Airbnb vs Traditional Hosting - The Pro's and Cons

The ever-changing world of property investment can be a confusing one, especially for those that are at the beginning of their journey. There are so many different strategies that you can apply, it can end up being pretty mind-boggling. Especially when it seems that every person you speak to will tell you something different!

In this blog post, I will look to address that confusion and focus on the short-let market (Airbnb, Booking.com, etc.) and how it compares to traditional rentals. Which is the best strategy? Which makes me the most profit? Which is the most time-consuming? All questions I will seek to answer.

To begin with a little about me. I have a background in both strategies having spent seven years in the property industry. The last four of those running a traditional lettings department. With regards to the tourism side of things, I have been managing holiday lets for over a year now with a consistently full calendar and high-profit margins for my clients. Additionally, in my younger years, I spent 6 months in France assisting in the operation of high-end chalets for ski holidays

Therefore I am well placed to give you a balanced analysis of the market and hopefully give you the answers you’re looking for!

Airbnb vs Traditional Hosting - The Pros and Cons

What is Airbnb rental?

Airbnb is a platform that connects people who are willing to share a space with guests for money. What you have to do is to list your room, house, villa, or even yacht on the website, and wait for reservations.

Airbnb rentals are considered a short term rental strategy because the properties are usually rented up to one month only. There are numerous other platforms that you can list on however Airbnb is the largest. Here at Air Necessities, we list on multiple platforms simultaneously giving your property maximum exposure.

What is a traditional rental?

Traditional rentals are more of a long term investment strategy. In traditional renting, a real estate investor buys a rental property to rent it out for at least 6 months at a time, during which the tenants will pay rent on a steady basis agreed upon in the lease agreement.

Now that we have an idea of what the two strategies entail, let's take a look at the pros and cons of each.

Traditional Rental

Pros

• Consistent fixed income stream.

• Less work than a holiday rental (no changeovers, guest management, etc.)

• Good tenants can potentially improve a property.

Cons

• Much lower rate of income compared to a holiday let.

• Large amounts of red tape make the industry complex.

• Get something wrong and you run the risk of lengthy court battles, fines, and lack of income.

• Bad tenants can wipe out any profit margin. It can take a long time to remove them from your property and you are usually left with high rent arrears and damage that, without insurance, you are unlikely to ever recover.

• Tax breaks for landlords have been greatly reduced thereby decreasing the profit to be made.

• Due to strict harassment laws, you are unable to attend the property and check on its condition as often as you may wish to.

Airbnb Rentals

Pros

• Potential for far higher earnings than traditional rentals.

• Guests pay upfront meaning no risk of late rents or arrears.

• You can use the property yourself when needed.

• You can keep a regular eye on the property and its condition.

• A booming staycation market in the wake of Coronavirus has meant that bookings and prices are at an all-time high!

• Damage is less likely.

• If the property is a holiday let for months at a time, you are exempt from council tax and pay business rates instead.

• Some platforms allow reviews for guests reducing the chance of having poor guests that will cause you problems. In the rare case that you do have trouble maker guests, they leave at the end of their stay meaning that you can get in, put the property right, and start making money again instantly.

• 100% capital allowances on your first £250,000 of capital expenditure.

• Potential capital gains tax relief when it comes to selling.

• Holiday lets aren’t subject to the new tax break reduction.

Cons

• There is a lot of work and time needed to run a successful holiday let. A survey carried out by Homeaway revealed that on average an owner spends 9 hours a week on the day to day administration of the holiday let.

• You won’t have guaranteed income and it can be seasonal depending on location. (more on this later)

• More expensive running costs than a traditional rental.

• You’ll have to communicate with guests, handle complaints, and ensure that all their requests are met.

• The insurance costs can be higher.

Summary

Ultimately the investment strategy that you choose will come down to personal preference and the level of commitment you are willing to put in. In our (admittedly biased) opinion, short holiday lets are worth the extra work for increased profits, tax breaks, and the reduced risk of having problem tenants. Although there are cons to the market these can easily be offset by enlisting the help of a quality holiday let agent such as Air Necessities. They do all the hard work for you and you can sit back and watch the significant income stream pour in with little to no effort. We have found that our customers make on average, four times the income of a traditional rental in the high season even after our fees! When it comes to the Winter low season they have still been raising more than a monthly AST would. They have comfortably covered their costs with a small profit to boot.

I hope this blog has helped to answer some of your questions regarding the two investment strategies.

If you have any further questions or wish to enlist Air Necessities to run your holiday let for you then do not hesitate to get in touch on 01803 262246 or email your enquiry to info@air-necessities.com.

All the best,

Josh Isaac,

Owner, Air Necessities