What are the costs involved in starting up a holiday rental business?
There’s more to starting a chalet rental business than just the costs of building, fitting out and decorating it. Many don’t consider the associated costs of renting the property – from registering the company to marketing, cleaning, reception and minor repairs.
So, to ensure effective financial management and a good income, it is essential that you understand and estimate as accurately as possible the costs associated with letting your chalet.
This article is split into two parts. The first section will detail the various costs you can expect to incur, accompanied by precise figures. And the second will present a practical case study, estimating the annual rental costs of an alpine chalet.
Table of contents
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- The costs of forming a company
- Specific insurance policies
- Listing on a holiday rental platform
- Marketing your property
- Equipment maintenance
- Maintenance costs for outside areas
- Concierge and property management services
- Energy consumption (gas, electricity, water)
- Welcome basket
- Chalet maintenance costs
- Taxes
- Estimating your rentals costs: a case study
Estimating your rental costs: useful figures and formulas
The costs of forming a company
Legal announcement costs
When an SCI or SARL is set up, entrepreneurs are required to publish a legal announcement in an authorised newspaper (JAL, Journal d’Annonces Légales) to inform the public of the formation (and, where applicable, modification) of a company.
These are now flat-rate fees. At the end of 2022, in mainland France, these costs were:
- 144€ excluding tax for a SARL
- 185€ excluding tax for an SCI
Registration fees
In France, SCIs and SARLs must be registered with the Registre du Commerce et des Sociétés (RCS). This takes place at the clerk’s office of the relevant commercial court. The steps involved may differ slightly depending on the company’s articles of association, but the registration fee is:
- 88.29€ for an SCI.
- 65€ for an SARL with a commercial activity.
Legal fees
In the case of an SCI or SARL, legal fees depend on the complexity of the company (for example, the number of partners involved), but also on the amount of the initial capital. As a general rule, fees should be estimated at 1-2% of the initial capital. But, in some cases, a minimum amount may apply.
Alternatively, if the owner opts for LMNP (location meublée non professionelle, or non-professional furnished rental) status, there will generally be no specific notary fees associated with setting up the rental company. This is because, as an LMNP, owners can operate as individuals without having to set up a company.
Drafting the company’s articles of association
In principle in France, individuals have the right to draw up their own Articles of Association. The law does not stipulate that they must be drawn up by a professional. In this case, the cost to the owner is nothing, apart from their own time.
However, drawing up a company’s Articles of Association is a complex and important task. These documents define the rules and procedures of the company in question and must be precise and in line with current legislation. It is therefore advisable, although not compulsory, to call on the expertise of a professional.
If you go through a legal platform, then the cost of drawing up the articles of association is around 200€. But, owners who prefer to go through a lawyer, notary or chartered accountant will need to budget between 500€ and 1,500€ to draw up these documents.
Specific insurance policies
Owners of furnished tourist accommodation are not legally obliged to take out specific insurance. However, taking out insurance is worth considering. Chalet owners can choose to take out insurance policies that provide independent or combined protection for:
- Their property and equipment;
- The owners themselves;
- Their tenants, with varying levels of cover.
The range of insurance rates is fairly wide, as each contract is calculated on a case-by-case basis (legal status, turnover, liabilities, size and equipment of the chalet, location and resort, clauses, etc.). The three types of insurance mentioned above will ensure that owners and holidaymakers have peace of mind from the start to the end of their stay, and that owners are protected in the long term against the various complications that can arise when renting out their property.
Operating liability insurance
This insurance is essential to cover damage to property or personal injury caused to tenants or third parties in connection with the use of the chalet. Therefore, it is highly recommended to protect you in the event of disputes or claims and to ensure your tenants’ peace of mind.
Comprehensive home insurance
This covers damage to the chalet itself, including water damage, fire, natural disasters, theft, etc. It may also include a specific cover for equipment (sauna, hammam, etc.) in the event of damage or malfunction.
The cost of comprehensive home insurance is generally calculated as a percentage of the value of the insured property. Rates can vary between 0.2% and 1% of the value of the property per year.
Loss of business insurance
This covers loss of income in the event of a temporary closure of the chalet due to major damage or necessary repairs to equipment.
In general, the cost of loss of business insurance is estimated at between 1% and 3% of your estimated annual income.
Unpaid rent insurance
Landlords wishing to insure against non-payment of rent can take out unpaid rent insurance, which costs between 2% and 4% of annual rental income.
However, by using a rental platform as a transaction intermediary, landlords are protected against this type of problem in most cases. Many providers offer insurance against non-payment or other protection services for landlords. For that reason, it is important to read the terms and conditions of the rental platform carefully and find out what cover is included before making a final decision on this particular type of insurance.
Listing on a holiday rental platform
Publication and listing fees on rental platforms vary, depending on factors such as the size of the chalet, the location, the rental period, the services offered, etc. Here is a general estimate of the publication costs on certain platforms (from the owners’ side).
Airbnb
Airbnb applies a service fee that generally varies between 3% and 5% of the rental price, as well as a payment processing fee. This fee rises to 16% in the case of professional owners. Additionally, they may also offer options such as paid promotion packages to highlight certain listings.
Chaletmontagne
Chaletmontagne is unique in the way it works because chalet owners pay no subscription, commission or handling fees. Instead, they pay for access to the contact details of potential guests in the form of credits, so it’s up to them to convert them into actual customers. Four credits cost 450€ on average, and 10 credits is 2,300€.
Booking.com
Booking.com generally charges a commission on bookings made via their platform, which varies between 10% and 17% of the rental price. On top of that, they also offer paid advertising options to improve the visibility of listings.
Abritel
Abritel charges owners 8% of the total cost of the booking. Additionally, the platform also offers a subscription package costing 249€ per year.
OVO Network
OVO Network carefully selects the properties it works with, in order to create the best relationship with owners and ensure they have the best chance of securing bookings.
Owners are offered comprehensive photography, marketing, reservation management and revenue optimisation services, as well as personalised support.
Finally, rental rates are tailored to the characteristics of the chalets and the services provided, and updated in real-time according to the recommendations of our property experts, who constantly monitor market trends. Find out how much rental income your Alpine chalet can generate with the OVO Network calculator.
Marketing your property
Photography
The photography of a top-of-the-range chalet has to be impeccable: it has to make holidaymakers fall in love with the chalet when they see the advert, while representing the property accurately and transparently. That’s why we strongly recommend using a professional photographer to capture your rental chalet.
The cost of a professional property photoshoot depends on a number of factors:
- The photographer’s reputation;
- The location of the chalet, travel time and accessibility;
- The length of the shoot (how many rooms there are to photograph, how many photos per room, interior or exterior photos);
- Additional services (such as photo editing);
- The type of service (hourly rate or fixed price).
In general, rates for a quality professional photo shoot for a luxury chalet are between 150€ and 200€ per hour. Therefore, it’s reasonable to budget between 500€ and 1,500€ for the shoot, or perhaps more, depending on the factors mentioned above.
Other services you could use to promote your chalet and its listing could include:
- A dedicated website
- Digital marketing (writing the advert, publishing your advert on different platforms, etc.)
- A blog
- Social networks
- Advertising campaigns
Subcontracting
Owners who wish to outsource this aspect of their business have two options:
- Call in a professional, such as a freelancer. Rates vary depending on the service, from an hourly rate (50€ to 200€) to a fixed price (1,500€, for example, to create a website and set up the associated social networks);
- Delegate marketing to a rental platform that will do everything it can to give the property in question visibility.
And while it’s obvious that with a little knowledge and a lot of time, owners can market their property themselves, we recommend delegating this part to a professional platform. This will result in greater visibility, efficiency and better results for owners.
Equipment maintenance
The annual maintenance costs of a chalet’s equipment can vary depending on the size of the facilities, frequency of use, technical specifications and geographical region.
Sauna
The annual cost of maintaining a sauna can vary between 100€ and 500€, which includes regular cleaning, replacement of sauna stones if necessary and inspection of the heating elements.
Steam room
Annual maintenance costs for a steam room can be around 200€ to 800€. This covers regular cleaning and disinfection, steam generator maintenance and filter replacement.
Swimming pool
The annual maintenance costs of a swimming pool can vary considerably, depending on the size and type of pool and the associated facilities. Regular maintenance costs include cleaning, water treatment and inspection of filtration and heating equipment. So the average annual cost can be around 500€ to 2,000€.
Hot tub
Annual maintenance costs for a hot tub can vary between 200€ and 800€. This includes regular cleaning, adding chemicals to keep the water clean and balanced, and inspecting the heating and filtration equipment.
But, additional costs may arise if faulty equipment has to be repaired or replaced. Therefore, it is in the homeowner’s best interest to set aside an additional savings account for this type of contingency.
Maintenance costs for outside areas
This is the first thing tenants will see when they arrive and the last impression they will take with them when they leave. For this reason, the exterior of a seasonal rental chalet must be memorable and impeccable, and keeping it this way must be taken into account when estimating rental costs.
The cost of maintaining the garden and exterior of a top-of-the-range chalet can vary, depending on the size of the garden, the complexity of the landscaping – and therefore the tasks to be carried out – plus the services required.
Garden maintenance
This includes mowing the lawn (25€ to 40€ per hour), pruning shrubs and hedges (2€ to 5€ per linear metre), weeding, watering and maintaining flowerbeds. These annual costs can vary between 500€ and 3,000€.
Pruning trees
If your chalet has large trees that need regular pruning, this can result in additional costs. This service costs between 300€ and 1,500€ per year, or between 25€ and 70€ per hour.
Maintenance of paths and driveways
This can include cleaning, occasional repointing of paving stones or slabs, and the application of protective products and the annual costs range from 200€ to 1,000€.
Lighting
If the chalet is equipped with an outdoor lighting system, annual maintenance costs may include replacing bulbs, checking cables and transformers, and general maintenance of the system. These costs range from 100€ to 500€.
Woodwork
Looking after the woodwork on your chalet is essential – after all, it’s often an integral part of a chalet’s style. Therefore, between cleaning, sanding and re-treating, you should expect to pay between 25€ and 50€ per square metre.
Concierge and property management services
These services may include welcoming tenants, handing over keys, providing assistance during the stay, handling requests and problems, coordinating cleaning and laundry services, and booking additional services (e.g. home chef, massages, and activities). The rates vary according to arrival and departure times and the services chosen.
The Groomlidays concierge service, for example, offers a welcome service for tenants that includes:
- Guest welcome;
- Tour and presentation of the property;
- A briefing for holidaymakers on what to do in the surrounding area;
- A report on how the welcome went by email or telephone.
…for 25€ to 50€, depending on the time of arrival of the tenants.
Property management includes an even wider range of services, such as general management of the property, including maintenance, repairs, supervision of service providers, reservation management, invoicing, etc.
These fees are generally calculated as a percentage of rental turnover or as a fixed annual fee, usually between 15% and 25%.
Energy consumption (gas, electricity, water)
The easiest way to estimate the annual energy consumption costs of a seasonal rental chalet is as follows:
- Determine the price of the energy in question (per kilowatt-hour (kWh) including tax for gas and electricity, per cubic metre for water);
- Estimate daily energy consumption per person;
- Multiply by the number of days the chalet will be rented out (an estimate is possible).
In France in 2023, a single person will consume an average of 30 kWh of gas, 3 kWh of electricity and 0,15 cubed metres of water (149l).
Welcome basket
The welcome basket is a necessary cost, as this small gesture creates a warm and welcoming experience from the moment guests arrive, contributing to their satisfaction and sense of well-being during their stay.
In order to estimate the cost of a welcome hamper, you first need to determine its contents, based on the owner’s preferences and the needs of the guests. As a general rule, a quality welcome hamper will be worth between 50€ and 150€ and may contain items such as:
- Top-quality local produce, such as cured meat and local cheese (approximately 12€ per person);
- Wellness products, such as soothing essential oils for the hammam, as well as scrubs or massage oils (100€ for the basket);
- A bottle of good champagne for groups of 6 to 8 people (150€);
- Sports items, such as energy gels or sports drinks, for themed breaks (10€ per person).
Chalet maintenance costs
Housekeeping
The cost of a cleaning service for a luxury chalet can be higher than for standard accommodation because of the higher cleaning requirements and top-of-the-range finishes. Do note that hourly rates for professional cleaning will vary, but you can expect:
- An average cost of around 25€ to 40€ per hour;
- A minimum of one visit per week after the tenants have left (4-6 hours);
- An optional extra visit during the week (2 hours).
Laundry
Laundry costs depend on the quality of the service and the amount of laundry to be cleaned.
For the comfort of tenants, the following items are usually required:
- 2 sets of sheets for each bed (mattress cover, fitted sheet, flat sheet, pillowcases);
- 3 bath towels per person;
- 2 bathmats per bathroom;
- 8 kitchen towels.
Ideally, these figures should be doubled to allow for turnover. Then, it will be possible to use a set of clean linen while the previous week’s linen is sent to the laundry.
And when it comes to cleaning, it’s best to use a professional service to ensure a high-quality finish. Here are some examples of average costs at a standard dry cleaner, per item:
- 12€ for a duvet cover;
- 7.50€ for a flat or fitted sheet;
- 3.50€ for a pillowcase;
- 5€ for a bath towel.
This works out to around 40€ to 50€ per person, per week, but it is also possible to negotiate a weekly or monthly package with a laundry service to reduce these costs.
Taxes
Property tax
The general formula for calculating property tax in France is as follows:
Property tax = Rental value x Tax rate
The rental value is an estimate of the rental value of your property established by the tax authorities. It is usually shown on the property tax notice or can be obtained by contacting the relevant tax authorities.
Council tax
Council tax on holiday lets is a local tax in France that generally applies to second homes (since 2023). Owners of seasonal rental properties are generally exempt if they operate as a business. In this case, they will be subject to CFE (Cotisation Foncière des Entreprises) and will apply a tourist tax to their tenants.
For accurate and up-to-date information, contact the local tax authorities or consult a tax professional.
Tourist tax
Tourist tax is levied by local or regional authorities on overnight stays by people in tourist accommodation, such as seasonal rental chalets. It is paid by the guests to the owners, who then pay it to the local authority.
In the French Alps, tourist tax can vary from 0.50€ to 4€ per person per night.
VAT
In France, the seasonal rental of chalets is subject to the “régime réel” VAT system, with the applicable VAT rate being 10%.
VAT must be collected from customers and paid to the tax authorities on a regular basis. However, it is sometimes possible to deduct it from business expenses relating to the seasonal rental activity, or to benefit from an exemption above a certain income threshold.
Estimating your rentals costs: a case study
Let’s take the case for a chalet with the following characteristics:
- Sleeps 8;
- Located in Chamonix, 1km from the pistes;
- Gas heating;
- Equipped with a sauna and hot tub;
- A forecast occupancy rate of 65% (34 weeks, 237 days);
- Weekly rental: 3,570€.
Estimated administrative set-up costs
Let’s say the owner chooses to set up as a limited liability company, with a starting capital of €6,000. In this case, they will have their lawyer draw up the company’s articles of association.
- Legal announcement costs: 144€
- Company registration: 65€
- Notary fees: 1% de 6000 € = 60€
- Legal fees: 850€
Estimated annual rental costs: 1,659€
Costs of promoting the chalet
Then, suppose that this owner decided to take care of his online marketing himself until he had received quotes from the various rental platforms and exchanged ideas with them. From there, they go on to start a blog and a Facebook page, without any paid advertising at first. Afterwards, they plan a photoshoot with a professional photographer with whom they have already worked.
- Starting a blog: 149€ (subscription + hosting)
- Professional photoshoot: 990€ (one-day package with 20 photos with retouching)
Estimated annual rental costs: 2,798€
Equipment maintenance costs
The sauna and jacuzzi are new and already installed and the owner has budgeted 500€ for each piece of equipment per year for minor repairs, maintenance products and the annual inspection appointment. They will spread this amount over the year.
Estimated annual costs: 3,798€
Outdoor maintenance costs
The chalet’s outdoor areas consist mainly of a large lawn, a tree-lined driveway and a 20m² wooden terrace. So the owner plans to hire a company on an hourly basis for:
- Annual tree pruning: 4 hours at 35€, 140€;
- Two annual cleanings of the main driveway: 2 hours at 20€, 40€;
- Lawn maintenance as follows: twice a week in spring (4 months), once a week in summer (3 months), 2 hours per job at 25€ per hour: 550€;
- Two cleanings of the terrace with the application of a maintenance product: 2 x 3 hours at 30€: 180€.
Estimated annual rental costs: 4,708€
Estimated property management costs
The chalet owner lives in Grenoble and would like to use a concierge service to welcome customers and manage the cleaning company. Together, they decide customers will be welcomed at 2 pm on Fridays.
Concierge service: 25€ over 34 weeks = 850€
Estimated annual rental costs: 5,558€
Estimated energy costs
The chalet accommodates groups of 8 people for an average of 237 days per year.
- Gas: 237x30x0.1043×8 = 5932.58€
- Electricity: 237x3x0,2062×8 = 1172,86€
- Water: 237×0,15×3,33×8 = 947,05€
Estimated annual rental costs (to the nearest euro): 13,611€
Estimated costs of a welcome gift
The owner decides to place an order with a local artisanal caterer for a tasting basket for 8 people at 73€ each. So, the total annual cost is 2,482€.
Estimated annual rental costs: 16,093€
Estimated housekeeping and laundry costs
The owner estimates their property will require:
- 5 hours of weekly cleaning per week rented, at 25€ per hour: 4,250€;
- A quarterly deep clean of 10 extra hours at 30€ per hour, costing 300€.
He signs a cleaning contract with a laundry company costing 365€ per month.
Estimated annual rental costs: 25,023€
Tax estimate
Finally, a chartered accountant prepared a forecast for their first balance sheet, which was based on a projected turnover of 121,380€ (3,570€ for 34 weeks’ rental).
- Accounting fees: 650€
- Tourist tax: 34x8x3 = 816€
- VAT on projected turnover: 12,138€
- Property tax: 6,500€
Estimated annual rental costs: 45,127€
The results obtained in this case study are based on a non-optimal situation. And in this case, the owner managed to be fairly exhaustive in their forecasts. They also made the intelligent choice to call in professionals on several occasions.
However, the owner could do more to reduce this estimate of rental costs, such as:
- Eliminate a number of redundant costs (it is possible to find a concierge service that also provides cleaning and laundry services in addition to reception);
- Give the property more visibility (marketing is neglected);
- Limit the number of people he deals with, to save time and minimise communication errors, by using a platform specialising in holiday rentals.
The experts at OVO Network, the leader in chalet rental management in the French Alps since 2008, are at your disposal. They’ll help you put in place the best possible pricing strategy to maximise your rental income.
You can also accurately estimate your chalet’s potential profitability using the OVO Network rental profitability calculator.
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