How Much Commission Should I Pay a Holiday Letting Agent?

Are you thinking about signing up to a holiday home letting agency? Not sure of the commission fees?

There are so many costs to take into consideration when running a holiday let, so commission fees on top of everything else can seem off-putting. However, they are for the most part a necessary evil when signing up with a holiday letting agency.

You may have already discovered that hardly any of the agencies mention these rates on their websites. Below are the average commission costs you can expect to pay, how commission costs are worked out, and ways you can save on your budget.  

How is commission worked out? 

Commission fees via holiday letting agencies are usually worked out based on a percentage of the booking cost. Most agencies work out their costs this way, although some larger holiday letting websites (such as Home Away) have a paid listing amount starting at around £350+. This is a good option if it turns out that they book up most of your available seasons. At first this is hard to know.

If you’re also paying for services such as property management (cleaning, laundry and maintenance) then these costs can be charged on top of your booking commission.

The average commission fees

For an average holiday let, the fees you can expect to pay are roughly 20% – 25% for bookings only. However, some of the smaller agencies may offer more competitive rates – for instance, we were charged 15% during our first year, which is highly competitive for the market. Note that they will charge VAT on the commission you pay to them.

Unfortunately, for most holiday letting agencies, the only way to really know how much commission you can expect to pay is to actually call them up and ask. This is because, like I said above, not many agencies will display these costs up front on their website.

Determining your costs

To figure out your costs, the best thing to do is to call up a few different agencies and work out exactly how much commission each will charge – as well as everything that’s included for that fee, such as:

• Marketing
• Administration
• Property management
• Changeovers
• Cleaning/laundry
• Waste disposal
• Professional photos

Once you have an idea of all you can expect to pay, you can factor this into your weekly costs and figure out your overall budget – Choose an agency that a) you’re happy with and b) makes financial sense. A balance of the two is usually the safest bet.

Ways to save on budget

If you are switching from another agency you may find you have some bargaining power since you are already established and may have your other services in place, such as cleaning.  You may or may not require a photo service either.

Some agencies are able to offer holiday let owners a bespoke service tailored to fit their needs, and this can be a great way to save on costs if you don’t want to pay for a full property management service. So, all you need to do is pick the services you need, and do the rest yourself!

The trick here is to pick a holiday letting agency that is happy to let you do that, but also be around to offer support and advice if and when you need it. Consider also whether they expect you to be exclusive to them or if they are happy for you to also be with other agencies.

Take your time when choosing and ensure you’re 100% confident it’s the right agency for you. Understand their payment structure - when do they release payments to you, what is their cancellation policy and if they operate a damage deposit policy, how does that work.

In summary

If you’re in the market for a holiday letting agency, one of the first things you’re going to want to learn is how much commission you can expect to pay, and exactly what you’re getting for your money – yet hardly any agencies actually display detailed costs on their website!

It’s usually worked out as a percentage of the overall booking cost, and the average you can expect to pay is around 20 – 25%. However, for full property management services, fees can be even higher, so I’d recommend talking to a few different agencies and getting some quotes to give you a rough idea.

You can save on your budget by choosing a bespoke service, and taking on some of the responsibilities yourself – however, I’d recommend finding an agency who will be there to offer support and advice when needed.

Covering the Expenses of your Holiday Home

For many owners, the dream lifestyle of having a primary home as their necessary base and a second home in the sun wouldn’t be possible without the income they earn by renting to holiday makers. Some offset a significant portion of their expenses, making a holiday home an affordable luxury, maybe only a third break even on their properties, still an enviable position to be in. For a minority the profits cover other important living expenses such as their children’s education, or fund a pot for a rainy day.

If you wish to pay all or just some of your expenses, it is important to work out what you’ll need to cover.

The typical costs of running a holiday rental business include:

• Initial investment of renovations and/or refurbishment
• Monthly mortgage payments (including interest, taxes & insurance)
• Insurance (building, contents and liability)
• Complex, or grounds fees (if you own an apartment or complex)
• Utility bills (monthly, quarterly or annually)
• Maintenance, repairs and redecorating
• Housekeeping, or housekeeper’s fees
• Advertising and marketing costs

The cost of your mortgage rate should be fixed, so it’s easy to determine what your annual expenses should be (x12 monthly payments). Only the final three costs are expenses generated by turning your second home into a holiday rental. Maintenance and repairs would still need to be paid whether you rent to travellers or not, but it’s likely you will need to spend more if you have paying guests in mind. The cost of marketing is relatively low, so the main extra expense is housekeeping.

If you use a property manager you will also have to pay:

• Management charges (usually in the form of % commission)
• Agency fees
• Some property management companies might charge other fees

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Perfect Housekeeping

You will have no problem finding people willing to be your cleaner, and some willing to take on your property as a caretaker-manager. However, what you will find difficult is sorting through these ads and applications for a person who can really do what they offer, week in, week out, to the standards you set and that they agree upon at the beginning.

If you are not living close by to check on the quality of this service, then it can be fraught with problems if you rush into employing someone and are then unable to run regular quality checks, especially at busy times. If possible take them on for a trial period, if they are as good as they say they will have no issue with that. Extend this trial period through the summer months if you still feel unsure, and if after that you are happy then offer them continuous work. You may prefer to offer this permanent basis on condition that their standards remain. Don't try to go for lowest hourly rate, and don't go over your budget if you feel they are asking too much. We pay a fixed change-over fee, plus any extra one-off cleaning fees, laundry fees and costs of materials and welcome packs.

Make the change-overs yourself

At least at first make the change-over yourself. You will then have an understanding of how long it takes to prepare the home ready for the next guest. Our check-in, check-out times allow a 5 hour turnaround, otherwise called a change-over. It is a two bedroom cottage with one large bathroom so it is possible to make the change-over in 4 hours. This leaves a buffer in case the departing guests leave late or an extra deep clean is required.

During our first months of letting our property, we had fantastic comments and feedback, after all it was effectively brand new, "like a show home". At that time living in another country we had to find someone to manage the change-over days and any maintenance that may need attention. In the middle of the high season we noticed 'suggestions' in our feedback forms. I should have acted immediately and visited to understand why this was so, but I put it down to overly fussy guests. This was my first and biggest mistake.

We did visit at the end of the high season for our own holiday and contacted the manager-cleaner to let him know when we'd be arriving.

Whilst I cannot say the house was filthy, it was far from the high standards we expected and believed we were providing to our guests. It was only then that we read through the cottage suggestions book to read things like "hairs in the bed and fridge" and "freezer solid with ice". I went around the cottage armed with my camera and found 30 issues which needed attention such as a broken glass bedside lamp - how could anyone miss that if they'd just cleaned the room?

What we found astonishing was the fact that he knew we were coming to stay, giving him the opportunity to make the place perfect for our arrival. After discussing this with him it became clear that he had not done the cleaning himself but sub-contracted someone else to do it. He insisted that he had checked it personally, especially on this occasion because he knew we were coming. He was either not telling the truth or has very low standards, you could not have missed the broken lamp. His overall response was quite aggressive, not a nice experience at all. His denial says everything about his attention to detail and customer care. After checking the inventory we found several items missing including more than a full set of bedding and towels, something he also denied knowledge of. There was also no record of any inventory check since he began.

Seek recommendations for your staff

Although he was recommended by an online holiday cottage website, I should have asked for recommendations and perhaps tried to speak with his existing clients. So I tried harder to find a replacement with this fresh in my mind, but again this was rushed through since we were there only a week and had new guests arriving after our departure. I found someone who had two of his own holiday apartments about an hour away from ours, he said he now cleaned his properties himself as he had had similar experiences to us. This time it was better but still we found too many issues during that second year, he too then sub-contracted the cleaning, and his arrogance and reluctance to speak with guests during their stay, unacceptable.

For the third and subsequent years we have been blessed with a fantastic cleaner who also part manages with me, this time recommended by word-of-mouth. She does not wish to have lots of properties to clean as she realizes that her standards might inevitably slip. Her friends joke that she has OCD for cleaning. We repeatedly get comments from guests complimenting her and thanking her for such a clean house and smiling welcome. We know that she does an enormous amount towards our repeat bookings and recommendations.

I take time to listen to her if she has any concerns with bookings or her responsibilities, she also has valuable advice on improving guest experience and cost reductions. She also informs me on each check out if any guests have caused damage or an issue which needs more of her time to resolve. This gives me time to evaluate as to whether any damage deposit should be withheld or absorbed into overheads.

It is worth considering, when interviewing potential cleaner caretakers, to ask if there is anything they would prefer not be responsible for, or anything that concerns them about your property. For example, we used to keep all our spare linen and consumables in dry storage, in the loft space, however not all people are happy with going into attics, some even have a phobia of them.

Be your own property manager

You've already decided that you'd like to turn your property into a holiday home, and you'd know like to begin the process of renting it out to guests in the weeks you don't use it. You do not wish to employ an agent to do this for you, or at least not completely.

There are many reasons perhaps of why you came to these decisions, and these reasons are important in understanding what you need back from your investment so far and for the inevitable investment of setting up to run it as a business.

For myself it was because I was living there less and less due to work contracts taking me to other countries. It was my main home, my only property, and I had tried residential letting for brief periods, but often the income didn't even cover the mortgage and maintenance costs. True, the tenants were responsible for all utilities, Council Tax rates and keeping it in good condition but so often not all tenants will respect that.

I discovered, after the last tenant vacated, a lot of damage and neglect but more importantly, rising damp which she had lived with without telling me, in fact had actually tried to hide it believing it was her fault. By this time I needed to make major repairs and decided to completely renovate, adding a second bedroom. After this huge expense and investment I decided that holiday letting would better provide regular checks on the property, any repairs could be done immediately, provide an income which would potentially cover all overheads and provide a little profit to put back into the property as and when needed. It also meant that I could stay there during the weeks it wasn't booked.

Pros and Cons

I started by listing all the pros and cons of running this as a small business and the more I researched the more it became a no-brainer to make it a holiday let. There are some things that I considered when coming to my decision to becoming a holiday home owner including:

• What will be the start up costs?
• What will the weekly, monthly or annual overheads be, including mortgage repayments?
• What is the minimum annual income I require to run the business without a loss. In other words what is my break-even point?
• How many years do I expect it to take to meet that break-even point. Was I prepared to make a loss for this time, could I carry that?
• Is my property in a desirable location? Why? Does it have enough of the right qualities and amenities? What are the benefits?
• What is the competition like? Are they close by and how do they compare to mine?

Ask for advice from holiday letting agencies

Before I could fully answer these questions I needed to make more research and approached a local holiday agent (as against a national one) to ask their advice. They were Cornish Cottage Holidays and even though the property was still looking more like a building site they were happy to visit and discuss my plans as they they did not have many properties in that local area and were keen to expand.

Once the cottage reconstruction was complete and furnished, they visited again and seemed genuinely impressed as they entered the property for the first time. This is one of the most important aspects of having a holiday home, the welcome the guests feel when first setting foot inside after an often long journey to get there. Cornish Cottage Holidays were keen that I signed up with them and I liked what I heard from them regarding their attention to detail and support. However, I was concerned about the 20% fee they would take from each booking, I knew that without them it would be slow going to get established and they had 40 years of experience in the region which would be invaluable to me.

I had also sought the same advice from one of their competitors, however the response I had from them was more distant and they were reluctant to visit the cottage first. To clinch the deal Cornish Cottage Holidays offered to waive the registration fee and drop their commission to 15% for the first year.

So my original aim of me managing the property totally by myself had now been watered down a little, by taking away the initial pressure of marketing and leaving that to Cornish Cottage Holidays along with getting bookings. I would begin my own marketing in parallel during this first year with the aim of reducing my reliance on another company.

If you do take the same route and sign up with someone for similar services, make sure that you are not tied to them for an unrealistic period of time and that it is not for exclusivity. With Cornish Cottage Holidays any owner's bookings were limited to five weeks in the high season and anything above that would still attract their commission fee (+Vat). One downside to using an existing online marketing solution is that they will want to protect their own client list and maybe reluctant to pass on your guests email to you, although you will most certainly receive the guests' phone numbers. This is slowly changing and you will now find that most will have a way for you to contact your clients by email even after they have finished their stay.

Similarly when you make a booking of your own and you relay it to the marketing company, don't feel that you need to give them any guest contact details unless you have an agreement that they will deal with any issues arising with your guests during their stay.

I will deal more specifically with that in another post.