Tourist or long-term rental in Madeira: which is better for owners?
We compare two strategies for a T2 apartment in Caniço: income, pricing flexibility, risk and the work required from the owner.
The main drivers of tourist-rental income
Long-term rent on the island is constrained by local salaries and residents' purchasing power. The short-term market, meanwhile, lets owners earn from international demand that is willing to pay a premium for a holiday stay.
- Year-round demand: Unlike many mainland resorts, Madeira has no pronounced dead season. Digital nomads arrive in winter, Flower Festival visitors come in spring and traditional holidaymakers travel during summer.
- Dynamic pricing: You are not tied to a single rate. For a two-bedroom apartment in Caniço, prices range from €155 to €245 per night, with occupancy of 55–80%.
- No fixed income ceiling: With a long-term tenancy, your income is fixed by contract. Tourist rentals let you adjust rates promptly as inflation and visitor numbers rise. You can also block dates for your own stays with family or friends; with a long-term tenant, you cannot.
Comparing the strategies: figures and facts
| Metric | Short-term rental (tourists) | Long-term rental (local) |
|---|---|---|
| Average income (T2, Caniço) | €46,200 per year (€3,850 per month on average) | €1,300–1,600 per month (€15,600–19,200 per year) |
| Pricing flexibility | High — the rate can change daily | Low — fixed for a term of at least one year |
| If the owner wants to stay | Dates can be blocked for the owner, family or friends | The apartment is unavailable while the long-term tenancy is active |
| Risk of non-payment | Minimal — platforms collect 100% in advance | Moderate — depends on the tenant's ability to pay |
| Wear on the property | Controlled — cleaning after every guest | Hidden — issues may emerge only when the tenant leaves |
Average income (T2, Caniço)
- Short-term rental (tourists)
- €46,200 per year (€3,850 per month on average)
- Long-term rental (local)
- €1,300–1,600 per month (€15,600–19,200 per year)
Pricing flexibility
- Short-term rental (tourists)
- High — the rate can change daily
- Long-term rental (local)
- Low — fixed for a term of at least one year
If the owner wants to stay
- Short-term rental (tourists)
- Dates can be blocked for the owner, family or friends
- Long-term rental (local)
- The apartment is unavailable while the long-term tenancy is active
Risk of non-payment
- Short-term rental (tourists)
- Minimal — platforms collect 100% in advance
- Long-term rental (local)
- Moderate — depends on the tenant's ability to pay
Wear on the property
- Short-term rental (tourists)
- Controlled — cleaning after every guest
- Long-term rental (local)
- Hidden — issues may emerge only when the tenant leaves
Want tourist-rental income without the daily operations? See how we manage property in Madeira.
Keeping control of your asset
Many owners worry that a constant flow of tourists will wear out a renovation faster. In practice, the opposite is often true:
- Regular oversight: Professionals inspect and clean the apartment several times a week, so small faults can be fixed before they become serious problems.
- Protection from difficult tenants: Portuguese law strongly protects long-term tenants. Evicting someone who does not pay can become a lengthy and expensive legal process. An unhappy or difficult tourist leaves after a few days.
Even after the 18% platform commission and Island Key's 30% management fee on the remainder, the amount left before the owner's own costs is about 1.4–1.7 times the current long-term asking-rent benchmark.
How can this income become genuinely passive?
The figures are attractive, but day-to-day operations hold many investors back. Constant guest communication, arranging cleaning, monitoring the apartment and setting prices on Airbnb and Booking can easily turn into a second job, especially if you live in another country.
That is why we take care of the entire routine. Our approach is a full-service property-management operation. We use dynamic pricing to make the most of every season, maintain the property's rating and ensure the apartment stays in impeccable condition. You simply receive your income each month.
Sources and benchmarks
Market figures change over time. The actual income of a particular property depends on its location, condition, seasonality, rating and the quality of management.