How Much Can You Earn with a Vacation Rental?

Is the vacation rental market right for you? The tourism sector, especially short-term rentals, offers excellent earnings opportunities. Whether it's an inherited apartment, a renovated villa, or a professional hospitality business, there are numerous ways to increase your income. But how much can you earn with a vacation rental? And what hidden costs should you consider?
In this article, we'll examine all the crucial aspects that influence the revenue of a non-hotel accommodation facility, from rental rates to operating expenses, to strategies for maximizing profits. This way, you'll have all the information you need to make an informed choice and plan your investment effectively.

How much can you earn with a holiday home in the UK and the US?

The income from managing a vacation rental property in the UK and the US can vary significantly. Before making your choice, you'll need to consider several factors, such as the property's location, the type of accommodation (vacation home, guest house, bed & breakfast), and the season.
Overall, the UK and US tourist rental markets are very dynamic and offer numerous opportunities, both in cities and in lesser-known areas.

Average earnings: City, seaside, mountain

• Art cities and metropolises: Large cities like London, New York City, Los Angeles, and Chicago tend to have steady demand. Rates can range from £70 to £200 or $100 to $300 per night, depending on the area and amenities offered. A centrally located apartment can generate between £1,500 and £3,000 or $2,000 and $4,000 per month, with peaks on long weekends and holidays.
  
• Seaside resorts: Owners of seaside vacation rentals, especially in popular destinations like Cornwall and the English Riviera or Florida’s Gulf Coast and the Outer Banks, can earn anywhere from £100 to £400 or $150 to $400 per night during the peak summer season. A property in these areas can generate between £2,000 and £5,000 or $3,000 and $6,000 per month during the warmest months (June–September), peaking during holiday periods.
  
• Mountain resorts: Mountain destinations, such as the Scottish Highlands or the Colorado Rockies, offer high profitability during the winter months, with rates ranging between £90 and £300 or $150 and $350 per night, depending on proximity to the slopes and the amenities offered. During the ski season, a property can earn between £1,500 and £3,500 or $2,000 and $4,500 per month. Lately, due to rising temperatures, these locations are also seeing positive profits during the summer months, when more and more tourists are seeking cool locations.
  

What factors can influence your short-term rental income?

Several factors contribute to determining a hospitality business's earnings. Here are the most relevant:

• Location: Clearly, the location of the accommodation is the primary factor. Generally, vacation rentals in popular tourist areas (such as London, Edinburgh, Cornwall, the Scottish Highlands, New York City, Los Angeles, the Florida coast, or U.S. national park gateways) are more sought after than in lesser-known locations. Accessibility, proximity to public transportation, tourist attractions, and infrastructure also play a key role.
  
• Seasonality: Seasons significantly influence short-term rental revenue. Seaside and mountain resorts are particularly profitable during the high season, but can have low occupancy rates during the low season. Art cities, on the other hand, tend to have consistent demand year-round, although with fluctuations during holidays and special events (sports games, fairs, concerts, culinary events, etc.).
  
• Property type: The type of property you purchased or inherited also makes a difference. Is it a small apartment, perfect for a couple, or a small house with a garden and pool, ideal for families with children or travelers with pets? Or a more spacious property with several rooms, which you could convert into a guesthouse or bed and breakfast?
  
• Rates and average nightly rate: The price you charge your guests depends on the type of accommodation, the quality of the amenities offered, the rates of competitors in the area, and your ability to manage bookings. It's essential to constantly monitor the prices of similar properties in your area to stay competitive—for example, by using a dynamic pricing tool.
  
• Amenities and facilities: To increase the value of your property and be able to ask a higher price per night, you can invest in exceptional amenities and facilities: a hot tub, sauna, equipped gym, TV with streaming services, smart home, etc.
  

Concrete examples of monthly and annual earnings for vacation rentals

To get a better idea of how much you can earn with a vacation rental, let's look at some concrete examples:

• City apartment (for example, in London): If you rent a two-room apartment in central London for £120 a night and rent it out for 20 nights a month, your monthly income will be approximately £2,400. On an annual basis, assuming good occupancy (80%), your yearly income could exceed £28,000.
  
• Seaside villa (for example, in Florida): If you rent a seaside villa for $300 per night and rent it for 25 nights during the high season (June–September), your seasonal earnings could reach $7,500. During the low season, your monthly earnings could drop to around $1,500–$2,000, but your annual total could still exceed $30,000, depending on occupancy.
  
• Mountain chalet (e.g., in the Colorado Rockies): A small chalet renting for $150 per night for 15 nights during the winter season (December–March) can earn approximately $2,250 per month. With efficient management and the provision of tailored guest experiences, annual revenue could reach $25,000–$30,000, depending on the length and frequency of bookings.
  

Market	Example	ADR	Nights	Gross/Month
City	London apartment	£120	20	£2,400
Seaside	Florida villa (peak)	$300	25	$7,500
Mountain	Colorado chalet (winter)	$150	15	$2,250

Opening a vacation rental: Fixed and variable costs to consider

Starting a vacation rental involves several costs, which can be broken down into opening costs and ongoing operating costs.
Here's an overview of the variable and fixed costs you'll face, to help you plan your investment wisely.

Opening costs: purchase and/or renovation, certificate of occupancy, local registration/licensing

Here are some initial expenses that you will hardly be able to avoid:

• Property purchase, renovation, and furnishing costs: Whether you buy a property or inherit a second home, you'll need to invest money to transform it into a vacation rental ready to welcome guests from around the world. When planning your new business, consider these costs. Renovation costs depend on the property's condition and local regulations. They can vary significantly, from a few thousand £/$ for minor renovations to tens of thousands for more complex renovations. Replacing windows, painting, plumbing, buying new beds, sheets, and towels, kitchen utensils, and much more: this is a significant but necessary real estate investment.
  
• Certificate of Occupancy: To legally rent out your vacation home, the property must comply with local safety and hygiene regulations. The certificate of occupancy (or local equivalent approval) certifies that your accommodation meets the minimum required standards. To obtain this document, you will need to request a specific inspection by a qualified technician. The cost of this inspection varies depending on the complexity of the property. Still, it typically ranges from £200 to £500 or $200 to $500, unless additional work is required to bring the property up to standard.
  
• Local registration/licensing (short-term rental registration): To start a tourist rental business, you may need to submit a registration or obtain a licence/permit from your local authority (city, county, or council). This process has a cost that varies by jurisdiction, but generally costs around £100–£200 or $100–$200. Some registrations must be renewed periodically to notify the authorities that the property is intended for short-term rentals.
  
• Other certificates: other certificates may be required, such as an energy performance or safety certificate (e.g., EPC in the UK), which can cost between £100 and £300 or $100 and $300, depending on the type of property.
  
• Other bureaucratic requirements: In addition to local registration/licensing, there may be other permits specific to your area. For example, in some tourist destinations, you must obtain licenses for tourist use of the property or the management of common areas if you are considering converting your vacation home into a hospitality facility such as a B&B.
  

Taxes and duties on short-term rentals

What taxes are you subject to when managing a vacation rental? In the UK and US, short-term rentals are regulated by tax law, which provides for different tax rates based on the type of contract and the length of the rental.
Here are the central taxes to consider:

• Personal Income Taxes (UK Self Assessment and US federal/state): Earnings from short-term rentals are taxed as personal income. Depending on the amount earned, you will need to declare it on your tax return.
  
• Flat tax/regime equivalents: There is no single flat-tax regime like “cedolare secca” in the UK or US. In the UK, property income is taxed under income tax rules, and you may also be subject to VAT if registered; in the US, income is reported and taxed at applicable federal/state rates, and the activity may be reported on Schedule E or Schedule C, depending on services provided.
  
• Tourist/visitor and lodging/occupancy taxes: Many UK cities and tourist destinations (e.g., local visitor levies) and many US states/cities charge a per-night lodging or occupancy tax on tourists staying overnight in your vacation rental. The owner is responsible for collecting this tax where required and remitting it to the relevant authority, unless your platform collects and remits on your behalf.
  

Operating costs: cleaning, linen, utilities, maintenance

Operating costs are recurring expenses that can significantly impact a vacation rental's earnings. Here are some of the main costs:

• Cleaning: One of the most significant costs is cleaning between stays. If you don't handle this yourself, you'll need to hire a cleaning company or a professional. Costs vary depending on the size of the property and the frequency of cleaning, but average between £30 and £100 or $40 and $120 per service.
  
• Linens: Providing clean, quality linens for guests is essential to ensuring a pleasant stay. Linen changes between bookings include sheets, towels, blankets, and pillowcases. Each linen change can cost between £10 and £30 or $15 and $35, depending on the size of the property and the quality of the materials.
  
• Utilities, including electricity, gas, water, and internet, are unavoidable. Utilities depend on the size of the property and the frequency and duration of bookings. It's important to consider that during high season, when occupancy is highest, consumption is typically higher. Generally speaking, utilities can cost between £200 and £500 or $250 and $650 per month, but it's always advisable to monitor consumption to avoid surprises.
  
• Maintenance: Even ordinary and extraordinary maintenance will lead to variable costs, with varying recurrence. Whether it's minor repairs, replacing electrical systems, or renovating furnishings, it's essential to budget annually for the maintenance of your vacation home.
  
• Accountant and tax management: Many hosts choose to hire an accountant, especially if they run their business professionally and have a VAT registration or a U.S. business entity. The cost varies based on the complexity of the structure and the number of properties, but can typically range from a few hundred to over £1,000 or $1,000 per year. This investment reduces the risk of errors and ensures compliance with current regulations.
  

OTA commissions (Airbnb, Booking.com, etc.)

Online Travel Agencies (OTA) commissions are a crucial expense for the success of your accommodation. Platforms like Airbnb, Booking.com, and Vrbo allow hosts from around the world to advertise their properties, increasing online visibility and bookings. Commissions vary depending on the platform and its policies, but generally range from 10% to 20% of the nightly rental price. Here's what you need to know:

• Airbnb and Booking.com commissions: Airbnb's service fee for vacation rental owners is approximately 3% (split-fee model) or ~14–16% under host-only pricing, while Booking.com charges a commission that can vary between 10% and 25%. It's essential to include these fees in your rental price calculations to avoid significantly reducing your earnings.
  
• Other platforms: In addition to the most popular ones, other short-term rental platforms charge different commissions, such as HomeToGo or Tripadvisor. It's essential to choose the right combination of channels to maximize visibility and reduce overall costs.
  
• To learn more: Check out our comprehensive guide "The Power of Online Travel Agencies (OTAs): A Practical Guide."
  

Management software: a cost that saves you money

You may be wondering whether it's worth investing in short-term rental management software or whether it's an expense you can avoid.
While this is an operating cost (monthly, annual, or biannual), a comprehensive management solution will save you money in the long run by reducing manual errors and improving the profitability of your properties. These tools help you manage reservations, synchronize prices and calendars, automate guest communication, and analyze your property's performance.
Among the main advantages of management software are:

• Synchronize calendars across different booking platforms using the channel manager feature.
  
• Automate daily operations, from managing reservations to sending automatic messages to guests.
  
• Optimize prices with dynamic pricing features that adjust rates based on demand and seasons, maximizing profits.
  
• Centralized management of reservations, payments, guest communications, and costs simplifies the management of your business.
  While management software can cost between £20 and £50 or $25 and $60 per month, its increased efficiency allows you to have a high return on investment.
  

How to maximize your vacation rental profit

Since the costs of opening and managing a short-term rental are so high, it's essential to implement strategies to maximize your earnings.

1. Optimize your listing description and photos
   The first step to attracting more guests is to have a listing with a compelling description and professional photos. Use clear titles and detailed text that highlight your property's strengths: location, amenities, included services, panoramic views, proximity to attractions, etc. Also invest in quality images, hiring a professional if necessary. They will help you stand out from the competition, especially on portals like Airbnb and Booking.com.
   
2. Optimize average occupancy with dynamic pricing
   The right price makes the difference between a lost booking and a fully booked property, especially during the low season. Use dynamic pricing tools to automatically update rates based on seasonality, demand, local events, and competitor prices.
   
3. Offer additional services designed for your target groups
   Analyze your target audience. What types of guests most frequently book your vacation rental? Families with children, couples, digital nomads, groups of friends, or perhaps tourists traveling with their pets? Analyze their needs and offer personalized extra services that will make their vacation unforgettable. From bike rentals to breakfast included, late checkout, local experiences (tours, tastings, outdoor activities), shuttle service, baby kits, and pet kits, the options are endless.
   
4. Maintain your brand's online reputation
   Guest reviews influence the online visibility of your listings and trust in your business. Always respond to feedback, even negative ones, with professionalism and courtesy. Encourage positive reviews by offering impeccable service and small touches that make guests feel at home.
   
5. Reduce costs without sacrificing quality
   To increase revenue, you can both raise prices and reduce unnecessary costs. Automate repetitive tasks, choose reliable suppliers, purchase durable linens, and optimize energy consumption. Good management can significantly improve your profit margins.
   
6. Take advantage of the low season
   Offer promotions or discounts for extended stays during off-peak periods. Or, promote your property for remote working, digital detox stays, or romantic getaways during the off-season. This way, you can ensure good occupancy even during the less profitable months.
   
7. Expand your online presence
   Choose the right contact points. Being present on multiple OTAs (Airbnb, Booking, HomeToGo, etc.) increases your visibility. Furthermore, a website for your property allows you to obtain direct bookings and build guest loyalty. Management software will help you keep everything under control.
   
8. Automate management to reduce errors and costs
   Managing a vacation rental requires time, attention to detail, and good organization. Smoobu is a management software for non-hotel accommodations that allows you to:
   • Synchronize calendars across all connected booking platforms, reducing the risk of overbooking.
   • Send automatic messages to guests (booking confirmation, check-in and check-out information, etc.);
   • Create a direct booking website.
   • Offer a personalized experience and provide additional services thanks to the digital guest guide.
   • track revenue, occupancy rates, and channel performance to keep profitability and cash flow under control;
   • Maximize revenue with a built-in dynamic pricing tool or one of our partner integrations.
   • Automating daily operations allows you to minimize manual errors, save time, and improve profits and overall efficiency.

Real net earnings: How much is left in your pocket?

When it comes to vacation rentals, the most common risk is focusing solely on gross revenues without considering expenses and taxes. In reality, to understand whether an investment is truly profitable, it's essential to calculate net earnings, which is the amount you'll have left after subtracting operating costs, commissions, and taxes.

Practical example with monthly revenues, costs, and net profit

Let's imagine a two-room apartment in London rented on Airbnb and Booking.com:

• Average price per night: £120
• Nights occupied in a month: 20
• Gross monthly income: £2,400
• From this must be subtracted:
• Cleaning and linen: ~£300
• Utilities and internet: ~£250
• OTA (Airbnb/Booking) fees: ~£200
• Maintenance and miscellaneous expenses: ~£150
• Accountant and tax management: ~£100 (monthly average)
• Taxes (income tax estimate): ~£500
• Monthly net profit: approximately £900–£1,000
  
  This example demonstrates how, despite an interesting gross revenue, costs can impact up to 60%.

Estimated ROI: Initial investment and return

• In addition to monthly profit, it's essential to calculate ROI (Return on Investment), which is the time it takes to recover the initial investment. For example:
• Initial investment: £80,000/$80,000 for the purchase and renovation of a small apartment (including furnishings and paperwork).
• Estimated annual net income: £12,000/$12,000.
• Payback period: approximately 6–7 years, without considering any revaluation of the property.
  
  ROI varies greatly depending on the area, the type of property, and the ability to maintain a high occupancy rate.

Holiday home as a second income or main business?

A vacation rental can be a stable second income or turn into a real business venture.

• Second income: If you manage just one property, your earnings can supplement your primary salary, cover family expenses, or finance other projects.
  
• Main business: With multiple properties or a large company (B&B, guesthouse, or other), management can become a full-time job. In this case, it's essential to adopt a professional approach, register for VAT where applicable (UK) or obtain any required U.S. licences, and use advanced management tools.
  In both cases, the key is to have a clear understanding of the costs, taxes, and market potential to understand whether the investment meets your personal and financial goals.
  

Conclusion: Is it worth investing in a holiday home?

Investing in a vacation rental can generate excellent returns, but only with careful and informed management of costs, taxes, and marketing strategies. The difference between a low-profit business and a stable source of income lies in organization.
Software like Smoobu helps you automate daily management, reduce errors, and simplify guest communication, so you can focus on the experience you offer and growing your business.
Want to maximize your earnings and save time? Try Smoobu for free for 14 days and discover how easy it is to manage your vacation rental.