International travel is returning to London
As Heathrow airport announces busiest start to year since before Covid lockdowns, as well as restrictions are lifted for travellers from China, many analysts are predicting a full recovery of international travel to London in 2023. Since domestic travel in London only accounts to 20-30% of all visitors, the short-term rental market of the capital heavily relies on international travel.
Data published by booking.com in January 2023 lists the biggest markets for inbound travel to London – Spain, Germany, Italy, Australia, Nertherlands and the US are among the top countries, see graph below:
If you have a property in London and you are considering renting it on Airbnb then 2023 is definitely a good year to try. Now let’s look at the numbers and how much on average an apartment or a house in London could make from short-term rentals on a monthly basis?
What average daily rate hosts expect?
Data published by booking.com in January 2023 (graph below) suggests an increase of ADR (average daily rate) of 20 to 30% compared to pre-covid and average nightly price hovers around £200, depending on the time of the year, as summer months are considered high-season in London.
If we took a real and active example from StayinLondon portfolio, a 2-bedroom property near Tower Bridge here are the numbers one could expect:
2-bedroom apartment in Tower Bridge
Avg. number of nights in month 24
Average price per night £200
Cleaning, laundry/linen and amenities fee per stay (paid by guests) £130
Average number of stays (4 nights per reservation) 6
Accommodation revenue £4,800
Cleaning revenue £780
Total revenue £5580
Airbnb & other channel fees (avg. 18% incl. VAT) - VRBO, booking. com £864
Management fee (DPO - 20%, incl. tax) £960
Monthly standing charge - listing IT solution, supplies, monthly inspection £50
Revenue less fees per month on average £2926
Larger properties would of course generate more. Let’s take a spacious 3-bedroom townhouse in Angel, Islington, with a private garden and repeat the same exercise. Based on historic rental data we can calculate that an average night here should fetch around £450:
3-bedroom townhouse in Angel, Islington
Avg. number of nights in month 24
Average price per night £450
Cleaning, laundry/linen and amenities fee per stay (paid by guests) £195
Average number of stays (4 nights per reservation) 6
Accommodation revenue £10,800
Cleaning revenue £1170
Total revenue £11970
Airbnb & other channel fees (avg. 18% incl. VAT) - VRBO, booking. com £1944
Management fee (DPO - 20%, incl. tax) £2160
Monthly standing charge - listing IT solution, supplies, monthly inspection £50
Revenue less fees per month on average £6646
And finally let’s look at a smallest type of property in StayinLondon’s portfolio – a 1-bedroom property in Vauxhall:
1-bedroom apartment in Vauxhall
Avg. number of nights in month 24
Average price per night £160
Cleaning, laundry/linen and amenities fee per stay (paid by guests) £95
Average number of stays (4 nights per reservation) 6
Accommodation revenue £3840
Cleaning revenue £570
Total revenue £4410
Airbnb & other channel fees (avg. 18% incl. VAT) - VRBO, booking. com £691
Management fee (DPO - 20%, incl. tax) £768
Monthly standing charge - listing IT solution, supplies, monthly inspection £50
Revenue less fees per month on average £2331
Average monthly occupancy
These calculations are based on an average monthly occupancy rate of 77%, which is will might not be the case on some months, especially during low-season – January and February for example. This can be and is compensated by increasing the ADR during high season (most of the summer) and on events/holidays, such as Easter bank holidays, King’s coronation weekend, August bank holiday weekend, concerts etc. Average occupancy can also be increased with medium-term rentals that are 28-days or more. Through our partners we often receive these longer reservations, examples could include insurance cases where someone’s home gets flooded, and they are looking for a 2-3 month stay while their own property is being repaired. We also receive enquiries from people moving to London for working and needing a temporary stay for a few months.
Other costs
I have highlighted the commission paid to sales channels e.g. Airbnb or booking.com (both are at 18% including VAT for software connected hosts), as well as the commission paid to management companies – this varies from 15% (listing and communications only) up to 25% for full-time management. When comparing management companies make sure you’re comparing the commission inclusive of VAT, as this will be added on top. Additional costs that hosts will have to include in the calculation are electricity and heating/gas costs, wireless internet as well as short-term rental landlord insurance which we highly recommend on top of AirCover insurance for Airbnb and Host Insurance by Booking.com
Which areas have the highest demand in London?
From experience we know that properties in London’s zones 1 and 2 have the highest demand in general. Another factor is how close the property is to public transport for easy access to London’s sights, ideally it should be a 5 to 10-minute walk from London underground.
What else should hosts pay attention to?
Other factors come into play as well – for example how spacious the property is, quality of the finish, whether the master bedroom has an ensuite bathroom, if there is a balcony or a garden, amenities like dishwasher, washer-dryer, espresso machine, smart-tv with apps also can play a deciding role when your property is compared to competition. Don’t forget taking professional photos as well – your potential guests will be deciding whether to book your apartment based on them!
Where do I start as a host?
For shorter periods it is possible to list and manage your property all by yourself, usually with a help of local housekeeper, many hosts in London do this. However, for longer periods or part-time short-term rentals (6 months in a year of more) many hosts choose to employ a professional agency like StayinLondon, to take the hassle away of managing enquiries, housekeeping, guest comms and other chores associated with running a short-term rental. If you’re keen to find out more and for a tailor-made revenue/cost calculation for your property please fill out our enquiry form and we’ll be in touch with you to discuss all the details!
Happy hosting in 2023!
