Short-term rentals have been in crisis for over a year – is there hope ahead?
Since March last year, the Czech Republic has been grappling with the covid-19 pandemic and its related impact on health and the economy. Although numerous easing measures allowed many sectors of the domestic economy to recover somewhat over the summer, doing business has remained virtually impossible in some sectors throughout. Short-term rentals are one example: until last spring, they generated income primarily from tourists. Should the owners of these flats remain patient, or is it time to say goodbye to short-term rentals?
Many people look for the answer to this question in the current pandemic situation, watching to see when the Czech Republic can expect a more substantial easing of government measures that would at least partly restart tourism and bring tourists back. At present, however, this is not on the agenda, and it appears that it will not be for some time.
The main problem is that many people entered the short-term rental business at a time when this type of venture was at its peak and seemed almost too good to be true. It was therefore not unusual for property investments to be made solely for short-term rentals, financed largely through mortgage loans. But who is paying the monthly mortgage instalments now that flats have stood empty for more than a year? “At this time last year, many owners of properties intended for short-term rentals had to decide what to do with them next: whether to sell them or try to switch to long-term rentals. However, we must not forget that the property market was virtually frozen for several months during last spring, with far fewer transactions taking place. In addition, many owners were able to bridge the first months of the pandemic and support themselves financially. Now, however, it is clear that the whole situation has simply lasted too long, with no light at the end of the tunnel. The number of people finding themselves in financial difficulties and unable to cover the costs of vacant properties is gradually increasing,” says David Novotný, owner of the independent real estate company Bohemian Estates International.
During the past year, the company introduced a new strategy and began offering owners of properties intended for short-term rental a property management service for mid-term rentals. “Mid-term rentals were, and still are, intended mainly for businesspeople and entrepreneurs, differing primarily in their rental terms. Different notice periods apply, along with several other specific features. This enabled us to keep our clients in profit and help them bridge this period until tourism in the Czech Republic is at least partially restored,” explains Novotný. Many property owners also made use of the guaranteed rent service, which Bohemian Estates International has offered for years and which guarantees an agreed level of rent even where the property is vacant or the tenant does not pay.
The company continues to offer both services, and for property owners they may be one way of making the best of the situation. “It is difficult to say whether this summer will be better in terms of foreign tourists. We would like to be optimistic, but we need to remain realistic for our clients. Personally, if I owned such a property, I would not wait for the situation to improve, but would instead try to find another solution. I believe there is always a way to ensure that a property earns at least enough to cover all associated costs. Simply get in touch and we will work out a viable option together,” concludes David Novotný of Bohemian Estates International.