspects of the holiday accommodation have to be taken care of by the property owners themselves. It is usual for an agency at this level of involvement to charge somewhere in the region of 15% to 20% of the gross income generated by the property. The owners sometimes are allowed to 'owner book' their property for customers which they have found themselves. They have to notify the letting agency of their booking so it can also be marked down on the agency's calendar, thus generating a reference number back for the accommodation owner's record.
Holiday lets vary a great deal in their occupancy level, depending on the surrounding attractions of the area in which the property is based and also its climate.
A typical seaside holiday let in the UK can often expect bookings throughout the summer with, hopefully, reasonable occupancy rates if the marketing has been done well. In some cases if the local area is very scenic with good local attractions, it may also generate some level of bookings throughout the off-peak months.
If the owner of the holiday accommodation decides not to use a letting agency at all, undertaking all the responsibilities and actions of letting the property themselves, obviously the profit margins could be much higher but only if the marketing campaign and management is done very well.
Often the hardest part of self-managing holiday accommodation successfully is obtaining a high enough occupancy rate throughout the year, which can involve some level of advertising through magazines and usually Internet marketing also.
In fact if Internet marketing is taken on very efficiently, this can be the main or even only source of bookings needed, especially for single holiday lets.
To obtain this kind of result from the Internet alone, it would be necessary for the property owner to either employ a website marketing company or to undertake the tasks themselves.
If the owners decide to undertake the Internet marketing themselves, they will initially have to master, to a reasonable degree, various skills which are usually referred to as search engine optimisation.
Some of the necessary skills required to market holiday accommodation from a website are things like keyword research, which means finding out the search terms that people type most often when looking for the type of property the owner has in that area.
For example, with our properties the term 'Whitby holiday cottage' is searched for much less than 'Whitby holiday cottages', because most people are looking for a list of properties from an agency. Also 'Whitby cottages' is typed in more often than 'Whitby holiday cottages' because usually people use the minimum number of words when searching.
The next step, therefore, is for the owner to have the business website optimised for the chosen keywords, so that it appears as high on the search engine rankings as possible for the important keywords.
This involves having the keywords inserted into the website in the appropriate manner and is referred to as, 'on page optimisation'.
Next there is, 'off page optimisation', which involves actions like obtaining inbound website links to the business website, which is time-consuming to accomplish, because it requires more skilled actions which are not always in the direct control of the Webmaster, relying to some degree on other external businesses' websites.
There are many other ways to get inbound links to improve search engine rankings, such as using online directories, which sometimes require a fee to be paid. Another way is to contact similar subject websites and ask for reciprocal links.
This whole process of search engine optimisation is a time-consuming process which, if done properly, will produce good results in the long-term.
There is an alternative to the long-term actions of search engine optimisation of the website, in which immediate results can be obtained on the Internet and this is 'paid-for advertising' on the Internet. This is called 'pay per click' and it can produce good results very quickly. The downside is it can also be expensive, especially if not managed very carefully. Once again this is another required skill that needs to be mastered efficiently. Alternatively, the owners could pay for the services of a company to manage the 'pay per click' campaigns.
What should be remembered is that if the owners of the property decide not to undertake the search engine optimisation, or the 'pay per click' campaigns themselves, they have to be very careful and select a company they can trust to do the work for them. The chosen company should provide detailed performance data of the website's traffic generated, in comparison to the works they have completed on their search engine optimisation campaign.
Owners who look after their own properties completely and don’t use an agency at all.
Firstly they have to arrange to let the holidaymakers in themselves on arrival day, or arrange for a representative like the cleaner to meet the customers. In some cases the accommodation owners choose to not provide anybody to meet the holidaymakers but just leave instructions on how to open a key safe outside the property, which allows the holidaymakers to let themselves in.
The maintenance and cleaning of the property has to be organised by the owner, along with all the necessary paperwork and any returnable bonds.
Some owners will organise a payment terminal at home, so that they can receive payments over the telephone from holidaymakers wishing to book or, even better, to have payment facilities integrated into their website, so payments can now be done by the customers immediately.
In today's world, probably the most important aspect of successful holiday accommodation letting, is a well organised marketing campaign on a business website. The accommodation owner must be prepared to continually work on this marketing, especially in the area of search engine optimisation of the website, because the competitors' websites are also always improving their online campaigns in order to improve their search engine rankings.
The accommodation website itself must also be well designed and well structured so that potential holidaymakers can navigate through the website easily, finding the important information they require. This will allow them to determine quickly if the property is suitable for them.
Often, when looking at a holiday accommodation website's traffic data through a tool like Google analytics, the most looked at pages on the website are the homepage, then the tariff page and finally the availability page.
It is also extremely important to make sure that the accommodation website has attractive pictures which represent the property accurately and it can also be very beneficial to include a video guide of the property. If enough information is provided on the website, customers will often book the accommodation without asking any questions whatsoever, which is a good situation for both customer and owner.
If the owner of a holiday accommodation property is prepared to do all aspects of the business themselves and do each one to a good efficient level, they will receive a much higher profit margin than using an agency to undertake some of the tasks. But it must be remembered that this is an on-going business in all areas to keep it successful.
For example, it is often stated that a holiday cottage can take up to five years before it can move into a profit situation, taking into account expenses etc. but, from my own experience, it is possible to obtain a good profit margin from year one, but only if all the above-mentioned aspects of the business are undertaken efficiently and with a dedicated amount of effort.
One last thing that should be mentioned is that the accommodation itself should obviously be to a good standard for the amount of tariff being charged, so that it represents value for money. Remember, repeat business is the name of the game long term.
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