Profit and Loss analyses the incomings and outgoings for a business, in our case a holiday let, over a set period of time. Keeping a month by month profit and loss account for the property is a useful tool for understanding the seasonality of the income and cashflow, and also for year on year analysis.

Profit

Simply this is the money earned from the property through bookings.

Loss

Defined as the running costs of the property. They can be grouped as follows:

• Mortgage cost or loan – outstanding debt owed on the property.
• Council tax (or business rate if registered) or ground rent if the property is a lodge on a holiday park.
• Utilities – gas, electricity, water.
• Other annual costs – such as TV licence and optional services such as boiler servicing, telephone line rental or wi-fi to the property.
• Buildings insurance and specialist holiday home insurance.
• Cleaning and changeover costs – if employing an agency or a cleaner and variable depending on the number of bookings and visitors.
• Maintenance and repairs – to allow for wear and tear, planned updates to the property such as new furniture and replacement items and unplanned emergency repairs, garden maintenance.
• Marketing and administration costs, or the letting agent commission.
• Legal and compliance annual costs such as a Fire Risk Assessment, PAT test or Quality in Tourism inspection.

By talking to relevant suppliers in all of the costs listed above, it is possible to build up a fairly accurate projection of the running costs of the property. Identifying the potential income from a holiday let can be provided from a good local holiday letting agent, or looking at the weekly rates and occupancy of similar properties in the area.

Repeat Business

Due to the nature of the holiday home letting, it is possible to build up strong repeat bookings over a number of years. Many operators claim 40-50% of bookings in a calendar year are from previous guests, which can have a positive impact on profitably through a reduction in marketing costs and improvement in occupancy.

So in terms of producing a profit and loss projection over a number of years, the income should show a year on year increase as more repeat bookings are generated.

Year 1: 15-20 bookings

Year 2: 20-25 bookings

Year 3: 25 bookings +

More bookings will naturally equate to more income. A very successful holiday let can also look to increase the weekly rents, thus adding further to the income and further improving the profit and loss.