The Economic Case for Holiday Lets [Updated, October 2026]

What a managed holiday let contributes locally, compared with a second home, and what reclassifying it would put at risk.

The value: seven times more

A managed holiday let puts £10,178 a year directly into its local economy through housekeeper wages and local trades, including maintenance and waste collection, before a single guest has spent anything locally. Guest spending on food and drink, shopping and entertainment adds a further £7,448, taking the total to £17,626. That is seven times what a second home contributes, and four times the contribution of a household living in the property full time.

The risk: what reclassification would cost

Reclassifying a holiday let as a second home would move it from business rates onto council tax, including the second homes premium of up to 100% now charged by around 84% of English councils. On an average managed holiday let, council tax on a Band D property with that premium would come to £4,784 a year, cutting annual profit from £4,976 to just £192, a fall of 96%.

This isn't a marginal squeeze. With the premium applied, an average holiday let is left with £192 a year, before accounting for a mortgage and before any of the other cost pressures already facing the sector. At that level, it is no longer a viable business.

Limitations

These figures describe a professionally managed holiday let. An unmanaged or self-run property may look different, for example in agent fees, changeover arrangements or guest spending patterns. Booking volume and rental income are UK-wide averages excluding properties in London, Manchester, Liverpool and Leeds (AirDNA). Guest spending is a Great Britain-wide average (VisitBritain). Direct contribution figures are based on Finest Retreats' own data, averaged across its managed portfolio of 922 properties. Rental income is based on one to four bedroom properties, excluding major cities. Full-time resident and second home figures are based on average UK household spending (ONS). The figures have not been independently verified. Actual figures will vary by property, region, season and local council. The model excludes mortgage interest, so an owner with a mortgage would see a larger fall in take-home profit than these figures show. Finest Retreats is publishing this methodology in the interests of transparency.

Sources and notes

Direct contribution (housekeeping, maintenance, waste): Finest Retreats' own portfolio data (average changeover cost of £151.73 per booking, maintenance) and Bubbles & Bins waste collection data, including VAT.

Guest spending (food and drink, shopping, entertainment): Great Britain Tourism Survey 2024, VisitBritain. Holiday trip spend on eating and drinking out, eating and drinking in accommodation, other shopping, entertainment and other items totalled £4.48bn across 32.5 million trips, an average of £137.93 per trip, across an average 54 bookings a year.

Bookings per year: AirDNA, average of 54.18 bookings per property.

Rental income: AirDNA, average annual income for one to four bedroom properties, major cities excluded.

Full-time resident and second home spending: ONS Family Spending Workbook 1: detailed expenditure and trends, covering average UK household spending on local cleaning, eating out and takeaways, and local clubs and shops. Second homes assume the same maintenance costs as full-time residents and 50% of their local spending.

Letting agent commission: average 18% + VAT, based on main UK letting agents.

Telephone and internet: £30 a month, average fibre broadband cost.

Utilities: Ofgem (energy price cap, October 2026) and water.org.uk (average annual bill changes, 2026-27).

Insurance: GoCompare, average holiday let insurance premium data.

Council tax: gov.uk, average Band D charge in England for 2026-27. Second homes premium modelled at 100%, now charged by around 84% of English councils (source: Hamptons analysis, reported by The Negotiator).

This document updates and supersedes Finest Retreats' 2022 economic comparison research. The categories have been consolidated and the sourcing refreshed for 2026, so the two sets of figures are not directly comparable without adjustment. The reclassification cost modelling is new analysis, produced in response to the prospect of holiday lets being reclassified as second homes, and has not been published before.

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