Serviced Accommodation Investment: Income, Costs and Rules

Serviced accommodation sits somewhere between a rental property and a hotel, and that middle ground is exactly why investors keep asking about it. The gross income can be much higher than a standard let. So are the costs, and so are the rules.

This guide covers what serviced accommodation actually is, what the industry's own trading data shows about income and margins, and how aparthotel and hotel room schemes are structured. It also goes through what it costs to run, and the rules that shape the strategy, from VAT and business rates to London's 90-night cap.

Article updated: July 2026

What is Serviced Accommodation?

Serviced accommodation is fully furnished, self-contained property let for short stays, with hotel-style services such as cleaning, linen changes and Wi-Fi included in the price. Guests range from business travellers to tourists and relocating professionals, and stays run from a single night to several months.

The meaning is broader than most people expect. A city centre apartment let to a contractor for a fortnight is serviced accommodation. So is a two-bed house near a hospital taken by a family visiting a patient, or a flat a relocating employee lives in while house-hunting. If it is furnished, let short-term and serviced between stays, it qualifies. "Short-term let" and "short stay accommodation" describe the same thing from the guest's side of the door.

It is a substantial sector in its own right. The Association of Serviced Apartment Providers, the sector's trade body, put the UK market at more than 56,700 serviced apartments in its 2024 independent review with research firm BONARD, with business travellers making up 45% of guests. Booking platforms such as Airbnb, Vrbo and Booking.com have done the rest, putting a marketing and payments system that once belonged to hotels into the hands of individual owners across the UK.

Serviced Accommodation as an Investment

To make money from serviced accommodation, the nightly calendar has to beat the monthly rent. A standard investment property collects one payment a month from one tenant. A serviced unit sells the same space night by night, at a nightly rate that can sit well above the equivalent daily rent, and the gap between those two numbers is the whole case for the strategy. The worked example below puts numbers on it.

The letting mechanics differ too. Guests typically stay under a licence rather than a residential tenancy, although the legal position turns on the facts of the arrangement rather than the label on the paperwork. In practice short stays carry no security of tenure and the owner keeps far more control of the calendar than standard letting allows in England, where, under government guidance, most new private rented tenancies in England from 1 May 2026 run as assured periodic tenancies under the Renters' Rights Act (some lettings, such as lodgers and purpose-built student accommodation, sit outside the new system), replacing the old fixed-term Assured Shorthold Tenancy model.

So, is serviced accommodation profitable? The sector's trading data gives a two-sided answer. The latest European sector report from hospitality consultancy HVS, published in July 2026, in its 2026 sector report put 2025 occupancy at around 80% across most markets, with average rates softening almost universally. The UK picture split in two: London occupancy edged up while rates fell, and the regions saw a sharper pull-back in occupancy with a more contained rate decline.

Margins are the other half of the answer. Knight Frank's 2026 trading review put regional serviced apartment margins at 39.5% for 2025, the strongest margin performance across the regional UK market, with rising business rates flagged as a coming pressure in the year ahead. That figure is gross operating profit, the share of revenue left after day-to-day running costs, and it describes operators' portfolios rather than an individual owner's net. Both sides of the data matter: the lean cost base is real, and so is the softening.

Investing in serviced apartments in the UK means running a small hospitality business as much as owning a property. The economics work much like buying a holiday let: nightly pricing, occupancy risk and a seasonal swing, rather than one rent landing on the first of the month.

A Worked Income Example: Short-Term Let vs Long-Term Let

Here is the shape of the comparison. Every figure below is an illustration with the assumptions stated, not market data.

The arithmetic: 70% occupancy is roughly 255 nights of the year, and 255 nights at an assumed £107 a night comes to about £27,000, rounded. On the same assumed £200,000 purchase price that is a gross yield of roughly 13.5%, against 6% for the long let.

Both columns are gross. The gross figure is the easy half of the sum: cleaning, linen, utilities, platform commission and management all come out of the serviced column before it reaches you, and none of them touch a long let to anywhere near the same degree. Here is the same illustration carried through to a net figure, again with every assumption declared:

On these assumptions the gap narrows from 13.5% against 6% gross to 7.5% against 5% net, before finance and tax on either side. Change any assumption and the answer moves, which is the point: the running costs decide this strategy, and the running costs section below goes through the real ones.

The Types of Serviced Accommodation

The classic furnished city flat run as an Airbnb investment property is the form most people already know. Beyond it, three professional formats come up again and again:

1. Serviced apartments, individual furnished apartments with hotel-style services
2. Aparthotels, purpose-built blocks combining hotel services with apartment living
3. Corporate housing, longer furnished stays aimed at business guests

Serviced Apartments

A serviced apartment is a fully furnished flat let with housekeeping, linen and utilities bundled into the price. Compared with a hotel room, the guest gets a separate living room, a proper kitchen and more space for less money on longer stays, which is why contractors, project teams and families use them. City centre new build apartments are a common vehicle: modern stock, central locations and layouts that suit two guests as easily as a small family.

Aparthotels

An aparthotel is a purpose-built building of self-contained units, studios up to two-beds with kitchenettes, run under one brand with a reception, daily or weekly housekeeping and sometimes a gym or co-working floor. It is the hotel model applied to apartment stock. The next section covers how the investment side of these schemes is structured, because it works very differently from buying a flat.

Corporate Housing

Corporate housing is the quieter end of the market: furnished apartments and houses let for a month or more to relocating employees, project staff and occasionally families displaced by insurance work or renovation. Stays are longer, changeovers fewer and the guest profile steady. Income per night is lower than tourist-facing stock, and so is the servicing bill.

Aparthotel Investment: How the Model Works

Aparthotel investment happens at two very different scales. At the institutional end the sector is in build-out: HVS's pipeline analysis counts around 19,800 serviced apartment rooms in Europe's development pipeline for the five years from mid-2026, with the UK taking 22% of the new supply and London 57% of the UK share. Individual investors are usually offered the other route: a single unit within a development, sold with a leaseback or management agreement under which the operator runs the room and pays the owner a return, often marketed as a fixed percentage for the first few years.

The structure turns on three documents rather than the bricks: the lease, the management agreement and the exit terms. The lease sets what the unit can be used for and what the owner actually controls, which in most schemes is very little day to day. The management agreement sets who collects the income, what costs come off it and what happens when the headline return period ends. The exit terms decide the resale story, and that is where these schemes differ most from ordinary property: in many schemes the practical route out is a sale to another investor rather than the open residential market, and the exit terms set how that works.

Planning status differs from a flat as well. Hotels and guest houses sit in use class C1, which the Planning Portal's use classes guidance defines as "hotels, boarding and guest houses where no significant element of care is provided", while an ordinary dwelling is class C3. An aparthotel unit's class is set in the scheme's planning consent, and it shapes everything from lending to resale. Two more questions belong on the list before any purchase conversation: who carries the service charge and ground rent on the unit throughout, usually the owner, and whether any mainstream lender will lend on an operated unit at all, which shapes both the purchase and the eventual exit.

Set against a standard buy-to-let, the comparison is structural, not just financial:

The industry's own data treats serviced apartments and aparthotels as one sector when it tracks performance. What separates one scheme from another is the paperwork, and the only way to know what you are buying is to read it.

Hotel Room Investment: How the Schemes Work

Hotel room investment in the UK usually means buying a single room within a hotel, on a long lease, with the operator running it and paying the owner a return, commonly promoted with a guaranteed income for a fixed period and sometimes a buy-back option at a set price. The owner never occupies the room and has no role in running it. Everything depends on the operator performing and the promises being honoured.

This corner of the market has its own rulebook, and the regulator has commented on it directly. The Financial Conduct Authority names hotel rooms among assets that are "tricky to value at any given time", and notes that schemes pooling investors' money in this way can amount to unregulated collective investment schemes. Its guidance is to check any firm on the FCA register before money moves.

The exit is the part the brochures spend least time on. A single hotel room sits outside the mainstream residential market, so resale typically depends on the operator's buy-back being honoured or on finding another private buyer for one room in someone else's hotel. Getting in is often easy. Exiting is the hard part.

The Running Costs of Serviced Accommodation

Serviced accommodation earns hotel-style income by carrying hotel-style costs. This is where the gap between the gross yield in the worked example and the money that actually lands gets decided.

Setup capital. The property is let fully furnished, so the entry cost includes furniture, kitchen equipment, soft furnishings and decor to a photographable standard, on top of the purchase itself. Wear and tear runs faster than a standard let and replacement cycles are shorter. Some investors offset the heavier entry cost by targeting below market value properties, putting the discount towards the fit-out.

Servicing. The clue is in the name. Cleaning, linen and towel changes happen at every changeover, which in a well-booked property typically means weekly or more, all year round. Managed properly this is a standing contract with a cleaning and laundry provider, and short-let management companies typically charge a share of booking revenue rather than the flat letting fee of a long let. The questions to put to any management company are simple: what percentage, what it includes, who pays for changeover consumables and who controls the pricing. The baseline buy to let costs picture makes a useful comparison: most of those costs still apply here, and the servicing bill sits on top.

Insurance. Standard landlord policies are written for tenancies rather than nightly stays, so short-let use typically needs specialist cover. Another one for the broker list.

Bills. The owner typically covers utilities, broadband and a TV licence, since guests expect an all-in price. Local taxation depends on how the property is used: in England a self-catering property is assessed for business rates rather than council tax where, per the business rates rules, it was available to let for at least 140 nights and actually let for at least 70 nights in the last 12 months, with an intention to make it available for at least 140 nights in the next 12. That switch is why the test matters to smaller operators: once assessed for business rates, small business rate relief can take the bill to nothing where the rateable value is £12,000 or under, tapering away up to £15,000. Where the property stays on council tax, the owner is usually the one liable for it, though the council tax exemption rules and the process for challenging your council tax bill can both change that picture.

VAT. Holiday and serviced accommodation is standard-rated for VAT under HMRC's VAT Notice 709/3, unlike residential lets, which are exempt. Registration becomes compulsory once taxable turnover passes £90,000 in a rolling 12 months, a threshold that matters here because gross nightly takings count towards it in full. On the tax side more broadly, the furnished holiday lettings regime, which used to give qualifying holiday lets favourable treatment, was abolished from April 2025, so income from properties that previously qualified is now taxed in line with other property income. Tax positions vary by person, and this is a subject for a qualified accountant rather than an article.

Leasehold restrictions. Many leases restrict or bar short-term letting outright. The lease sets the answer: one that bars short lets ends the strategy regardless of what the numbers say.

Finance. Mainstream residential and buy-to-let mortgage products often restrict short-term letting, so serviced accommodation is generally financed with specialist short-let or holiday-let products, or commercial lending. Criteria and pricing differ widely between lenders, which is a conversation for a whole-of-market broker. Converting an existing rental is its own path: a sitting tenancy now runs under the assured periodic rules described earlier, and the existing lender's consent question comes before anything else.

That is the list the worked example's assumed costs stand in for. Every one of these lines varies property by property, which is why the same gross income can produce very different net results, and why the sums are worth running before a purchase rather than after one.

The Rules: London's 90-Night Cap, Planning and Registration

The headline rule sits in London. Under section 44 of the Deregulation Act 2015, using a Greater London home as temporary sleeping accommodation does not count as a material change of use provided the nights "do not exceed ninety" in a calendar year and at least one of the people providing the accommodation is liable for council tax at the property. The Greater London Authority's guidance states the practical effect plainly: the GLA's guidance states the total nights a property is used as short-term accommodation "must not add up to more than 90 nights in a calendar year".

Past 90 nights, the use becomes a material change of use. The GLA's guidance for the private rented sector puts it directly: "Unless planning permission is obtained, Londoners are restricted to renting their property short term for a maximum of 90 nights in a calendar year", and breaches sit with the local council's planning enforcement team. A property let short-term full time can find itself on the hotel side of the planning system, where use class C1 covers hotels and guest houses and class C3 covers ordinary dwellings. Whether a particular short let has crossed that line is a fact-specific judgement for the council, and moving between the classes deliberately is a planning application with no guaranteed outcome.

The cap is London-specific legislation. It does not apply outside Greater London, which is one reason the strategy concentrates in regional cities: the London buy-to-let market carries a night limit that Manchester and Birmingham do not, and outside the capital short-let units appear among ordinary buy to let property for sale listings.

Regulation is moving, though. The government has consulted on a registration scheme for short-term lets in England, and current government guidance describes a mandatory national registration scheme as "not yet in force" and expected to begin in 2026. The direction of travel is towards councils knowing exactly which properties are short lets.

Setting Up a Serviced Accommodation Property

The setup decisions start with the guest, not the property. Business travellers and contractors tend to prioritise reliable Wi-Fi, parking and a location near the work. Tourists tend to book on location and photographs. Relocating professionals and families visiting hospital typically stay longest and lean hardest on a proper kitchen and laundry. A one-bed city centre flat photographs well, but if the target market is corporate bookings a two-bed often books better: companies can book them for two colleagues and pay more per night than either would alone.

Sourcing follows the same logic as any other purchase, with the short-let lens applied: central locations, strong transport links and evidence that people actually book stays in that postcode. That evidence is checkable: how many comparable listings are live in the area, how full their calendars look, the review volumes they carry, and whether professional operators already run there. These properties show up in Airbnb for sale and holiday lets for sale listings, often with booking history attached, which is usually worth more than any projection.

The fit-out is a hospitality job: furnished to a photographable standard, equipped like a home, and photographed professionally, because on the platforms the pictures do much of the selling and cleanliness reviews shape repeat bookings. Listing runs through the platforms named earlier plus a direct website for owners building a repeat corporate trade.

Then the operational reality: guest communication, check-ins, cleaning schedules, maintenance callouts and pricing adjustments, every week. Owners either build that routine themselves or hand it to a short-let management company for a slice of revenue. Both models work; the mistake is pricing the income like a hotel while planning the workload like a long let. Alongside the direct route, this strategy sits within the wider menu of property investment strategies, and for some owners a hybrid works: corporate lets in the week, leisure stays at weekends.

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