Most new operators price a serviced apartment by looking at what everyone else on the same street charges, then knocking a bit off to get bookings. That is not pricing, it is guessing with a discount attached.
The nightly rate is one lever out of four, and on its own it tells you almost nothing about whether the unit makes money.
The four levers
- Nightly rate. What a guest pays per night, before platform fees and cleaning.
- Occupancy. Nights sold as a share of nights available. The number that decides your year.
- Length of stay. Average nights per booking. Longer stays mean fewer turnovers, less cleaning, less laundry, fewer messages.
- Net per available night. What is left after commission, cleaning, linen, laundry, utilities and damage. The only figure that decides whether the model works.
Operators chase the first lever and ignore the fourth. A unit at 90 pounds a night with a two night minimum, 75 percent occupancy and a 45 pound turnover cost is not the same business as the same unit at 80 pounds with a four night minimum and 60 percent occupancy. Run both through a spreadsheet before you argue about which is better.
Start from the cost of a night, not the price of one
Work out what a night costs you before you decide what to charge for it.
- Cleaning per turnover, at the rate your cleaner actually charges, including the odd job they find.
- Linen and laundry per stay, or the cost of running your own.
- Utilities and broadband, spread across available nights rather than sold nights.
- Platform commission, which is not the same on every channel.
- Council tax or business rates, spread the same way.
- Insurance, licensing or registration costs, and a sinking fund for repairs.
Then add the nights you will not sell. At 65 percent occupancy, a third of your fixed costs are carried by the nights that do sell.
What the market will carry
Look at comparables properly. Not the headline rate on the listing. The rate on the nights people are actually booking, in the season you are pricing, at the length of stay you are offering.
Check the same dates on three channels across a fortnight, weekday and weekend, and note four things: the minimum stay, the cleaning fee, the total including fees, and whether the calendar shows gaps. Gaps in someone else’s calendar are information.
Central London does not price like outer London, and neither prices like a city where one contract can fill a whole quarter. Corporate midweek and leisure weekends behave differently, and a unit that holds 70 percent occupancy midweek can still sit empty on a Saturday.
Length of stay as a pricing tool
Longer minimum stays are the quiet win. Every turnover costs money and carries the risk of a bad review, and a guest who stays three nights does not pay three times the turnover cost.
- Two night minimum at weekends, when leisure demand is there.
- Three to four nights minimum midweek, aimed at contractors and relocating professionals.
- Discounted weekly and monthly rates that price the discount into the cleaning saving, not on top of it.
- A higher rate for single nights, because a one night stay is mostly turnover cost.
The exception is gaps. A single gap night between two bookings costs almost nothing to fill and covers the fixed cost of that night. Fill the gaps, protect the pattern.
A worked example, with round numbers
Illustrative only, not a promise of what a London unit will do.
- Nightly rate 95, average stay 3.2 nights, occupancy 68 percent.
- Gross nights sold per month: roughly 21.
- Gross revenue: roughly 1,995.
- Cleaning and laundry, 7 turnovers at 55: 385.
- Platform commission at 12 percent: 239.
- Utilities and broadband: 220.
- Rates and insurance, monthly: 180.
- Net before mortgage: roughly 971.
Now change one thing. Four night average stay instead of 3.2 at the same occupancy: five turnovers instead of seven. That is 110 saved for the same revenue, which is more than a five pound rate rise delivers.
How often to review
Rates are not set and forgotten. Review weekly for the next six weeks, and daily for the next fourteen days.
- Book early for events, and price them hard, because that demand is certain.
- Discount late, not early. Cutting a rate ninety days out trains your best guests to wait.
- Watch your own conversion, not just a competitor’s rate.
- Log every booking: nights, rate, channel, lead time. In three months the pattern is yours, not someone else’s theory.
This is general information, not financial advice. Build your own model, with your own costs, before you commit to a property. The cost side is in what it really costs to set up a serviced apartment, and the choice between models is in serviced accommodation or HMO.
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