The Capability Gaps That Kill SA Returns
Why most operators are leaving thousands on the table and how to bridge the divide between property investor and hospitality professional
The spreadsheet I sent was brutal - or so it turned out.
An investor had reached out asking if we'd help with design and hosting for their upcoming conversion to SA property. I was appraising their situation - their own property plus the competitive set in the same location - when I realised the gulf between property education, BTL experience and SA investment reality.
I provided the investor with a simple spreadsheet identifying the likely financial realities for their location and property. The investor had a real battle on their hands if they were to deliver anything like the hoped-for returns, especially given their geographical dislocation (lived abroad) and need to outsource both expertise and hosting. They simply didn’t understand the financial model for SA.
The best performing SA in their location was generating £22k per annum. But a quick look at the property, the nightly rates and the occupancy highlighted opportunities to do significantly better. Based on knowledge of SA profit and loss, plus additional research and mortgage cost assumptions, I ran multiple revenue models with different occupancy and ADR rates.
Revenue of £22k would deliver annual profit of just over £1k.
I sent four P&L versions demonstrating the impacts of different levels of revenue and different operating models. Outlining the potential for good returns. The reply surprised me - I had underestimated a number of things:
the price anyone would pay for this property,
the pre existing understanding of the hosting model and associated costs,
the level of knowledge of Airbnb fee models and the conditionalities of each.
Each of these presented challenges for the investor. The expectation of returns were out of kilter with the realities and the mortgage payments alone made the model a significant challenge and BTL as an alternative was out of the question.
They had mortgage payments which were 50% pa higher than expected - more akin to a R2R cost. The property had been extended but without successfully moving it from 2 to 3 bedrooms - it certainly couldn’t be marketed as a three bed. My insights were not going to help but no one in good conscience would not share the truth to help ensure the investor only made good decisions from here on.
None of this was insurmountable, but the options were significantly reduced.
While I could run a whole session on this case study, i mention it simply to highlight the fundamental issue between amateur (no slight intended) and professional hospitality operators.
The issue is the gap between property education and the business hospitality knowledge and expertise required to operate SA.
The Property Investor Trap
Here's the uncomfortable truth most SA educators won't tell you:
Property investment skills are not enough to land your hopes and dreams of SA. SA is not simply a property play when BTL gets tough. Hospitality expertise and business skills are completely different disciplines and are required if you hope to be assured of the returns touted, especially when only working with entry-level investment capital.
SA education; primarily from property investors; treats them as if they're the same thing - essentially buy a property, add furniture, market and enjoy the returns.
Please don’t destroy the opportunity your hard-earned capital can afford you by thinking its that easy.
You wouldn't expect a brilliant surgeon to excel at aircraft maintenance simply because both require precision and attention to detail. Yet we expect property investors to instinctively understand profit and loss accounts, sensitivity modelling, guest psychology, guest experience design, hospitality operational systems, service delivery, site criteria, SA financial appraisals—to name but a few.
Most SA "education" is an evolution of property strategy and focuses on the wrong things:
Finding deals (property investment skill but identifying SA locations is more complex and the financials are different)
Raising finance (property investment skill but evidence of expertise and a track record make this infinitely easier)
Legal structures (most are astute enough to outsource this to an expert)
Contractor Models and Airbnb Avoidance (narrow guest targeting and host skills with a cost mentality)
Unicorn examples that yes they describe the art of the possible but don't expose why they were great deals and why for those specific people in that specific location
What's missing? The hospitality and business expertise that separates profitable operations from expensive hobbies or shattered hopes and dreams.
But none of it is rocket science that cannot be learned or supplemented by experts.
What Professional Hospitality Actually Means
After four decades in hospitality - from trainee manager to CEO roles - I can tell you that running a successful guest accommodation business requires a completely different skill set than property investment.
Property investors ask: "What's the yield?" and "How little can I spend to generate income?"
Hospitality professionals ask: "Who will it be for?” and “What's the guest experience and USP?"
Property investors optimise for: Cost per square foot
Hospitality professionals optimise for: Net Promoter Score and maximising revenue
Property investors think in: Capital appreciation cycles
Hospitality professionals think in: Guest journey touch-points to build a brand with passionate fans
This isn't semantics. These different mindsets create dramatically different results.
Our first SA property performance? We leveraged our combined 60+ years of running and developing businesses - primarily hospitality - to focus this extensive experience and expertise while also freeing our time to create a gorgeous home, design service systems and build operational processes that could consistently deliver experiences guests would rave about.
A property developed without the expertise and experience is more likely to be at the budget end, operating on thinner margins where cost concerns dominate. Decisions can therefore be flawed, impairing the potential from the start because it was launched as a property play to try to beat the diminishing margins from Buy to Let. This is hardly surprising given the unicorn examples cited and the absence of a lifetime of experience and expertise in hospitality and business.
The Five Critical Capability Gaps
Through working with and listening to many existing and aspiring SA operators, I've identified five consistent gaps that separate amateur operations from professional ones:
1. Business Intelligence & Financial Mastery
Amateur approach: Focus on occupancy rates, celebrate being "busy"
Professional approach: Understand the numbers that actually matter - net promoter score, profit per available night, ADR v Occupancy, guest acquisition cost, lifetime value and ROI.
Most operators obsess over occupancy while ignoring profit per booking. They don't understand their true cost base or which levers actually drive returns.
Professional operators know that 51% occupancy at £200 ADR generates the same revenue as 85% occupancy at £120 ADR—but with dramatically lower costs for cleaning, laundry, utilities, maintenance, and your time.
2. Design That Transforms
Amateur approach: HMO furniture packs, functional basics, cost-focused decisions
Professional approach: Create spaces that guests don't want to leave—homes that invite relaxation, socialisation, and genuine escape
This isn't about spending more money. It's about understanding that design drives revenue.
When guests walk into an HMO furniture pack setup, they can feel like they're in temporary accommodation. When they walk into a thoughtfully and beautifully designed space with quality linens, curated artwork, ambient lighting, and those unexpected touches; the coffee machine with premium beans, the bookshelf with interesting reads, the bathroom amenities they'd never buy themselves; they feel like they're somewhere special.
Professional operators understand that design is their most powerful revenue lever. An investment in professional design can generate not only significant increases in ADR but also in occupancy - paying for itself in months while creating a sustainable competitive advantage.
Having access to or finding design expertise that understands both residential comfort and SA operational requirements (I have the luxury that my business partner and wife is Samantha from The Ticking Stripe) is another crucial capability advantage: understanding the value of great design for both financial and competitive advantage, and having the business nous to recognise that expertise is an investment, not a cost.
This principle applies far beyond design. Whether it's identifying the correct target market, area and specific location, legal advice, accountancy, marketing, or operational systems. Professional operators know when to invest in expertise rather than attempting everything themselves, and understand that working with experts and mentors accelerates not only their own learning and capability development but their returns.
3. Guest Experience Architecture
Amateur approach: Copy other listings, basic welcome messages, hope for the best DIY systems
Professional approach: Map every touchpoint from booking to checkout, identify emotional moments and design experiences that exceed expectations
Founded on being guest centric first, hospitality professionals deliver experiences that enable their marketing and therefore their ADR and occupancy. They recognise that Airbnb is an ally - essentially an expert - not a cost and that every positive review grows their future returns. They understand that value is a perception that they can create beyond furnishings with personal touches and genuine interactions that recognise and respect the guests and their experience needs and build everything to deliver this.
4. Expert Operational Systems That Scale
Amateur approach: Handle tasks as they arise, reactive management, personal hero syndrome
Professional approach: Build systematic processes for every interaction, preventive maintenance schedules and quality assurance protocols that work without you
They use expert software to price their offer - they would never dream of setting their own prices beyond identifying the profit positive minimum price and designing the pricing strategies that are right for them and their property location.
The uses systems and software to provide timely guest communication and seemless operational delivery and spent time identifying the right solutions for their goals and strategies.
5. Strategic Positioning & Brand Development
Amateur approach: Generic descriptions, amateur photography, compete on price
Professional approach: Clear value proposition, professional visual identity, strategic differentiation and genuine care that justifies premium rates
Dynamic pricing strategies that support their value proposition and maximise the future revenue allow a mentality that fixes problems and helps the guest have not only the experience they expected but one that exceeds their expectations filling them with a burning desire to return and tell their friends.
The Hospitality Mindset Shift
The successful SA operators make one fundamental shift: they stop thinking like property investors and started thinking like hospitality entrepreneurs.
This means:
Understanding that design isn't decoration—it's your most powerful business lever. Guests make emotional decisions and justify them rationally. Outstanding design creates the emotional connection that justifies premium pricing and generates the reviews that drive future bookings.
Mastering the numbers that actually matter. While amateurs obsess over occupancy, professionals optimise to maximise profit. They understand their true cost base, know which investments drive returns, and can identify the three or four levers that most impact their bottom line.
Recognising that systematic excellence creates unassailable competitive advantages. Every process you perfect, every guest touchpoint you optimise, every design detail you nail makes it harder for competitors to replicate.
Ordinary Houses: What Made the Difference For Us
Broadly what we did differently from day 1. We had three projects live at once - not to be advised but:
Business Intelligence:
Understood all the numbers and that lower occupancy with premium pricing generates higher profit margins
House 1 - an ordinary 3 bed mid terrace - Achieved 45% ROI in year one through strategic positioning rather than volume chasing
Understood the lifetime value of each and every guest and particularly the review value
Leveraged expertise at every opportunity - whether our own, expertise that we paid for or that we learned. Three projects at the same time is not to be advised.
Invested in Design Investment:
Invested in design—creating an environment that not only stood out in marketing but worked to elevate the guest experience and met SA operational requirements
Understood the cost benefit differential between investing in design versus HMO furniture packs
Created spaces that command 50-70% higher ADR compared to the local competitive set
Focused on details that justify premium rates: home from home and boutique feel, quality bedding, ambient lighting, curated books, premium coffee setup, artwork, smart use of colour and the extra unexpected touches.
The design investment was recovered in less than three months through higher ADR and occupancy.
Guest Experience Architecture & Focus:
Mapped the complete guest journey from initial search to post-stay follow-up and curated every touch point ensuring we could deliver effortlessly in a timely and personal way
Identified typical pain points (parking anxiety, check-in uncertainty, local area confusion) and provided solutions and comfort through personal messaging
We deliver appropriate informative messages, digital personal guest guide with local recommendations and 24/7 access to us with an assurance that we will fix or help anything so don’t hesitate to contact us
Limited rules - check in check out time - respect our house and neighbours and enjoy your stay!
Leaving time free to focus on adding value in every ad hoc guest message or inquiry.
Results speak for themselves:
Compared to our local competitive sets across our ordinary houses we find:
Our Quality Score: 11.7% better
Listing Accuracy: 8.42% better
Cleanliness: 11.2% better
Location: 7.2% better
Communication: 6.3% better
Check In: 7.9% better
ADR: £89 better
Occupancy: 34.4% better
We receive more per night yet we have better occupancy and our Value perception is 7.9% better
We operate with lower occupancy than we could achieve but with a simple understanding that maximising long term profit matters more than nights occupied. That's the difference between understanding the business and just filling beds.
But here's the crucial insight: our properties generate great ROI - not because they are special properties in unique locations but because of the experience we deliver. There is money left in each property - they are not unicorns - they are ordinary properties and are replicable. We buy wisely for a purpose and leverage our capital, experience, expertise and time to maximise revenue and returns.
Your Capability Development Roadmap
If you're serious about professional SA operation, here's your development path:
Phase 1: Foundation
Master the financial fundamentals: understand your true cost base, profit per booking, and the key levers that drive returns
Study the best operators, best properties and best design—what creates spaces people don't want to leave
Identify the different models of SA and the pro’s and con’s of each - budget to luxury - the potential guest avatars and use cases
Articulate your complete guest experience and identify who can deliver your interior design
Understand and learn the operational systems and the metrics that matter
Appraise the capital requirements for different locations and different sized properties having understood the true costs and opportunities
Phase 2: Launching
Actively searching potential properties and appraising them using your financial models
Explore and learn revenue management strategies based on your business intelligence, desired model and target guests
Cost renovations and furnishing to establish budgets by property - operating within your capital budget and profit models
Develop your unique value proposition that justifies your target ADR and occupancy - understand breakeven points
Place offers on target properties that meet your models and satisfy profit sensitivities
Phase 3: Going Live
Employ great trades and project manage to a clear plan
Like a food recipe understand the time to switch focuses and begin the next work thread as you prepare to market
Always keep guest experience and satisfaction front and centre
Hire a great photographer and potentially a “stager” if not your designer - don’t select the cheapest as lots of amazing photo’s fuel your marketing
Stay in your house and have friends test the entire guest pipeline
Launch with a focus on guest reviews—this is the only metric that matters at first having budgeted for a slow start in terms of profit
The Investment in Professional Development
Here's what most operators don't realise: the capability gap doesn't just cost you money, it opens you up to costly mistakes and prevents you from building a valuable business. Think lifetime value not next month's profit.
Amateur operations generate income but require constant oversight of margins, often being sucked into gradually reducing ADR to ensure occupancy. Professional operations build equity and generate a flywheel of growing revenue generation.
Amateur operations buy HMO furniture packs and compete on price. Professional operations invest in design and guest experience that allows them to command premium rates and creates a competitive moat.
Amateur operations track and celebrate occupancy. Professional operations understand their numbers, optimise to maximise revenue and profit per booking, and make decisions based on business intelligence.
The difference? Professional capability in four critical areas: acquisitions, business mastery, design excellence, and hospitality operation. Gaps can be filled by mentors or “done with you” services or simply hiring the talent to bridge that gap.
Why This Matters Now More Than Ever
The SA market is evolving rapidly. Regulation is coming. Competition is increasing. Amateur operators are being filtered out and will be squeezed further.
But this creates opportunity for professionals.
While others panic about legislation, professionals welcome higher standards -they're already operating at that level.
While others compete on price, professionals compete on value - and win.
While others struggle with occupancy, professionals build waitlists and wish-list additions.
The capability gaps are not insurmountable problems, they can be your competitive advantage, if you're willing to bridge them.
The Real Question
The question isn't whether SA works. Our numbers and thousands of others prove it does.
The question is: Are you willing to develop the hospitality and business capabilities that separate profitable operations from expensive hobbies? Are you willing to see developing or buying in expertise as an investment rather than a cost?
Because property investment skills got you to the starting line.
Hospitality business excellence gets you to the finish line.
And in a market where hotels are cracking and amateur operators are falling behind or are even being removed from platforms, professional capability isn't just an advantage—it's essential.
What capability gap are you most eager to bridge in your SA operation? Reply and let me know - your challenges will shape our future deep dives as we seek to democratise SA education.