Foreign tourists are unlikely to fill accommodation capacity this summer – how should we respond to the situation?
Although the Czech Republic is gradually reopening its borders to foreign tourists and travel between several countries is already possible without restrictions, tourism remains stagnant. Forecasts are far from favourable, and we cannot expect a full return during the summer to the situation before the coronavirus pandemic began. This is also an absolutely fundamental problem for accommodation providers in cities such as Prague, Český Krumlov and Karlovy Vary.
In recent years, these cities’ profits have depended precisely on foreign clientele. While Český Krumlov attracted mainly tourists from China and South Korea, Karlovy Vary was popular with Russians, and Prague was increasingly being discovered by tourists from Asia, South America and Africa. For several years, demand exceeded supply, making the operation of accommodation services one of the most successful service-sector businesses for most of the year.
Not only hoteliers, but also ordinary property owners were able to benefit from the situation without difficulty. This is evidenced by the boom in platforms such as Airbnb and Couchsurfing. Property investment thus became even more profitable in recent years, and this type of business came to be known as short-term rental. It is attractive to foreign tourists for several reasons: in the vast majority of cases, it offers greater privacy, is more authentic and costs less. There are thousands of such flats in Prague alone, but the problem is that no one has been available to fill them for several months.
“January and February are generally Prague’s weakest months for tourism. The coronavirus pandemic therefore arrived at the worst possible time, at the beginning of a new season, and landlords have now been losing significant income for several months,” explains David Novotný, owner and managing director of the independent real estate company Bohemian Estates International. In addition to property investment, the company also provides property management for long-term and short-term rentals and, like other real estate companies, is currently facing a number of challenges. “It was not only tourism that came to a standstill for several months. The property market is in a similar position. Hardly anyone is selling or buying at the moment, and flat owners who rented their properties to tourists as short-term rentals are in a particularly precarious situation – especially if they financed the property with a mortgage. They still have to make the repayments, but have no income to do so,” Novotný adds.
However, the company has come up with a plan that can help property owners quickly and effectively. “Anyone operating a short-term rental had only two options in the situation: wait to see how things developed, or choose a strategy that would remain profitable,” says David Novotný. One logical solution is to offer the flat for long-term rental. However, the rent must be set at a level that can compete with other listings, while a long-term rental can become a burden when tourism fully resumes. Is there a middle ground?
“We now offer our clients mid-term rental management, with the option to terminate the agreement once it is again possible to make full use of the potential of short-term rentals. Property owners will therefore not lose income while retaining sufficient flexibility to respond to any increase in demand. We are happy to discuss the details of how the service works with anyone who currently needs some support and know-how to get through this period. Simply contact us and we will discuss together how to avoid financial losses,” Novotný concludes on behalf of Bohemian Estates International.