Short-Term Lets vs Traditional ASTs: Is Dynamic Pricing the Key to Higher Income for Landlords

For many landlords, the financial landscape has shifted dramatically. Rising mortgage rates, increasing compliance costs, and rent growth capped by regulations and market tolerance have squeezed traditional rental income. Yet, some landlords report earning significantly higher gross income from the same properties without raising rents or committing to long-term tenants. What explains this change? The answer lies in the difference between traditional Assured Shorthold Tenancies (ASTs) and short-term lets, particularly the use of dynamic pricing.

Why Traditional AST Income Remains Static

Traditional ASTs offer landlords a fixed monthly income. Once the rent is set, it usually remains unchanged for 12 months or more. This fixed income model provides predictability but limits potential earnings. Factors such as seasonal demand, local events, market shifts, and inflation do not affect the rent until the lease is renewed.

For example, a property rented at £1,200 per month will almost always stay at that rate for the lease duration, even if demand surges in the area. This static income model caps upside potential, especially in high-demand locations.

Understanding Gross Income vs Net Income in Short-Term Lets

Short-term lets often generate higher gross income compared to traditional ASTs. For instance, a property that earns £1,200 per month on a long-term lease might bring in £2,200 to £2,400 per month in gross income through short-term letting. However, gross income does not equal profit.

Short-term lets come with additional costs such as:

• Cleaning fees between guests

• Utility bills (electricity, water, internet)

• Property management fees

• Linen and consumables replacement

  
  

Despite these expenses, many landlords find that the net income from short-term lets can surpass the net income from traditional ASTs, especially for:

• Larger properties

• City or commuter locations

• Homes near hospitals, business parks, or transport hubs

  
  

For example, after deducting costs, a short-term let might still net more than £1,200 per month, outperforming the traditional rental income.

!Eye-level view of a modern city apartment with a balcony overlooking a busy street

How Dynamic Pricing Works in Short-Term Lets

Unlike ASTs, short-term lets use dynamic pricing, similar to hotels. This means rental rates adjust regularly based on several factors:

• Current demand levels

• Length of stay

• Seasonal trends

• Local events

• Day of the week

  
  

This flexibility allows landlords to increase rates during peak demand periods and lower them during quieter times to maintain occupancy. Dynamic pricing enables income to fluctuate with the market rather than remaining fixed.

For example, during a local festival or business conference, short-term let prices can rise significantly, boosting gross income. Conversely, during off-peak seasons, prices adjust downward to attract guests and avoid vacancies.

Benefits of Short-Term Lets Beyond Income

Short-term lets offer more than just potential for higher income. Other advantages include:

• Flexibility: Landlords can use the property themselves during vacant periods.

• Reduced long-term tenant risk: No long-term lease commitments reduce the risk of rent arrears or property damage over time.

• Market responsiveness: Ability to quickly adapt pricing and availability based on market conditions.

  
  

However, landlords must be prepared for more active management, including frequent cleaning, guest communication, and maintenance.

Challenges and Considerations for Landlords

While short-term lets can be lucrative, they come with challenges:

• Higher operational costs: Cleaning, utilities, and management fees add up.

• Regulatory compliance: Some areas have strict rules on short-term rentals, including licensing and limits on rental days.

• Market volatility: Income can fluctuate widely with demand changes.

• Guest turnover: More frequent guest changes require more time and effort.

  
  

Landlords should carefully assess these factors and consider whether short-term letting suits their property and lifestyle.

Real-World Example: Comparing Income from AST and Short-Term Let

Consider a three-bedroom apartment in a commuter town near a business park:

• AST rent: £1,200 per month (£14,400 per year)

• Short-term let gross income: £2,300 per month on average (£27,600 per year)

• Estimated costs: £700 per month (cleaning, utilities, management)

• Net income from short-term let: £1,600 per month (£19,200 per year)

  
  

In this example, the short-term let nets £400 more per month than the traditional AST, despite higher costs and management effort.

Is Dynamic Pricing the Future for Landlords?

Dynamic pricing allows landlords to capture market demand and maximize income potential. While traditional ASTs provide stability, they limit earnings to fixed rents that rarely reflect current market conditions.

Short-term lets with dynamic pricing offer a way to increase gross and net income, especially in high-demand locations or properties suited to short stays. Landlords willing to manage the operational demands and navigate regulations can benefit from this flexible approach.