For many landlords and property investors in the UK, the traditional buy-to-let model has long been the default. But in recent years, serviced accommodation has grown in popularity – and profitability. So, is serviced accommodation really more profitable than buy-to-let?
Let’s break down the numbers, the variables that affect profitability, and how you can make the most of your property.
What Do We Mean by Profitability?
Profitability isn’t just about gross income – it’s about net return after costs, tax, and effort. When comparing serviced accommodation and buy-to-let, we consider:
- Gross rental income
- Operating costs
- Void periods
- Maintenance and furnishings
- Tax treatment
Income Potential: Short-Term vs Long-Term Lets
One of the main draws of serviced accommodation is the ability to charge a nightly rate rather than a fixed monthly rent. This opens the door to significantly higher gross income – particularly in high-demand areas.
Example:
| Property Type | Traditional Let | Serviced Accommodation |
|---|---|---|
| 2-bed flat in a city centre | £850/month (£10,200/year) | £100/night at 75% occupancy = £2,250/month (£27,000/year) |
Even after subtracting management, cleaning, and running costs, the net profit is often still 1.5x to 2x higher than a traditional let.
Key Factors That Influence Profitability
1. Location Demand
City centres, business hubs, tourist spots, and areas near major employers perform best as serviced accommodation. In quieter or rural locations, a buy-to-let model may be more reliable.
2. Occupancy Rates
Serviced accommodation requires active management to keep occupancy high. Tools like dynamic pricing, professional listings, and responsive guest communication can significantly impact returns.
3. Management Style
If you self-manage your property, you’ll save on fees but spend more time. If you use a management company, like Gough Groves, you’ll pay a percentage – but enjoy hands-free income.
4. Setup and Running Costs
Serviced accommodation requires:
- Quality furnishings and appliances
- Regular cleaning
- Utility bills and Wi-Fi
- Guest consumables (e.g. toiletries, linen)
Initial setup is higher, but these costs are offset by higher income over time.
Tax Treatment: An Overlooked Advantage
Unlike traditional buy-to-let, serviced accommodation qualifies for different tax rules, especially if it meets Furnished Holiday Let (FHL) criteria.
Benefits can include:
- Claiming capital allowances on furniture and fixtures
- Avoiding Section 24 restrictions (which limit mortgage interest relief)
- Potential business rates treatment instead of council tax
These advantages can make a major difference to your final net income.
Voids and Risks
- Buy-to-let: Longer-term tenants mean fewer voids, but it can take months to re-let if a tenancy ends suddenly.
- Serviced accommodation: More short gaps, but with the right setup and marketing, properties can maintain high occupancy and generate income year-round – especially from contractors, corporate stays, and relocations.
Real-World Example: Serviced Accommodation in Derby
One of our managed properties in Derby — a 3-bed house near a major employer — earned 2.5x more as serviced accommodation than it did as a long-term rental.
It attracts:
- Business travellers
- Visiting engineers
- Families relocating temporarily
With the right guest profile and pricing strategy, these properties can outperform traditional lets consistently.
Conclusion: Is It More Profitable?
In the right area, with the right management, yes — serviced accommodation is more profitable than buy-to-let.
But it’s not passive income by default. You need:
- A strong understanding of demand in your area
- A well-presented, fully equipped property
- Either a hands-on approach or a professional partner to manage it for you
Want to Explore Your Property’s Potential?
At Gough Groves, we specialise in helping landlords turn underperforming lets into high-yield short stays. We’ll assess your property, forecast your income, and handle everything from listings to guest care.