The UK holiday let market

The UK holiday let market is the part of the property market that earns from short-stay leisure and business accommodation rather than long tenancies, spanning coastal cottages, rural lets, city short lets and aparthotels. It has been through an eventful few years: a staycation boom as overseas travel was disrupted in the early 2020s, a wave of new entrants, and then a tightening of tax and regulation that is reshaping the sector. Understanding the direction of travel matters for anyone buying or financing a holiday let.

This guide sets out the market with sourced reference points: demand and the staycation, occupancy and rates, regional hotspots, the regulatory direction, and what it all means for borrowers. We arrange holiday let and serviced accommodation finance as a broker and introducer, not a lender. Figures here are qualitative or attributed to named sources, and this is general information rather than investment advice.

Demand and the staycation

The defining feature of the recent UK holiday let market has been the strength of domestic tourism. As overseas travel was disrupted in the early 2020s, UK holidaymakers turned to domestic breaks in large numbers, and although overseas travel has since recovered, the staycation habit has proved durable. VisitBritain's forecasts and tracking show domestic tourism spend remaining a substantial part of the visitor economy, supporting demand for self-catering and short-let accommodation across the country.

Operators corroborate the picture. Sykes Holiday Cottages reports sustained booking demand for managed cottages through its annual Staycation Index, and data firms such as AirDNA track continued short-let activity across UK markets. The demand is not uniform, though: it concentrates in established destinations and is strongly seasonal in coastal and rural areas, while city and business-travel markets are steadier. The headline is a market with resilient underlying demand, but one where success still depends heavily on location and the ability to attract bookings across more of the year than a single summer peak.

Occupancy, rates and seasonality

Holiday let income is built from occupancy and nightly rates, and both vary enormously by location and season. Coastal and rural lets typically achieve high occupancy and strong rates in peak summer weeks and school holidays, and much lower occupancy in winter, so the bulk of annual income is earned in a concentrated period. City and business-travel markets are flatter across the year, mixing weekend leisure with midweek business demand. Data providers such as AirDNA publish occupancy and average daily rate figures by market, which are the most reliable guide to what a specific area actually achieves.

The practical lesson for investors and lenders alike is to underwrite on realistic, year-round occupancy rather than peak-season figures, because the most common cause of disappointing returns is an occupancy assumption built from summer alone. The strongest-performing lets are those that extend the season, through scenery, features such as hot tubs, dog-friendly policies, or business and city-break demand. A holiday let mortgage is sized on exactly this seasonal income, which is why lenders average across the seasons and stress the figures rather than relying on a property's best weeks.

Regional hotspots and the property mix

The UK holiday let market is concentrated in recognised destinations. The South West, particularly Cornwall and Devon, is the largest and best-established self-catering market, drawing consistent demand across a long season. The Lake District, Yorkshire Dales and other national parks combine scenery with year-round touring and walking demand, while the Welsh coast and Snowdonia, and the Scottish Highlands and islands, draw strong outdoor and touring visitors. Heritage cities such as Edinburgh, Bath and York anchor the city short-let and business-travel market.

The property mix spans single cottages and apartments through to portfolios and aparthotels. At the leisure end, two and three-bedroom cottages with parking, outdoor space and features perform best; in cities, serviced apartments mixing leisure and business demand dominate; and at the top of the market, aparthotels and blocks of serviced apartments are run as hospitality businesses. Each requires a different funding route, from holiday let mortgages on single units to commercial finance on aparthotels, which is the spectrum we arrange across.

The regulatory and tax direction of travel

The single biggest force reshaping the market is the tightening of tax and regulation. The furnished holiday lettings tax regime, which long gave qualifying holiday lets favourable treatment, was abolished from April 2025, removing tax advantages that had drawn many investors in and pushing owners towards limited company ownership. At the same time, licensing and registration have tightened: Scotland operates short-term let licensing, Wales applies a 182-day letting test, London caps whole-home short lets at 90 nights, and England is introducing a registration scheme.

The direction of travel is clearly towards more regulation and less favourable tax, which is reshaping the economics and pushing the market towards more professional, better-capitalised operators and away from casual entrants. This is not the end of holiday lets as an investment, but it raises the bar: the properties and operators that succeed now are those with genuine demand, sound economics on a post-2025 basis, and a compliant regulatory position. Our holiday let rules guide and FHL tax changes guide cover these shifts in detail.

What the market means for borrowers

For borrowers, the market backdrop has clear implications. The case for a holiday let now rests more on strong net income and a genuine demand story than on tax advantages or a rising-tide staycation boom, so lenders and investors alike are underwriting more conservatively, on realistic occupancy and post-2025 tax. A well-located, well-run, compliant property in a recognised market remains very fundable; a marginal property in a secondary location with regulatory question marks is a harder credit story than it would have been a few years ago.

The funding market itself remains active, with specialist holiday let and serviced accommodation lenders, challenger banks and commercial lenders all competing for good business, and limited company lending well established. The investors who finance well in this market are those who buy on sound, current-basis numbers and present a clear regulatory position. We arrange the finance across the whole sector, from single lets to aparthotels, as a broker and introducer, and we help clients present their deal the way lenders now want to see it.