Deposit and balances

The amount of administration and accountancy involved in your business will be dependent on whether you employ the services of an agent or decide to do the work yourself.

If you employ an agent, they will be responsible for taking your bookings. A deposit will usually be requested at the time of the booking and this can be anything from, say, £50 per week to a percentage of the overall cost of the rental. Most holiday let agencies request the balance of the monies due eight to ten weeks before the holiday is to be taken. If you decide not to employ the services of an agent, then the taking of deposits and balances will lie solely with you. This may seem like an easy quest, but you should bear in mind that some guests may fail to pay the balance on time, or cancel at the last minute, and you should have a strategy in place for dealing with these situations.

When deciding on the amount of deposit to charge, bear in mind the following:

• 1.Too high a deposit may put off potential customers, particularly those who are already wary of booking directly with an owner rather than through an agent.
• 2.Too low a deposit may enable the potential guests to cancel at the last minute, as they do not risk losing a large amount of money. If they cancel within a couple of weeks of when their holiday is due to commence, it may be difficult for you to re-book the property. You therefore stand to lose a large sum of money should this happen in the prime weeks throughout the summer season. If you advertise your holiday property for £500 for a week in August and only request potential customers to pay a £20 deposit, if they cancel at the last minute you stand to lose £480 in potential rental. Of course, if you are able to re-book the property you stand to make the extra £20 in profit.
• 3.If you try to overcome the potential for cancellations by requesting that customers pay an additional amount should they cancel within, say, four weeks of departure, it is highly unlikely that you will receive the money. Of course, cancelling a holiday is in some cases inevitable, but for others it may just be because of the lack of funds or a change of heart. You should try to set your deposits at a level that you are happy with in the unfortunate circumstances that someone may have to cancel.

If you employ an agent, you should receive that deposit for a booking when your next payment is due from them. For example, an agent who pays their client monthly and receives a deposit for a booking in June should in theory be paying their client this deposit in July. This will of course depend on the date the booking was taken and the date the monthly statements are prepared. Large agencies often charge low or reduced deposits. This is because they know that people are encouraged to book when a small deposit is needed and in the event of a cancellation, they usually have the means of re-letting the property at short notice. In the event of a booking being cancelled whereby a reduced deposit has been charged, the customer will be expected to pay the remainder of the deposit despite having cancelled their holiday.

The final monies due should be requested before the customer takes their holiday. Never allow guests to holiday in your property before paying the rental. Although this may seem like common sense, some people can be too trusting and allow guests to sample the property first. This is not to say that your guests are going to be disappointed and therefore refuse to pay, as this is most definitely not what you should be aiming for. If you follow the guidelines set out in this book you should be hoping for repeat bookings, not unhappy guests. However, many people are unwilling to pay for something after they have had it and even if they do pay, you may have to chase your money up and still end up waiting many months for the cheque. All agencies will set a deadline for the balance of the monies to be paid and this can be anything from one to two months in advance. If a booking is taken less than four weeks before the start of the holiday, the agency will request the full amount when taking the booking, and this may be something you would like to consider if you are marketing the property yourself.

If you decide to market your property yourself, bear in mind the length of time it may take you to:

• a)chase up the balance of the funds when the due date passes.
• b)allow for the payment to reach you.
• c)re-advertise the property in the event of a holiday being cancelled.

Of course, we can all be forgetful. If a guest who has booked their holiday and paid the deposit fails to deliver the balance of the monies on time, do not automatically assume they are untrustworthy and immediately offer the property for re-letting. A quick telephone call to remind the guest that the payment is due may be all that is needed. Inform them that you will allow them a further week to post the cheque, after which they stand to lose the deposit they have already paid and you will offer the property for re-letting. This is usually all it takes to get the balance owed to you. Of course, the number of weeks you request the balance of the rental prior to the holiday will need to take into account any further time you allow guests to pay up.

Agencies will have their own strategies for collecting the balance of the monies due. Often late payments can incorporate additional fees or the property would have to be re-booked and the initial deposit lost. An agency will of course furnish potential guests with a contract giving all the details for deposits and balances.

If you employ an agent to take care of the bookings for you, it will be impossible for guests to turn up at your property having not paid the full amount of money due as the agent will not give the property’s address and directions until they are in receipt of the full rental funds. Important information about the property such as its full address, direction, housekeeper details where to obtain the key from and if used, the code for the key safe, will only be sent out once the customer has paid the rental fees in full. If how ever you are marketing the property yourself you may be asked by a potential guest for the address of the property. Avoid giving the full address at all costs and never give details of where to obtain the keys until you have received a firm booking and all the rental fess. Of course, it is acceptable to tell potential customers the vicinity of the property but do not give the precise location.

Remember, although the vast majority of the enquiries you receive will be from genuine holidaymakers, you may also fall victim to opportunists looking for empty properties. Never make things easy for them by giving away too much information early on. Of course, even after receiving the rental in full you cannot guarantee that the people holidaying in your property are honest people who will look after your possessions. If you employ a housekeeper, make sure they keep an eye on the property, without interfering or making a nuisance of themselves. Some property owners instruct their housekeepers to make a note of the car’s registration number and to check the property immediately after guests have vacated in order to check for damage and breakages.

Some guests may well abuse your accommodation, but in my experience this is far more likely to happen in a longterm let than in a holiday let. You may well command a rental fee in excess of £400 per week in the summer, even for a small property, and it is probably true to say that guests paying this kind of money usually treat their accommodation with respect, though obviously this is not always the case. Apart from the odd spill, dirty footprints, dog hairs and dirty ovens, on the whole my own rental property has been treated well. You must learn to accept that accidents can and will happen. Unless you feel that your property has been badly damaged or wilfully abused, you must take any accidental damage in your stride as this is part and parcel of what should be accepted in a rental property. It is important when letting your property to see it as a business and not as your home. Although it is vital that your property is welcoming and comfortable, avoid furnishing your accommodation with family heirlooms and very expensive furniture, unless of course your rental more than covers any damage that may occur.

It is worth bearing in mind that the location of your property may also be a factor that contributes to the type of holidaymakers you will attract. For example, many landlords consider large groups of teenage boys to be undesirable guests due to their tendency to want to throw parties and consume alcohol. It is probably true to say that groups of teenagers are more likely to book a holiday in a lively resort where entertainment is on hand. If your holiday home is in the remote highlands of Scotland, this is probably a problem that you will never encounter. You may prefer to rent your property to couples and families, although this is not something that will be easy to monitor. It may be worth considering how you will deal with an enquiry from a teenager, what questions you will ask and whether you will allow them to book. How, in fact, will you be able to tell the age of prospective holiday makers from their voice on the telephone? You could consider charging a bond, which you will refund should the property be kept in good condition, but of course you risk losing customers if you choose this method.

Cancellations

This can be a tricky one, as usually people do not cancel a holiday unless they really have to. An agent will have a strategy in place for cancellations and will not be deterred by sob stories or personal misfortune which should, in the case of genuine circumstances, be covered by the prospective holidaymakers insurance policy, if they have one. However, if you are responsible for the bookings yourself you many well find yourself faced with a dilemma if a holiday maker telephones you to cancel two weeks prior to their holiday, with a personal tragedy to tell as to why they can no longer go on their holiday. Think about how you would deal with this kind of situation. If an elderly lady requested to cancel her holiday stating that her husband had been taken into hospital, how would you deal with her request of the £500 rental fee she had paid to you to be refunded? You may feel sorry for the lady and her circumstances, but you must also bear in mind that you are running a business and the chances of you being able to relet your property at such late notice are drastically reduced. Think about whether:

• a)you would refund the full amount.
• b)you would refund the full amount minus the deposit.
• c)you would refund a percentage of the amount.
• d)you would not refund anything
• e)you would agree to refund some or all of the money providing you are able to re-let your property.

In theory, you would be well within your rights to keep a percentage of the full amount of money paid as you may not be able to re-let you property; but are you the type of person who would stick to this arrangement? If you refuse to refund any of the money and then end up re-letting your property, you could stand to make twice as much profit, but this appears hardhearted and unfair when someone has had to cancel through difficult circumstances. It is therefore probably reasonable to tell the customer that you would consider refunding their costs only if you are able to re-let your property.

Although some of the people who cancel are doing so far genuine reasons, you may also come across those who have had a change of heart and are relying on your good nature to refund their money should they choose to cancel. This does not make good business sense. If you employ an agent they may well follow a strategy such as the one set out below, and you should bear this in mind when running your own holiday lets:

There are certain circumstances that will enable guests to qualify for a refund on their insurance policy when cancelling a holiday, such as:

Death (member of the holiday party or a close relative)

Illness

Pregnancy

Redundancy

Jury or witness service

Unable to reach the destination due to an accident en route

Unable to reach the destination due to flooding or heavy snowfall

Different agencies will have differing cancellation circumstances and all guests booking a holiday will be furnished with these conditions.

There may be circumstances when a holiday has to be cancelled by you, the owner, for example in the event of a fire, flood or burglary, and you should have a strategy in place for compensating guests should this unfortunate matter arise. An agency will be in the enviable position of being able to offer alternative accommodation but, unless you have a large property portfolio, you will not be able to offer this service if you are letting your property yourself. You must bear in mind that potential holidaymakers will be disappointed if their holiday is cancelled, particularly at short notice, and you will need to offer acceptable compensation in addition to a full refund. Situations such as these, though hopefully few and far between, must be handled sensitively in order to minimise the disappointment and hopefully reduce the chance of losing potential customers. As an incentive to re-book, should you have to cancel a guest’s holiday, consider refunding the monies paid together with an additional amount of money as a goodwill gesture, or perhaps offer the accommodation at a later date at a reduced rate. This will ensure that you retain the booking and therefore hopefully secure another happy customer.

It is because holidaymakers sometimes cancel their bookings that most agencies offer cancellation insurance as part of their package. Some agencies will insist that guests take out their insurance while others will simply recommend it. Agencies usually offer cancellation insurance in scales according to the total value of the holiday booked. If you do not employ an agency to let your property on your behalf, it may be worth doing your own research into holiday cancellation insurance so that you can recommend an insurance company, should your guests require it.

How many bookings can I expect?

As mentioned previously in this book, the number of bookings you can expect will depend on a number of factors, namely:

• 1.The location of the property.
• 2.The type of property.
• 3.The number of guests the property can accommodate.
• 4.The price.
• 5.The inclusion of linen, gas and electricity in the rental.
• 6.The number of attractive facilities, such as an automatic washing machine, dishwasher or cable television.
• 7.The number of special features, such as a swimming pool, gym or four-poster beds.
• 8.Whether or not the property accommodates children.
• 9.Whether or not the property welcomes pets.

Earlier in the book, we talked about the added luxuries you could incorporate when furnishing your property, such as the provision of toiletries or a welcome pack, but these items are not usually advertised and it is therefore the actual facilities on offer that attract potential guests. The items they find on arrival, such as fresh flowers or a bottle of wine, are an added bonus and may well encourage guests to re-book, but they will not be the deciding factors the actually secure a booking.

Most agencies will give you an indication as to the number of bookings an average property can expect, but

these are simply a guideline and must not be taken as gospel. An attractive property in a good location can probably expect to achieve 40 bookings per annum, if it is marketed well. A premier property offering spacious accommodation and luxury amenities such as a swimming pool and a gym may well exceed this number of bookings. Likewise, a character cottage in a romantic setting featuring a four-poster bed may achieve a high number of bookings. Few agents will guarantee a number of bookings and may well inform you that the average properties are reaching between 20 and 30 bookings per annum. If you take into account that many properties only attract visitors during the summer months, this is quite impressive.

It is up to you to ensure that your property has the ‘wow’ factor and offers prospective guests that little bit more so that they are encouraged to book your property rather than one of the thousands of other self-catering properties on offer.

How can I increase my bookings?

The methods you choose to try to increase your bookings will depend on whether you employ an agent or not. If you are unhappy with the number of bookings you are achieving and you are using the services of an agent, then it is important that you talk to them about your concerns. Ask them why they think you are underachieving and what advice they have to offer to improve your bookings. Many agents share customer feedback with the property owners and by discussing your bookings or lack of them with your agent you may well be able to decide on a plan to help promote your property and encourage people to book. If you are going to ask for advice though, it is important that you heed it, and take on board what the agent is telling you, even if it will entail more work and expense on your behalf. If you have refused to allow pets or smokers into your property in the past, try lifting this ban for the time being and see if it helps to generate more bookings.

Placing a visitor’s book in your property may also open your eyes to problems you did not know existed. Often disgruntled guests who do not wish to lodge a formal complaint with the owner or agency may well let off steam in the visitor’s book. Consider yourself lucky if they channel their frustrations in this way, rather than putting their complaint in writing, to either yourself or your agent, but also take on board their criticism. You may have escaped a written complaint, which could warrant a refund, but you will have lost a customer. Take note of their grievances and correct the problem wherever possible.

If you market the property yourself, you will be able to try many different ways of generating more bookings without the restrictions an agent may impost. For example, during a quiet period you may like to consider:

• 1.Offering friends or family discount during the quieter weeks.
• 2.Offering friends or family incentives to help promote your property.
• 3.Advertising discounts through the winter months.
• 4.Offering weekend breaks, midweek breaks and short breaks (although always make sure that the price you charge covers the fuel and cleaning bills you will incorporate).
• 5.Offering any friends who are tradesmen a free or discounted week in return for work done on the property, for example painting and decorating. (Although in theory you will probably only cover your own costs, fuel and cleaning, you will save yourself money by not having to employ a decorator.)
• 6.Increasing your advertising if there are any special events going on in the area where you have your property. For example, a holiday home near to a watersports club that has competitions for waterskiing or surfing. Find out, in advance, about any forthcoming events and advertise your property in time to incorporate them. Traditional shows, celebrations, Christmas markets and harvest festivals can all attract potential holidaymakers.

Shorts breaks and discounts

If you decide to market your property with an agent, they will ask about your opinion of short breaks. Although they will probably insist that your property is available throughout the year, they do not usually insist that you agree to anything less than a full week’s rental. Most agents do, however, offer weekend and short breaks and it is entirely up to you whether or not you are willing to allow your property to be rented in this way. Before agreeing to allow your agent to advertise your property for weekend and short breaks, consider the following:

• 1.Will the income you receive, after your agent has taken their commission, cover the cost of cleaning the property?
• 2.Will the income you receive, after your agent has taken their commission, cover the cost of the gas and electricity your guests will use, particularly during the winter months when they are more likely to have the heating on all the time?
• 3.Is your housekeeper/cleaner available to clean on a Sunday after weekend visitors or midweek after guests who have booked a short break?
• 4.What is your opinion of short breaks that may be split between two weeks? These have the potential of reducing your income if, for instance, a four-day break is taken in the middle of a two-week period. For example, if your changeover day is usually Saturday, how would you handle a request for a four-day break from Friday to Tuesday? This booking may be welcome if you have no other bookings, but you may well end up turning down two full weeks’ lets at a later date.

A good agent will be able to advise you as to the market potential of your particular property. Some properties fair better than others for weekend and short-term lettings. Indeed, some properties such as city flats may make the majority of their income from weekend and short breaks, as guests will book for shopping trips, shows, sightseeing, special events, etc.

If you do not use an agent, you stand to make more money from letting your property for weekends and short breaks as the only expenditure you will have will be the cleaning and fuel costs and there will be no commission fees to pay. However, you must still think carefully about two- and threeday breaks as these may not be profitable. If you are intending to let your property for short breaks, consider a minimum of four days to ensure that the rental you receive will cover the full cost of the expenses you have incurred.