Is the short-let boom over? Declining occupancy rates drive a reduction in revenues

The latest research from London lettings and estate agent, Benham and Reeves, has shown that while the number of short-term rental properties has climbed across the majority of holiday hotspots, there’s been a reduction in occupancy rates across the board.

Benham and Reeves analysed the current state of the short-term rental market, looking at the level of available market stock, occupancy rates and revenues and how these market metrics have changed over the last year*.

The figures show that there are over half a million active short-let listings across the UK and when it comes to this number, there has been an increase across all but one holiday hotspot analysed by Benham and Reeves.

With 52,494 active listings, London is home to the largest number of short-term lets, with this number having increased by 22% over the last year. Just Manchester has seen a larger increase at 29%, with the Peak District (+18%), Lake District (+15%) and Cotswolds (+10%) also seeing a notable increase.

Somerset, Dorset, Devon and Cornwall have also seen an increase, with just Edinburgh seeing the number of active listings fall year on year (-12%).

However, while many landlords have been tempted away from the private rental sector by the far higher rental incomes secured across the short let space, the figures highlight a worrying trend that could come back to bite them.

All 10 of the areas analysed by Benham and Reeves have seen a reduction in occupancy rates over the last year, with the largest coming across Devon (-16%), Dorset (-14%) and the Cotswolds (-14%).

As a result, annual revenues have also been lacklustre over the last year, with Devon (-7%), Cornwall (-4%), London (-4%) and Manchester (-3%) all seeing an annual drop, while annual revenue growth across Dorset (0%), the Cotswolds (1%) and Somerset (2%) have been largely flat.

The result? A price hike passed onto the consumer in order to help balance the books, with all 10 areas seeing a sharp increase in the average daily rate charged – the largest of which have been seen across Edinburgh (+18%), the Lake District (+16%), Somerset (13%), the Peak District (+13%) and Cornwall (+10%).

Director of Benham and Reeves, Marc von Grundherr, commented:

“Many traditional landlords have succumbed to the allure of the short-term rental market in recent years, as they’ve looked to boost the profit margins of their rental portfolio following a string of legislative changes to the PRS sector.

This is a trend that has continued over the last year with the vast majority of areas we analysed seeing an increase in active listings.
However, the data also suggests that the heat may be dying down with respect to consumer demand, with occupancy rates falling significantly and denting annual revenues in the process.

As a result, it seems as though short-let providers have ramped up daily rates in order to compensate, but this is a tactic that is unlikely to resonate with consumers given the current economic landscape.”