Setting the rental price for a holiday cottage is central to lettings success. Why? Well get the price right at different times of the year and occupancy will be high and so will profits. And with the Internet so influential, it is easy for guests to find and compare holiday properties at the click of a mouse.

I once spoke to the owner of a holiday let who had good bookings in her property but wanted to put the price up. When I asked why, she said it was due to her mortgage going up! I doubt any repeat guests would have been happy to pay an extra £50 to help her pay the mortgage off.

It does raise an interesting point though, which owners often wrestle with. By raising the price in the story above, bookings drop off, as the property is now uncompetitively priced and the owner earns less money than before.

Be Realistic

The issue for owners is often clouded by the percentage return they make on the purchase price of the holiday home. It is risky to set pricing based on hitting a % return on investment against the purchase price, rather than the market rate for that type of property. As property prices doubled and remain high, as of 2011, the cost a UK holiday has not doubled.

So the exercise of pricing and forecasting income on a property should be done separately and irrespective of the purchase price. Guests will not book a property based on the purchase price of that property.

Peak vs Off-Peak

The following stattistics show occupancy levels for self-catering properties in Cornwall.

• January 12%
• February 29%
• March 29%
• April 61%
• May 58%
• June 70%
• July 76%
• August 88%
• September 69%
• October 42%
• November 13%
• December 24%

Source: VisitCornwall 2009 Occupancy Data for self-catering accommodation.

These are the figures for one county only, and nationally they will vary depending on the popularity of the area and demand for different types of holidays. However you can see the variation in demand between the summer and winter and also how key booking periods such as Easter and October half term affect the occupancy figures. So the weekly rental price fluctuates up and down to reflect demand.

Occupancy vs. Profit

Another dilemma for owners, especially for larger houses, is the balance between the running costs and rental income. The costs, including wear and tear, fuel and cleaning can mount up and outweigh the benefits of letting the property, especially in the winter when the price is lower and more heating is required. In some cases it may be better to price higher, and achieve 20 bookings per year instead of 30.

The solution is to look at the profit after all running costs at the end of the year and factor profitability into the next year’s pricing.

Influencing Factors

So with these factors in mind, how do you set the rental rates for the property? A good starting point is the competition. Look at similar properties in the area on the Internet via search engines, letting agents and holiday portals and how their prices fluctuate. Note their bookings if online availability is shown. If they are fully booked, this is a sign of success, whereas if they are empty the price may be too high.

Ask friends and family to give honest appraisals of how your property compares to others, as it is often easy to have a biased view of your own property.

Secondly monitor the performance of bookings as you move through the year. If key months are unbooked, it could be worth tweaking the price downwards to fill empty weeks. After all it’s better to have 80% of the weekly rental price rather than 100% of nothing ...

Of courcse if the property is let through an agency, pricing will be determined by them, using their expertise and experience to generate the most amount of income possible. They typically have price bands – A, B, C, etc and will place the property in an appropriate band.

Annual Reviews

At the end of year, it is worth looking at the year’s bookings to see where bookings came in and where they didn’t. For example if August booked quickly and there were many more enquiries, the demand would suggest that those weeks could be let for a higher amount. Conversely empty months may need the price reducing downwards.

Ultimately it’s about ensuring the maximum amount of profit from the property, which comes through market research and monitoring bookings throughout the year to ensure as many weeks as possible can be booked at profitable rental rates.