Managing income and expenses for your holiday rental

May 2024

Running a holiday flat or house isn’t a walk in the park. It requires knowledge, skills, and above all, diligence. According to the dictionary, the definition of accounting is: “A system adopted for keeping accounts and records in public and private offices: cash, treasury, accounting, bookkeeping or administration.” In everyday language, it simply means keeping the financial records of a business.

In your holiday rental, you’ll undoubtedly need to manage the accounting, create and process budgets, send invoices, and/or organise your tax returns. All this means maintaining strict control of your accommodation’s income and expenses. In this article, we provide you with some key tips to boost the profitability of your holiday rental and improve its management.

Use specialised software for basic accounting

Old-school holiday rental hosts used to rely on specialised notebooks, paper, and pen to keep track of all their income and expenses. Some still do… But nowadays, with all the technology available, there’s hardly any need for paper. We can manage our budget and accounts using digital applications on our personal computers or mobile phones. There are numerous accounting apps to choose from: QuickBooks, Xero, Wave, FreshBooks, Rentec Direct, etc. Many of them offer a trial version that lets you use their features for a few days at no cost.

The idea is simply to have a database where you can store the financial flows of your holiday project. Some hosts just use Microsoft Excel (or similar), while others need an app to manage their Airbnb income and expenses. Whatever works for you as long as it suits your needs and keeps your accounts clear.

Implement daily financial tracking

Set aside 15 or 20 minutes each day as a host to do the accounts for the day. Reviewing income, expenses, and the balance daily is better than doing it weekly or monthly. Why? Because you’ll get an up-to-date perspective on your business in real time and be able to control your holiday rental expenses. Day by day, you can correct any deviations from your business plan and roadmap. Consider also the days of the month with the highest inflow and outflow of capital (and know how long you can go without any income) so you can manage better.

It’s always advisable to have an economic reserve for unexpected expenses. Many hosts rightly point out that all the extra income they earn ends up being invested in their property; that’s why if we assign a fixed monthly amount, even if modest, by the end of the year we’ll have a contingency fund that will always save us from any mishap. We must be forward-thinking.

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Consider annual fluctuations

When renting out a holiday home, it’s crucial to pay attention to seasonal fluctuations. There are certain times of the year when your income will be significantly higher than at others. In summer, for instance, rentals by the beach earn much more money than in October. If your holiday home is suitable for Christmas, the end of December and the beginning of January are ideal months to get extra returns from your holiday home. Long weekends can also be key dates to launch holiday offers.

Since holiday home rentals are very seasonal, it’s difficult to calculate their profitability on a monthly basis. Therefore, it’s better to calculate the return over a calendar year. Renting out a holiday home 100% of the time is practically impossible, but of course, we should try to get as close as possible to a full occupancy rate. If you collaborate with Holidu, you can optimise the performance of your holiday home and have access to millions of potential travellers from all over the world.

How to control household expenses

Start by summarising your monthly fixed costs. Do you know exactly how much money you spend each month? If the answer is no, it might be helpful to break it down. Here are some ideas of the fixed costs that usually arise with rental homes or flats:

• The mortgage.
• Property tax and rubbish collection fee.
• Energy, gas, and water.
• TV, Internet, and phone line.
• Cleaning and associated laundry.
• Home and liability insurance.

Take a pencil and paper and break down these expenses: if you have any other fixed costs, write them down. Next, put them under the microscope and see if you can save some money by switching providers. Rates can vary a lot from one provider to another and you might be able to save some money that you can then invest in another need. Every pound counts.

On the other hand, you’ll also have to face occasional and sporadic expenses such as repairs, home maintenance, supplies (soap, kitchen roll, toilet paper, light bulbs, etc.), and other services that may arise.

Maximising income

How can we make more money than expected and boost the profitability of our holiday rental? There are several strategies. You can offer a seasonal discount with a competitive price or set discounts if guests return for another stay. Also, invest in professional photos of your property; a good appearance of your holiday rental is non-negotiable!

You can also offer personalised experience packages and partner with a local business (for free tours, excursions, workshops, sports activities, etc.) to offer a unique and local stay. This will set you apart from the competition. This commercial strategy can bring in extra commission that will help balance the books. It’s another way of doing business.

Expert advice, a viable option

If managing your holiday rental expenses and supervision becomes overwhelming, you can always seek external help and hire a consultancy service for the promotion, management, and administration of your holiday home. Additionally, real estate market professionals can always advise you on how to maximise income and minimise expenses. Of course, you’ll need to allocate part of your financial investment to this service, which will save you time and work. Weigh your options.

You already know that Holidu offers a comprehensive solution for owners and small businesses looking to make the most of their holiday rentals.

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