Prague's Old Town. via Raymond Johnston

One-quarter of Prague’s Old Town flats now rented out for short-term tourist accommodation

Flats rented out over services such as Airbnb have saturated Prague's center

In Prague’s Old Town just under 25% of apartments can be found on flat-sharing services such as Airbnb. Renting them out this way can bring the owner up to twice as much money as a traditional long-term rental.

According to research by Deloitte, 24.8% of flats in Old Town are used for short term accommodation arranged on a peer-to-peer (P2P) network, while in New Town the figure is 16.3%, in Malá Strana 13.7%, in Josefov 12.2%, and in Hradčany 5.3%. The most common provider of such flats is Airbnb, although there are several other similar services.

Of the 27,000 apartments located in Prague’s Old Town, New Town, Josefov, Malá Strana, and Hradčany districts, 821 have been offered for long-term rent, equaling 3% in recent months, while short-term accommodation took up 4,770 flats, or 17.6%.

The original concept of Airbnb was that people would rent out spare rooms. But it quickly evolved to a situation where landlords bought multiple flats with the sole purpose of renting them out to tourists. In total, in Prague, 80% of what is available on platforms such as Airbnb iswhole apartments or houses, and not spare rooms, according to Deloitte.

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The number of tourists coming to Prague has been increasing annually. In 2016, Prague saw 8.2 million tourists, which in 2018 rose to over 9 million tourists, and that is expected to rise to 11.4 million by 2025. These figures are higher than some other estimates but take into account visitors whose stays were not declared. The full-year population of Prague is only 1.3 million.

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prague castle
Tourists want to be near major sights such as Prague Castle and Charles Bridge. via Raymond Johnston

Overtourism is boosted by an uncontrolled increase in tourist accommodation. Between 2018 and 2018, the number of combined hotel rooms and shared flats increased by 12.5%. The growth was mainly due to shared flats, while hotel space increased only slightly.

And Prague is not alone. Vienna was up 16.3% and Budapest rose 14.8%, based on figures from Euromonitor and AirOna. Both cities saw most growth from shared flats, and Budapest even saw a 2% drop in hotel space.

Concretely, this means 300,000 more people visit Prague every year, while new bed capacities in hotels have increasing only slightly, by only 1.4 percent over the last two years. On the other hand, capacity offered through accommodation platforms such as Airbnb increased by 34.1 percent over the same period.

The number of available units in Prague offered through shared accommodation platforms increased between 2016 and 2018 from 10,310 to almost 14,000 in 2018 in 2016. Last year alone, Prague estimated to lose local tourism fees ranging from 88.5 million CZK to 124 million CZK. Prague plans to increase the accommodation tax in the future. In connection with this, it can be expected that the amount of uncollected fees will further increase to more than 250 million CZK.

Thousands of tourists flood Prague's Old Town Square during the summer season
Thousands of tourists flood Prague’s Old Town Square during the summer season. via iStock

The rapid rise in short term flats is due to them costing significantly less than hotel rooms. The average price of a four-star hotel in the center of Prague for two nights for two people during the weekend during November costs on average 7,400 CZK including VAT, while a comparable Airbnb flat will cost around 5,700 CZK, or a savings of 23%.

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The number of flats used for short-term rentals has also led to a shortage of flats available for residents and an increase in both rent and sale prices for flats. And as the city center is now saturated with short-term rentals, the neighboring districts are now expected to become affected. Prague plans to build more affordable housing, and several neighborhoods such as Karlín, Smíchov and Nové Butovice are seeing significant private investment in housing projects, but these won’t be ready for several years.

“The prospect of interesting earnings through short-term housing platforms pushes people out of the city center. We expect this effect to continue into the wider city center. The latest forecasts show that by 2025, 330,000 more tourists will come to Prague each year than the previous one,” Miroslav Linhart, head of real estate department Deloitte, said in a press release.

View over central Prague's Old Town district
View over central Prague’s Old Town district. via iStock

The city has been looking at ways to regulate such services, and also to ensure that the relevant taxes and fees are paid. Prague plans to increase the accommodation tax in the future. According to Deloitte, lost income to the city in unpaid fees in 2018 was between 88.5 million CZK and 124 million CZK. In 2021 it will be an estimated 250 million CZK.

Another Czech tourist destination, Český Krumlov, now collects fees from long-distance bus drivers who bring tourists to the city. Venice, Italy, charges tourists a fee to visit the city and also limits the number of large ships that can anchor nearby. But since Prague is easily accessible from all sides, taxing tourists as they enter is difficult.

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The previous Prague City Hall administration considered limiting the time that each flat could be rented out to just a few months per year, requiring someone to actually live in each flat and just rent spare rooms, or allowing building societies to ban flats in communally owned buildings. The only action take was to launch a website informing landlords of their legal obligations.

charles bridge
Tourists on Charles Bridge. via Raymond Johnston

Recently, Prague has been cracking down on key safes chained to public property, but this does little to address the overall problem.

Tourism has ups and downs, and short-term rental flats can respond much faster to trends than hotels. Switching a flat from family use to tourist use can be dome rapidly at little cost, while building a new hotel or converting an existing building takes several years and requires a lot of red tape. By the time the hotel is finished, there could be a slump again in tourism.

Hard Rock International and EP Real Estate just announced the construction of a hotel in Prague’s Letná district, but it won’t open until 2023.

But Deloitte see more hotels as part of the solution. “Unfortunately, the growth in tourism and the popularity of shared platforms have negative effects on the city or parts of it, as well as on the local property market. Legislation and local government are responding slowly to all this. The response could be not only possible regulation of shared accommodation, but also a new offer from hotels, which would increase the flexibility of the market,” Petr Hána, Senior Property Manager at Deloitte, said in a press release.

Airbnb was first introduced in the Czech Republic in 2009. Apart from Airbnb, there are also other services available on the market such as Flipkey, HomeAway, House Trip, Vacation Rentals or Vrbo.

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