The 50% Myth

Why an often-repeated rule of thumb in Serviced Accommodation is wrong, and what it actually costs the people who believe it

I appraise Serviced Accommodation properties for a living. I have researched, sourced and developed hospitality locations and properties for PLC’s. Often enough (so often that it has stopped surprising me), I meet someone who has been told, by someone they seem to trust, that SA revenue converts into profit at a rate of roughly 50%. It doesn’t. It isn’t close.

The number is wrong, consistently enough that I’ve come to think of it as one of the most damaging ideas in the UK short-stay rental space. It tells existing operators that the 9% margins they are actually producing represent failure, when in reality a 9% margin is the typical starting point for this business and the path to better returns is real and walkable. It tells prospective buyers that a £30,000 revenue property will produce £15,000 of profit, when reality on the same property could be closer to £4,000.

And it survives for two reasons. The people who repeat it commercially have never built the full spreadsheet, because the rule serves them. The people who operate under it have never built one either, because an unknown number of SA operators run the business out of a current account and judge each booking against its cleaning and laundry cost alone. They see what’s left in the bank that night, call it profit, and never come back to reconcile against the fixed costs that left by direct debit at the start of the month. The myth isn’t only repeated. It is confirmed weekly by an accidental P&L that excludes half the costs.

Naturally I built the spreadsheets. This is what they show.