Capitalising on the staycation boom with higher yields and tourism-driven demand

The UK tourism market has undergone a structural shift. Rising overseas travel costs, increased environmental awareness, and a renewed appreciation for domestic destinations have sustained the staycation trend that accelerated during the pandemic. For property investors, holiday lodges offer an alternative to traditional buy-to-let with potentially higher returns and exposure to a growing sector.

This guide examines holiday lodge investment fundamentals, expected returns, location considerations, and how this asset class compares to conventional residential property investment.

UK Tourism Market: The Numbers

Tourism contributed £286 billion to the UK economy in 2024, representing approximately 10% of GDP and supporting over 4 million jobs. Domestic tourism spending reached £32.9 billion on overnight trips alone, with British residents taking over 105 million overnight trips within the UK.

International inbound tourism is also recovering strongly. VisitBritain forecasts 43.4 million visits and £33.7 billion in spending for 2025, with US visitors alone projected to contribute £6.7 billion. This combination of domestic and international demand creates robust occupancy potential for well-located holiday accommodation.

What is Holiday Lodge Investment?

A holiday lodge is typically a purpose-built, fully furnished property located within a managed holiday park or resort. Unlike standard residential properties, lodges are designed exclusively for short-term stays, catering to tourists, weekend breaks, and longer leisure holidays.

Most holiday lodges are sold on long leases or licence agreements and managed either by an on-site operator or a professional holiday letting company. This management model makes lodges attractive for investors seeking passive income without the day-to-day responsibilities of self-management.

Key Characteristics

Holiday lodges differ from residential buy-to-let in several important ways. They are classified as lodges rather than dwellings, which affects stamp duty treatment and planning status. Most parks restrict residential use, meaning you cannot live in your lodge permanently. Ownership typically includes site fees covering maintenance, utilities, and communal facilities.

Expected Returns

Rental Income Potential

Holiday lodges can generate significantly higher gross income than traditional buy-to-let properties. Peak season rates of £1,500 to £2,500 per week are achievable in popular locations, compared to perhaps £1,200 per month for a standard rental. Average annual turnover for a holiday lodge is approximately £12,220 according to Sykes Holiday Cottages data, though well-located premium lodges can exceed £40,000.

Gross yields of 10% to 15% are possible in strong locations, though net yields after site fees, management costs, and seasonal voids are typically 6% to 10%. This still compares favourably to traditional buy-to-let yields of 5% to 7% in most markets.

Comparison to Traditional Buy-to-Let

A direct comparison illustrates the difference. A £200,000 buy-to-let property generating £1,000 per month produces £12,000 annually, a 6% gross yield. A £120,000 holiday lodge achieving 60% occupancy at £150 per night averages £27,000 annually, a 22.5% gross yield. After higher running costs, net returns remain substantially above traditional buy-to-let.

Location Considerations

Prime Destinations

The South West remains the leading domestic holiday destination, capturing 16% to 20% of overnight trips. Cornwall, Devon, and Dorset command premium rates and strong year-round demand. The Lake District, Scottish Highlands, and North Wales also perform consistently.

Coastal locations, national parks, and areas of outstanding natural beauty drive the highest occupancy rates. Proximity to tourist attractions, good transport links, and distinctive local character all contribute to letting success.

Year-Round vs Seasonal

Some locations deliver strong year-round occupancy while others are highly seasonal. The Lake District and Cotswolds attract visitors throughout the year, supporting consistent income. Pure seaside destinations may achieve excellent summer returns but struggle in winter.

Consider your tolerance for seasonal income variation when selecting locations. Year-round destinations provide steadier cash flow, while seasonal locations may deliver higher total returns concentrated in fewer months.

Advantages of Holiday Lodge Investment

Higher Income Potential

The combination of nightly rates and flexible pricing allows holiday lodges to generate more income per square foot than traditional rentals. Dynamic pricing during peak periods, bank holidays, and school holidays maximises revenue.

Lower Entry Costs

Holiday lodges typically cost less than equivalent residential properties. Entry points from £80,000 to £150,000 are common, compared to £200,000 or more for houses in similar tourist areas. This lower capital requirement makes the sector accessible to investors with limited funds.

Professional Management

Most lodge parks offer comprehensive management services including marketing, bookings, housekeeping, and maintenance. This hands-off model suits investors who want passive income without becoming hospitality operators.

Personal Use

Unlike pure investment properties, holiday lodges often allow limited owner use. Many investors enjoy two to four weeks personal holiday use while generating income the rest of the year. This dual benefit appeals to lifestyle-oriented investors.

Tax Treatment

Holiday lodges classified as furnished holiday lettings can access certain tax advantages including capital allowances on furnishings and potential business property relief for inheritance tax. However, recent changes have affected some benefits, so professional tax advice is essential.

Considerations and Risks

Seasonality

Most holiday accommodation experiences significant seasonal variation. You may achieve 90% occupancy in July and August but 20% in January and February. Cash flow planning must account for this variability.

Operating Costs

Running costs are higher than traditional buy-to-let. Site fees, management charges, cleaning between guests, utilities (often included in rental price), maintenance, and insurance all reduce net returns. Budget 40% to 50% of gross income for operating expenses.

Depreciation

Holiday lodges depreciate over time, unlike bricks-and-mortar properties that typically appreciate. A lodge purchased for £120,000 may be worth £80,000 after 15 years. Factor this capital erosion into your return calculations.

Lease and Licence Terms

Understand the legal basis of your ownership. Some lodges are sold on diminishing leases that affect resale value as the term shortens. Others operate under licence agreements with different rights and obligations. Review terms carefully with a solicitor before purchasing.

Featured Opportunity: Rookery Manor Lodges

Rookery Manor Lodges in Somerset exemplifies a well-positioned holiday lodge investment. Located near Weston-super-Mare, Cheddar Gorge, and the Mendip Hills, the development offers exposure to established tourist demand with professional on-site management.

The location benefits from year-round appeal combining coastal access with countryside attractions. Somerset’s growing reputation as a food and drink destination adds to visitor interest. For investors seeking holiday lodge exposure with guaranteed return structures, developments like Rookery Manor warrant consideration.

Is Holiday Lodge Investment Right for You?

Holiday lodges suit investors comfortable with seasonality, higher operating costs, and depreciation in exchange for potentially superior yields and tourism sector exposure. They work well as portfolio diversification alongside traditional residential property.

Success depends on location selection, realistic occupancy expectations, and understanding the different dynamics compared to conventional buy-to-let. Professional management reduces operational burden but adds to costs.

For investors seeking alternative property opportunities beyond standard residential buy-to-let, holiday lodges offer a compelling proposition in the context of sustained domestic tourism growth and structural changes in travel preferences.

To learn more about holiday lodge investment opportunities, including Somerset developments with guaranteed returns, contact our team for detailed information.