There are many approaches to letting out a property, but the two most debated are long-term AST lets, and short-term Airbnb holiday lets.
Both strategies are profitable and can be quite versatile, but which is best for you? Stick around and find out by the end of this article.
Prefer video format? watch our video comparing Airbnb and AST tenancies below:Â
At its core, the biggest difference between the two strategies is the amount of time that the property is leased from the landlord/owner.
AST renting lends itself to long-term renting whereas Airbnb sees the best returns with short-term lets. This means that AST is more suited for residential dwellings and Airbnb is more popular with holidaymakers.
As a side note, this article will not be discussing any tax-related topics, if you need more information surrounding property tax, please contact a financial advisor.
Now with that out of the way let’s get into the specifics of both strategies:
Compliance
Before letting out a property, regardless of whether on Airbnb or Ast, you should obtain a valid:
- an EICR
- A Gas Safety Certificate
- an EPC rating
- Fire risk assessment (More so in HMOs & Airbnbs)
Duration
For AST renting, you will need to create a tenancy agreement, where you can determine the minimum length of a contract – typically 6 months to a year.
The average tenancy duration in 2024 was 924 days or just over 2-and-a-half years. Airbnb on the other hand had an average stay length of 8.4 nights in the UK.
Deposit
Unless the annual rent is above £50,000, you can take up to 5 weeks’ deposit on AST contracts – which must be stored in one of the 3 government-approved schemes: DPS, MyDeposits, or TDS.
Security Deposits on Airbnb aren’t mandatory but can be set by a host, a rule of thumb is that the deposit should not exceed 20% of the entire booking cost.
Licensing
Whether you need licensing will vary depending on the discrepancy of the local authority.
In London for example, many boroughs like Newham, Tower Hamlets, and Southwark require landlords to have a licence to let out a property – even just on a single-let basis.
If you are unsure whether you need licensing, check with your local authority to check the requirements of your property.
As Airbnbs are considered holiday lets, they are exempt from most selective licensing schemes, unless you are in London, where you need planning permission if you plan to rent out the property for more than 90 days. This is because the property is no longer considered a short-term let.
However, if the property is being let for any duration below 90 days, there is no need to apply for a change of use.
This is called the ‘90 Day Rule’ and currently applies to all Airbnb properties in the Greater London Area – though this may be extended to different areas in the future.
Accommodation type
Naturally, different properties will be better suited to one strategy over the other, so let’s look at how to gauge a property’s suitability to these methods.
As mentioned before, AST lets function primarily as long-term private residential accommodation whereas Airbnb work better as short-term holiday lets, so the property must reflect this.
For example, most long-term properties are advertised as unfurnished – as tenants are encouraged to provide their own furniture and make the house their own for the duration of their lease period. The tenant also pays council tax and utility bills.
The highest-yielding Airbnbs let out their property on a furnished, serviced accommodation basis, which means that all amenities and utilities are paid for.
This ensures a greater level of flexibility for the tenant, as all they are responsible for is paying the rent and returning the property in good condition.
Tenant Demographics
Depending on the size of the property, AST-lets achieve longer rental durations when let to families and couples rather than individuals.
Because AST contracts grant the tenants security on the length of their occupancy, it is often of interest to both parties to renew their lease for another fixed period when their initial AST contract ends.
Airbnbs attract a different calibre of clients; the primary appeal of Airbnbs is their flexibility, and so they function more akin to a hotel, where many different people may come and go over the course of a season and stay for a short period of time.
Holidaymakers, professionals, and large groups often choose Airbnb as they offer a much more homely experience than a hotel – often at a competitive price.
Property Location
To achieve the highest rental yields, rental properties should be situated in areas with high demand for housing. To achieve the best possible occupancy rates, you should match the property with the desired demographic.
For instance, a studio apartment situated close to a town centre is a great location for a long-term AST rental property as there will be demand for housing for people who work near the town centre.
Alternatively, a 3-bedroom house near a beach would make for a good Airbnb holiday let, as families may prefer to rent out an entire house rather than individual hotel rooms, this would also assure a steady demand of tenants in the summer months.
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Vacancy
Due to the nature of rental demand, it’s difficult to accurately predict how a property would fare when being let on an AST basis vs Airbnb, however, we can look at the way each method earns and compare how they would earn.
A lot of Airbnb properties are seasonal holiday lets, meaning they are only occupied for a portion of the year, instead of year-round like a traditional long-term let yet can generate a similar return if not, more.
Let’s take the example of a 1-bedroom apartment in Brighton and Hove.
If you were to rent it privately on a long-term AST basis, you could earn between £1100-£1400 per month, or £36-£46 per night.
Whereas if you were to rent it out through Airbnb, you could earn £90-£130 per night, or £2700-£3900 [Data taken from Airbnb averaged across several 1-bedroom apartments in ‘Brighton & Hove’ Date Range: 1st Jan-31st Jan 2025]
Now it may look like Airbnb is the easy choice for investors, but you must also consider two main factors:
1 – Airbnb properties are bills-included, furnished, and come with amenities, resulting in higher operating costs.
2 – Airbnbs are short-term holiday lets, so the occupancy rate is subject to seasonal demand.
These factors mean that Airbnb properties are often more expensive to operate than standard residential properties, are not occupied in a regular fashion, and are subject to large void periods.
The main selling point of long-term AST rentals is that they provide a regular steady income and given the extreme supply & demand imbalance in the residential property market.
Properties in prime locations, such as Brighton are likely to be let fast and at a competitive price.
However, with AST lettings, there are greater tenancy start-up costs, which is offset by the fact that tenants tend to stay for longer periods of time.
Costs
Naturally, there are costs associated with setting up a rental property and taking on a new tenant, let’s have a look at the costs involved with renting out a property using both methods once all the safety checks and any licensing have been carried out:
AST properties
Marketing/Advertising: To ensure your property is seen by the best clients, you’d want to advertise on platforms like Rightmove and Zoopla. To do this, you need to use a letting agent.
Which can either be a flat fee or a percentage. Most agents will also reference and create a contract for this price, meaning that more inexperienced landlords may be better off using an agent for this.
Tenant finder’s fees can range from a flat fee of £700-£1500 or from 50-100% of the first month’s rent.
Once the property is occupied the only expenses relating to the property are any maintenance or repairs which need addressing, as well as any mortgage/loans which need to be paid.
Remember that on an AST arrangement, the tenant(s) are responsible for paying any utility bills and council tax.
Airbnb
With Airbnb, it demands a higher rental price, but more costs are paid by the host (landlord). Not only utility bills and council tax but also furnishing costs as well as any other amenities, such as cleaning.
With Airbnb, there is no need to use external portals to advertise the property as it is all done through their own platform. Airbnb usually takes 3% of the booking fee from the host as a fee.
Estimated furnishing cost: £3,000-£4,000
Average utility bill for a 1-bedroom apartment in Brighton: £75 per month
Estimated Council Tax: £150-200 per month
Cleaning: £100-£180
When looking at the two strategies side-by-side, you can see how Airbnb has the potential to generate much higher yields, but with its seasonality and cost of operation, it’s not as simple as an AST long-term lease.
With ASTs, granted, you won’t be achieving quite so much in the short-term, but its relatively few overheads (bar maintenance and any loans or mortgages) compared to Airbnb and its security mean that it is a reliable income in the long-term, making it a good source of passive income, especially with the employment of a managing agent.
This makes ASTs more suitable for accidental and first-time landlords, whereas experienced investors may diversify their portfolio with a short-let Airbnb property.
Looking ahead
With many changes on the horizon for the private rental sector, many investors are looking ahead for the most future-proof investment strategies.
Renters’ Rights Bill
Labour’s Renters’ Rights Bill sets out to make a series of changes to the rental sector which will affect how properties are advertised and managed.
One of the most impactful yet least-detailed inclusions in the bill is the scrapping of AST contracts, which will be replaced by periodic assured tenancies – which have no fixed term meaning the tenant can give notice at any time and does not have to stay for a minimum duration of time.
With other inclusions such as the banning of Section 21 evictions, many landlords are apprehensive about the future of the PRS – making Airbnb look like a more attractive solution.
This, paired with the rise of domestic holidays in the UK since the pandemic, means that there is a huge demand for holiday lets in locations like Cornwall, the Cotswolds, and practically anywhere near the seafront.
Market oversaturation
With the rise of short-term holiday lets in such places, we are seeing a detrimental effect on local housing stock, as the already short supply of housing is being restricted by increased use of holiday lets – which in extreme cases can negatively affect the local communities by artificially increasing the prices of rental property.
So, are Labour looking to target short-term lets next?
Well, the Labour Housing Minister Matthew Pennycook revealed that the Labour government is considering tighter clampdowns for short lets.
However, with no legislation or official statements in place, the future of the short-let market is uncertain. Changes which may come to the sector are:
- Extension of the ’90-Day rule’ to more areas in the country
- Greater power given to local authorities to reject short-term ‘holiday lets’
- Seeking planning permission or licensing for short-let property use.
Conclusion
After looking at short-term Airbnb lets and long-term AST rentals, you can see a lot of differences between the two, and how the location of a property may determine the best course of action.
So, should you go for a short-term let or a long-term rental? The determining factor should be the supply and demand of the desired area.
Granted, not every location will be so easy to read, but stick to the basics:
- Compare listings on Airbnb to Rightmove and Zoopla respectively and look at how long each listing has been live and look at sources online to determine the demand of an area.
- Then look at how much time and effort you wish to dedicate to the project. Airbnbs require much more work to set up and operate than a standard rental property.
- Lastly, consider your goals, are you looking for consistent, year-long income, or a greater seasonal income? Your financial objectives should also have a say in your investment strategy.
Thank you for reading, if you’d like to see more from us, be sure to check out our other property blog posts for more insights.