Holiday let operators in Wales have claimed that the market has reached saturation point.
As more holiday lets open, it’s becoming increasingly difficult to make a profit in an industry already grappling with rising costs and poor weather forecasted for 2024, they have claimed.
The new 182-day occupancy rule is adding to the challenges, as failure to meet this can result in hefty additional costs. This has led some operators to decline short-break bookings despite a surge in demand from consumers who prefer these over traditional week-long stays.
A limited survey by the Wales Tourism Alliance revealed that four per cent of holiday let operators in Wales are now merely surviving, while 12 per cent are performing poorly and 40 per cent are experiencing mixed results. Despite an eight per cent increase in visitors last year compared to 2023, profits were down eight per cent compared to 2019.
The 182-day rule, escalating costs and an influx of holiday let owners entering the Welsh market were identified as the biggest challenges. One operator shared in the survey: “Our occupancy was well down in 2024. One major contributor is the 10 new self catering units/properties that opened this year within a mile of us.”
Another added: “The self-catering market is saturated with and an over-supply [of lets]. The sector has been allowed to run out of control by the government for far too long. Now it’s in a bad state”, reports North Wales Live.
Since April 2023, holiday property owners in Wales have been hit with a new rule requiring them to rent out their properties for at least 182 days per year, a significant jump from the previous 70-day threshold. If they fail to meet this target, they’ll be subject to residential council taxes instead of business rates, which can be substantially higher, especially in areas with additional council tax premiums.
This change has been described as potentially devastating for businesses by the sector.
A survey conducted by the Welsh Tourism Alliance (WTA) in October 2024, which for the first time included collaboration with the UK’s three other tourism alliances, revealed the strain on Welsh operators. One operator expressed their frustration, saying: “Literally the only thing that matters at this stage in the year, after a poor April, September and October, is to hit 182 nights at any cost, to avoid the double council tax fine which would take the majority of this year’s poor profits.”
They continued, lamenting the impact on local investment: “There is no way we can risk paying local trades for any non-essential work – this after 10 years of happily ploughing a large proportion of profits into the local economy to pay for improvements to our cottage. [It’s a] completely nonsensical way to run a business, favouring really cheap week stays over short breaks that could bring in more profit, give cleaners twice the work and likely generate extra visits to local amenities. But the risk of losing nights-booked is too high.”
One Welsh business included in a survey shared a bleak outlook, saying it will “have to close” if it can’t achieve the 182-day operational target this year. To reach this goal, many are slashing prices on holiday breaks.
The prevailing uncertainty is compelling some to halt investing in their property maintenance and upgrades, with one operator detailing the removal of their kitchen equipment piece by piece. Two significant challenges the industry faces are the rising trend of short-term breaks and last-minute bookings due to tighter budgets, which complicate the pursuit of the 182-day mark.
One respondent lamented: “People seem to be booking later, and many are wanting short breaks. It’s very stressful trying to decide whether to accept them, or hold out for more nights. With every short break I take or decline, I’m gambling losing half my profits on the council tax fine.”
Another voiced frustration over the conundrum: “Guests want short breaks. We can’t afford to offer them because we’d fail 182 days. The Welsh Government has applied general purpose weedkiller to the whole sector rather than target the properties they would like to free up for housing.”
While domestic visits to Wales dipped last year according to the tourism and hospitality businesses polled, international visitors increased by 20 per cent, mostly favouring hotels. This shift left many bed and breakfasts and holiday cottages fighting to survive as consumers tighten spending and suppliers raise prices, despite an overall visitor volume rise of eight per cent.
According to a recent survey, 40 per cent of businesses in Wales attribute their decreased profits to unfavourable weather conditions, while one-third of respondents cite the perceived high costs of domestic holidays compared to international destinations. The growing sentiment of ‘anti-tourism’ in Wales has also been identified as a contributing factor to the decline in domestic tourism last year.
The implementation of various tourism policies by the Cardiff government has led to concerns that the holiday sector is being neglected. The introduction of a tourist tax scheduled for 2027 has further exacerbated the situation.
Although not all businesses are struggling – with 44 per cent performing “quite well” and four per cent doing “very well” – there is a widespread call for an urgent review of the 182-day rule. A business owner in Pembrokeshire noted that this rule has had little to no impact on increasing housing availability for local residents, stating: “There are fewer comments on [online] message boards that the policies will create more affordable homes for local people as residents realise this hasn’t happened.”
A proposed rental limit of 140 days has been suggested to bring Wales in line with England, but the Welsh Government has resisted making any changes.
Monmouthshire Council is among the local authorities expressing concerns about the high threshold, as it may impact the council’s ability to generate revenue from the upcoming tourist tax. A holiday let operator is eagerly awaiting a 182-day review, expressing their frustration: “There are not magically more visitors,” they said.
“Just holiday lets losing much needed business. Even ones that previously operated successfully under 182 nights are having to do anything they can to get over the line.”
They continued to explain the impact on different business models, “Each business knows what they need to turn the right profit for them. Many are run by pensioners who don’t want to work themselves into the ground, nor do they need to. It doesn’t mean they can afford the council tax fine on top. Many large houses earn very good money on weekends, and have the weeks off – that’s their business model. They shouldn’t be forced into trying to operate in the couples market, which the one-beds thrive on.”
Rowland Rees-Evans, chair of the WTA, also highlighted concerns about the Article 4 planning regime in Gwynedd, which aims to regulate the number of holiday lets and second homes, as another potential hurdle. He pointed out that government tourism policies are imposing “significant burdens on local people” in areas like Anglesey, where up to 20 per cent of the population is employed in the sector and “alternative employment is scarce”.
He further commented: “Whilst we recognise that many of these policies derive from the need to provide local homes for local people, it is evident that they are not having the desired outcome. We are only just starting to see the bigger economic impact of consistently hitting a sector that is a significant driver of the Welsh economy.”
