Prices and Rents for Holiday Homes

LEOMINSTER_HOUSE_leominster3Good booking agents usually advise on the best rate structure to get results but, equally, benefit from listening to the experience and observations of homeowners.  Agreed rates are normally reached by consensus after discussion of pros and cons and different possibilities.  If it is felt that suggested rates are a little too high or low, a good agent will not hold back from saying so, in the interests of all parties, to maximise the income from the holiday let.  This approach sometimes can sometimes contrast with the practice of booking agents setting prices and being unable to flex outside of rigid bands sometimes to the detriment of income and bookings.   Getting the prices or rent right is important and negotiating before agreeing a deal about is well worth thinking about.

The ’The Rates Tool’ provides a systematic and logical way to calculate rates for any combination of start and finish days based on the standard rate for a week and chosen percentages to apply to each type of period.  It is a valuable and useful tool to apply logic to setting rates whilst retaining flexibility and freedom to set the much as you would prefer. This can be sent free of charge by a request to charles@holidayletsforsale.com  See useful suppliers, national agencies & regional agencies

A logical method of setting rates can be seen with the CHL rates tool.  An image of the spreadsheet is at the bottom of this page.   However, we can send a copy in Excel form so you can experiment and see how it works.

The main factors determining rents or prices are:

Number of guests who can stay;

Quality;

Facilities and Location.talltrees09

Marketing presentation, such as the quantity, quality and choice of photographs can radically improve bookings and, even, increase prices you can charge.

Do not make the mistake of setting rates on the basis of quality and facilities alone.  For instance, a top quality holiday let in central Hay on Wye (famous for its book festival) can command significantly more than one of equal quality a few miles away in a beautiful rural location.  The Internet will give you a good initial indication range of the level of prices you might be able to charge, then you need to sort out the best ones suited to your cottage, its location, quality and facilities.

Feeling The Market/ Setting Prices

LEOMINSTER_HOUSE_extra5This may sound obvious but it needs to be said.

Selling a possession is not like renting out a holiday let.  If you wait for someone to come along and pay the price you want for something you are selling, it can be profitable to hold out for several months to get the asking price.  If you hold out the same way when renting a cottage, you can end up seriously out of pocket.  We advise new cottage owners to set initial rates lower than the eventual target rates.  The idea is to feel out the market and raise rates to maximise bookings and revenue.  Excepting cottage terraces (rows) or large, purpose built developments, each is individual, so they do benefit from individual treatment.  Feeling out the market may cost owners in terms of lost edge on rates, but the cost of lost bookings by going in too high could be far greater, as you wait for weeks or months before inching rates downwards to get bookings.

Niche Markets And Seasonal Rates

Rate structures vary, depending on the markets your holiday let appeals to.  The ideal holiday let will appeal to as many niche markets as possible.  This can have an impact in surprising ways.  For instance, when buying furnishings for a twin bedroom it is important to buy beds that can be arranged either as twins or as a single large double bed.  This simple provision will ensure you can get the best from niche markets that either insist on doubles or require twin beds.  The single most easily avoidable costly mistake encountered by many booking agents on their travels is where owners have bought twin beds that cannot be joined to create a double.

The times of year people  guests prefer for their holidays can have a significant impact on the market.  For high occupancy, the ideal is to appeal to the demand during the school holiday periods as well as to cater for those who often take breaks outside of the school holidays.  In many cases, people actively choose not to take holidays during the rush periods as they wish to enjoy quieter and less frantic arrangements when the bulk of the younger people are back at school.

Occupancy And Rates

The link between number of guests and rates is complicated.  For instance, cottages with sleep 3 will benefit from niche markets such as: professional couples, elderly couples, walkers, couples + 1, young families with one child etc:.  But these niche markets are different sizes.  Thus, if you price for sleep 3, which might command a higher rate, you are in danger of losing the far larger market and bookings which will be generated from the sleep 2 niche market.  To maximise revenue, it is a better plan to price close to the couples rate even if there is an extra single bedroom. This way, you will gain more bookings although those booking for 3 may have been willing to pay a little more than for couples.ash08

On the other hand, the market for sleep 4 benefits from strong niche demand from the two couples market; thus, the market rate difference between sleep 3 and 4 is often far greater than any rate difference between sleep 2 and 3.   Sleep 6 niche is smaller than the sleep 4, but larger than sleep 3; the choice of whether to price for as if sleep 4 is more difficult but in most cases it could pay to do so.  It can be a costly error to price in proportion to occupancy.

The size of markets for the different niches will vary depending on the area.  Niche demand, for instance, for sleep 6, may well be higher in coastal areas.  Supply is also significant… thus, sleep 10 or more could be a better proposition than sleep 6.  Hard times will create a demand for low cost per person per night with families deciding to make holiday savings by sharing large lets.

The above is from our experience in Herefordshire, South Shropshire, Mid Wales and small parts of Gloucester and Worcestershire.

Rate Structures

DSCF9648The UK cottage break market has established a general template towards rate structures.  However, we do come across holiday lets run as adjuncts to Bed and Breakfast operations.  The result is, frequently, a B&B style rate structure applied to self-catering, renting out by the day, in many cases.  This approach tends to encourage short breaks and they often straddle popular letting periods; one short break can write off a full week and, even worse, could even straddle two periods, so eliminating the potential for two full week lets.

The problem is made worse when starting out because, quite naturally, taking any rentals is important.  The trick is to be highly flexible at the beginning and to know, as demand picks up, when to adopt tried and tested rental practices.  Making the right decision is very much a matter of judgement with a little luck thrown in.  We tend to find that in high season sticking to the self-catering rate structure is often for the best, and more flexibility can be a good idea in less busy periods.

If you run an automated booking system, it is possible to get the best of both worlds by setting the system to the self catering rate model and then inviting people to ring, if they are seeking to book for other periods.  For instance: Saturday to Saturday, when the automated system will only accept Friday to Friday, Friday to Monday or Monday to Friday.  Automated systems can have the direct effect of giving homeowners between 20-25% more revenue; many people actively do not want to speak to someone when making a booking, particularly those under 40 years old.

Some advanced websites can now can be arranged to accept automate bookings starting and finishing on any day of the week up to 31 days in length.  The Rates Tool we use produces a logic to do this working on a standard week rate and percentages you can choose to ratchet out the rates for every combination of days avoiding the danger of absurdities where a six day break including a weekend could end up costing more than a seven day week break.  This Rates Tool is available on request.  Please send an e-mail to charles@holidayletsforsale.com  The general trend in the market is going towards a requirement to be this flexible, at least, in the shoulder and low season periods.

Throughout, it is important to arrange your cottage to appeal to markets it is most suited to.  Dealing with any ‘red flags’ (see below) is an important first step.  One holiday let owner found their family bookings went up by over 50% when they hit on the idea of putting a fence around their swimming pool.   Health and safety can pay huge dividends.   Simple steps can have a radical affect and these are easier to identify if you have a clear view of the markets you want to attract.  These, of course, have a significant relationship to the rates you can charge and the occupancy you can expect.

Detail on setting rates

This is the one area that causes more concern than anything else.  Setting rates for holiday cottage rentals need not be such a dark art, once the basics are understood.  But there are some common mistakes that need to be avoided.  There is a little repetition here with other parts of this advice page… please forgive this.

Charging periods / dates over the year
xmas-card014First, you need to work out a structure for your rental year.  In the UK there are some useful web sites which will give you the basics such as the timing of bank (national) holidays; the Easter break; and school holidays and their half terms.  It is also useful to include any local festivals or events that may cause a spike in demand for few days or longer.  Using an annual calendar, highlight the weeks using a Friday to Thursday format.

Now, consider the seasons you feel are appropriate.  Many choose four rates being, Winter, Shoulder, Summer and super peak.  The Shoulder seasons are Spring and Autumn.  Super peaks can arise when, for instance with The Hay on Wye literary festival, local events cause a demand spike for a week or two in the year.  Select the dates to define the periods.

Rents
When you have settled all the dates and the basic charging periods now look around at what others are charging in your area for the same occupancy and quality of your holiday let in the seasons and periods you are to use for charging.  Be realistic, there’s no point in taking the rents for a let that is not getting many bookings seriously; too often, the temptation of wishful thinking combined with a tendency to hope what is expected will be what people are willing to pay causes impractically high rates and lost bookings.  This is particularly important in times when the market is oversupplied and / or demand is faltering . If you are not realistic you will end up paying for this error.  Demand can be choked off by quite small increases in such a transparent market.  The good news is that when the market improves demand can reappear at equal speed.

It is important to avoid the mistake of assuming all niches work the same way.  Bookings for sleep 2 and 3 holiday lets do not have greater demand, indeed the demand tends to fall away a little, during school half terms.  Demand for sleep 2 / 3 does increase during national holidays but not quite so much as for the larger lets.  It is, therefore, a mistake to factor in half terms for sleep 2 holiday cottages. On the other hand, it is a mistake not to do this for larger holiday homes.

Extras can have a different impact, depending on the location.  For instance, sofa beds do not attract additional rental for our inland area where they can be more positive in coastal areas.  A sofa bed is a radically lower quality experience to a proper room and, unless they are in bedrooms, sofa beds tend to attract little use.  This is because they are usually allocated to children or more junior party members who often go to bed before others.  That being the case, use of the lounge can be cut short in the evening . It is, generally, a mistake to expect increased rents from sofa beds. They may increase occupancy for one or two weeks a year but usually only at the same rents. Very often, we find, they are used as infrequently as once a year and, sometimes, not at all.

DSCF9614Putting it together
Once you have sorted out the dates, periods and rents put them all together.  The first thing will be to put in the rents determined by the seasons.  Then overwrite them with the rents for half terms, national holidays and festivals.

Damage and security deposits

It can be a good plan for owners to deal with these as they are best taken directly from the holiday guests by the home owner or their representative.  A common way is to take a cheque or cash on arrival and then to refund the sum by cheque or bank transfer within seven or ten days of departure.  The chosen procedure should be included in the holiday let details on the web site. The point of a damage deposit is twofold.  Firstly, to recover any costs due to undue damage caused by visitors.  Secondly, and by far the most important, is to show that you care for your holiday let as much as you care that every visitor has a really good holiday.  In the majority of cases it is, simply, not worth claiming for small sum, and most deposits will not pay for badly stained carpets, leaving the only really significant argument that these deposits are to underline that you care.

This information is provided by way of contrast and to prompt further investigation before acting.  As ever, seek relevant professional or competent people to check before taking any decisions.  Where applicable, all contents of this website are copyright Country Holiday Lets Ltd.  See useful suppliers, national agencies & regional agencies

Below is a copy of the CHL Rates Tool