Holiday Let Booking and Accounts.
When you take bookings
(Money and other aspects are covered below). See some services to get you bookings on this page
Taking bookings and fielding enquiries can be rewarding and pleasant but sometimes it can be quite difficult and stressful. Much of the downside can be eliminated with experience and understanding of where some enquirers ‘are coming from’. The customer is always king and the potential customer should be treated with absolute respect to their nature.
A serious potential guest will do their best not to leave things until it is too late. Bookings for the next year tend to gather momentum from as early as September and some top value holiday lets are often well on the way to being booked out by the end of the previous year or earlier. The general rule is that if an enquiry is well in advance it is a good bet that they will be the quality of guest to match the value you offer.
The way guests request discounts, if they request them at all, is also telling. Agencies are normally bound by centralised directions related to discounting and smaller booking services normally cannot discount without the permission of owners. Some guests may expect you to do their search for them; working out from their style as to how serious they are can remove stress and upset should nothing come from your efforts. Some will contact you to ask the price or rental when it is very clear on the web site.. they are normally indirectly asking for a discount. The more diplomatic and tactful the enquiry, usually, the more chance you have of landing the fish. In any case, it can almost be a pleasure to handle enquires from guests who are good at buying as it is from getting a booking from someone learning the ropes.
Those guests who simply think they can strong arm you and say things like ‘ it’s better than having your cottage empty’ are usually bad news.. but not always. It is worth trying to feel them out to see if such remarks are simply due to a lack of experience in buying holiday stays as opposed to a rather brusque and highhanded attitude.
If an enquirer is overly secretive about contact details this could be, again, down to a lack of trust or experience in dealing with owners or booking agents. There is a fear that doing so will open the gates to spam and other intrusions. A lack of trust is often a bad sign but, again, sound out the situation before coming to any conclusion
It is a good idea to make sure enquirers have easy access to your terms and conditions. They make for a better understanding and greater trust particularly if they are well formed and set out. In addition, some potentially difficult guests can decide to go elsewhere. What can appear reasonable guidance to some sometimes appears overly restrictive to others.
Some of the best guests will ring up to check the booking agent or the owner. However the same thing can apply for some of the worst guest who are equally interested in sounding out the situation and the owners. There tends to be a more gentle approach to the former and the latter people are often more demanding of attention.
Some guests can be tempted to add numbers to their party without telling you. This needs careful handling. The basic rule should be always to take all guest names and the ages of children stating clearly that the booking is made for those numbers only. If additional people wish to stay, whether the formal capacity of your holiday let can or cannot accommodate, you should insist on permission being sought and granted from you.
This sort of thing has implications from laundry bills through to insurance and general changeover costs, let alone safety, licensing and the possibility of damage.
Sometimes you may be asked for extra information about the cottage, area or facilities. In most cases this is genuine, but in some it can arise from simple laziness which could hint to a lack of real interest or intention to book. Again, sounding this out comes with experience; in the early days it is better to assume the best and learn as you go along. If you do get an enquiry about a rental price for a clearly advertised period this is often a hint for an offer of a discount… again this is not always the case.
Beware of people trying to book a family stay when they may have a works outing or a group trip in mind. Although uncommon, it does happen. If the party leader of a group rings up it is normally a good sign that there is an intention to be good guests. However, intentions do not always carry through. Side effects of group trips include possible behaviour upsetting local pubs; the upset can spread beyond your holiday let. On the other hand business gained from your holiday let over the year should mollify any upset.
Experience will gradually inform you how to handle booking enquiries, problems and any upsets. The stress and disappointment generated by doing quite a bit of work to answer enquiries and then to find that your time and bother has been wasted will be greatly reduced if you have a good idea as to how genuine and serious the potential guest is. A pleasant experience where an enquirer has used some charm and been thoughtful in their enquiry leading to no result is infinitely preferable to a push and shove enquiry, what’s your best price, non-result.
The extreme version of this is when people ring up and simply say, what have you got? Yes, it does happen. As ever it is essential to sound the situation out. I have managed to get some good bookings from a very poor starts. See useful suppliers, national agencies & regional agencies
This is rarely a job that people relish, but it is key to prepare a simple and effective way of recording what you spend and what income you receive. It is absolutely essential to set up an efficient diary system to be 100% certain and clear when the let is booked, who is coming with their contact details and any special arrangements, and to check all payments are made, as and when due. When doing your sums, remember that booking agencies may say they charge a percentage of rental to you, but they often leave it for you to discover that VAT has to go on top of their charge. Thus, if a booking agent charges, for the sake of argument, 20% for a high quality ‘easy to let’ assignment, the real cost to the homeowner is really 20% + VAT or a gross of 24%.
Although owners do not strictly have to know, it is usual practice for agents to charge a booking fee, sometimes topped up with holiday insurance as guests pay for their holidays. Booking agents charge guests for use of the booking system. (They do not act for guests). Booking fees vary from around £15 and can go up to £30 and more.
Many booking agents charge to inspect properties, charge a joining fee and charge, even, for changes to web site details. Some may charge for more than a standard number of web site pictures and levy commission charges on some private bookings. An important issue is whether an agent is exclusive or not. This is often, but not always an issue of how many bookings but exclusive agencies justify their existence by performance and in return they insist that they are the only source for your bookings and you are not permitted to seek your own bookings or use another agency at the same time. But there are good non exclusive agencies out there including Cottage Holiday Group or our sister business Country Holiday Lets
It is worth constructing what is called a profit and loss account so you can work out how well you are doing. A list of major costs to take into account can be found at the bottom of this page. Simply, profit and loss consists of recording all costs and adding them up and then recording all income and taking one from the other to see if you have made a profit or loss for a given period. Some people do profit and loss calculations on a monthly basis, others choose quarterly and many prefer annual accounts.
The advantage of short periods is that you can get much more up to date information about how you are doing, but the disadvantage is that the results can be skewed because summer should always be substantially more profitable than winter except, of course, where the seasons have a different impact such as in skiing resorts.
Another trick when doing accounts is to list the bookings and note when they are made. If the cost of your advertising varies, say if you use pay per click, or if you have just invested in extra advertising, listing when bookings are made and the value of those bookings can get you good idea of the value of your advertising. It is a mistake to take, say, the value of stays taken in August and set them against the advertising bill in August. The result might be gratifying, but considering that most of the bookings in August will have been made in previous months, what looks like first class news and a highly profitable month is very deceptive. This type of accounting is not financial as such, it is what is called management accounting because it helps you plan how, in this case, you spend your advertising budget.
A similar approach is useful when working out your profit when renting holiday homes in periods where costs are higher. Heating bills can bite into profit in seasons when the rent tends to be lower for certain operations. However, it can be shortsighted to try to close down for, say, 2 months in a year on the basis that the size of profit compared to the boom time in the Summer makes things hardly worth running. Keeping a place warm is a good plan, keeping changeover staff (when employed) with some work in the off season is hugely appreciated and reduces labour problems, and short breaks tend to be more common in the off season which attract higher pro rata guest rents off setting usually higher heating bills.
Being aware of costs is important. Sometimes, simple tests can be very useful. On a cold day, record the outside temperature and then run the heating. Check the amount of oil, gas or electricty used for a full day and night. It is worth doing the same experiment for a warmer day. This simple method will be very useful predicting costs as well as to keep a reasonable control on consumption. It is worth doing similar checks for electric consumption, where relevant.
On a more general front it is a good idea to find out about tax. For older people such things as The Pawson Case illustrate how important it is to know these things. This case deals with inheritance and whether the UK tax authorities consider a holiday home or vacation rental holiday cottage as qualifying as a business for the purposes of inheritance tax exemption.
UK Tax allowances against rental income
The UK HMRC requires certain conditions before you can set your costs against income for the purposes of tax. At the time of writing, 12 September 2013 these include:
- availability for renting for at least 140 days in a year, and let out for at least 105 days. (Was 70 days. Thanks @TheCottageGilla on Twitter for the update)
- Specific individual guests should be restricted to 31 days in any period of seven months.
- Costs incurred for periods when the accommodation is not available for letting are not allowable.
- The let has to be fully furnished
- Market rate should apply to rents
Your net income is, of course, still subject to any income tax where applicable. As ever, check with an appropriate accountant for tax matters.
A basic structure for a Profit and Loss Account.
Estimated rental income per week
Number of bookings from listing sites
Number of return bookings
Number of bookings through agent
Laundry per booking
Changeover labour per booking
Variable extras including:
Toilet rolls, cleaning materials and equipment, dishwasher tablets, and sundries
Total per booking:
ANNUAL VARIABLE COSTS
Agents commission plus vat
Listing site fees
Web site costs
Electric, Water, Gas, broadband, TV licence
Gardening and maintenance
Spring and Autumn deep cleans
Breakages, wear and tear and exceptional items
Total yearly costs:
Annual income less total yearly costs = Profit
It is worth doing several of these trying out what might happen for different levels of income using different sources. If the property is to be used for private visits from time to time some notional income value for these should be included in the profit and loss to give a realistic picture. This is especially the case if private visits take place in periods when they displace income that would, otherwise have come from commercial lettings. These sums can be significant. Four week’s use a year will have a significant impact.
It is an illusion to think that running a holiday home with its costs covered by holiday letting means that you get ‘cost free’ use. Every aspect of the use of the property should be included in the costings.
If strict business principles are employed the cost of the capital employed in purchasing the property should be included. For a large number of holiday lets this inclusion would render them uneconomic, sometimes, in the extreme. Keeping an eye on cash flow and operating profit is usually the desired approach.
It is also important to include, where relevant, any taxation that might be applicable to income and be aware of those costs which will be permissible to set against rental income. The rules for holiday letting lay down operational parameters which have to be met before costs can be set against income for tax purposes. These exist to prevent individuals from setting up holiday lets, taking, say, a couple of bookings in a year and then claiming all the fixed costs, maintenance. Holiday letting has to be done seriously to assure the tax authorities that the business is genuine. Good holiday let booking accounts are very useful.
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