A Guide to Holiday Let Security Deposits

The question of whether or not to ask your guests for holiday let security deposits is commonly debated.

A large number of property owners firmly believe in taking deposits and ask for around a 20% prepayment.

Similarly, many owners including some of those who list their properties with us at Character Cottages, don’t require a security deposit.

As a desirable location, the Cotswolds is peppered with luxury properties. Read our guide to the pros and cons of charging a holiday let security deposit on your property.

Holiday Let Security Deposits Pros

A good place to start is by understanding the pros and cons of taking a security deposit. Look from the perspective of both the holiday home guests and the owner.

Pros

The owner has the knowledge that they have cash under their control to cover the cost of any loss or damage
The owner may feel that guests will be more careful in their home, if there is a risk that they could lose some of their deposit.

Holiday Let Security Deposits Cons

Cons

Many guests will simply not make a booking if a security deposit is required, due to their fear of potential exploitation
Guests who have paid a security deposit may not fully enjoy their stay at the holiday cottage, due to a feeling of “walking on egg shells”
This could restrict repeat bookings and referrals from these guests
There is additional administration time for both you and your guests.

When to claim

In our experience, damage or breakages incurred during a holiday let can typically be classified as regular, occasional or rare.

For example:

Regular	Occasional	Rare
Broken glasses	Permanent stains on towels or bed linen	Broken dishwasher, tumble dryer, TV, etc
Luggage marks on walls	Broken bedside lights	Broken windows
Missing torches	Excessive mess upon departure	Broken furniture

Are you guests aware that you have expensive crystal glasses or luxury wallpaper?

Withholding money from a security deposit for “minor” mishaps can appear negative.

There is a stronger case for withholding cash from security deposits for the more occasional and more expensive damage. For example, permanent stains on bed linen, or where significant extra cleaning is required.

Is it worth the potential loss of goodwill and negative property reviews to withhold £25 from a guest’s deposit for additional cleaning costs?

Even in the rare event where there is an expensive breakage, it may not always be clear cut as to which guests are at fault.

Holiday Let Insurance

Genuine, “malicious” damage is rare and the costs of wear and tear should be factored into the rental rates charged for luxury properties.

Furthermore, it’s recommended to take out additional insurance to protect against expensive damage from rare events.

In theory, deposits give owners peace of mind against unwanted financial costs. However, they can deter many potential guests.

Finally, withholding cash from deposits can lead to significant disenchantment.

This is especially true if guests feel that they have been unfairly treated by the owner. As a result, this can lead to negative publicity and lost revenue.

Where an owner’s objective is to maximise their profit, they should avoid security deposits.

Ultimately, the benefits of higher income and guest goodwill levels will outweigh the limited financial protection that withholding cash from guests can provide.