Monday, 9 September 2019

Is it worth it?

I've just run the annual accounts for 2018 - 2019 for the cottage. Not including our manpower costs in cleaning the cottage and other running around, the profit margins are slim, representing a return of 1.2% on the capital investment. If we took the same capital investment and put it shares we'd see an average return of 4% without having to lift a finger.

Taking account of running costs and assuming a very optimistic 75% occupancy, we have to see a fee of £103 in a week before we've covered operational costs. Bear in mind that the agency takes 25% of the booking (plus an admin fee) of the money paid by our guests. The agency deducts VAT at 20% from the balance it pays us as "income"; so the guest has to pay in the region of £160/week before we see a penny profit. Our multi-room cottage is about half the price of a room at the local Premier Inn.

To cap it all we have to pay income tax on any profit.  So when we have a guest saying we're too expensive or the furnishings need upgrading (hint; they are all less than three years old), we don't take them too seriously.

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