Prague targets Airbnb

Prague, Czech Republic (LenDog64, CC BY-ND)

In 2017, more than 8,5 million tourists visited the Czech capital of Prague, making it the 5th most visited city in Europe.

An increasing number of those choosing Prague as their holyday destination opt for the accommodation site Airbnb to find a place to stay in the city. Unlike many other popular tourist destinations on the continent, Prague has not been very strict when it comes to the regulation of services such as Airbnb. However, this might change soon.

Conceived in 2007, Air Bed & Breakfast, later known as Airbnb, started as a business project designed to help struggling youngsters make some extra cash by offering their space to people travelling into their area. As the name of the project suggest, the first users of the site, launched in 2008, were offering their inflatable matrasses as a cheap alternative to hotels. As the site grew, more unique listings appeared on the site — boats, igloos, planes, and tree-houses. All of that was in line with the general direction towards a sharing economy.

Sharing economy

Although never properly defined, the concept of a sharing economy is typically used in the context of a digitally, highly advanced society that makes intensive use of data collection. In such a society, access to goods and services becomes more important than ownership. The same applies to the labor market where individual services are offered online. Most companies that are usually put into this category are structured as ‘peer-to-peer platforms’ (P2P), internet sites that match a consumer with a provider.

A typical example of such an enterprise is Uber, which was conceived as a peer-to-peer ridesharing company. The San Francisco-headquartered company helps you find a car to drive you to your desired destination. The driver is not a taxi driver, but rather someone who uses his car and car driving skills to make some extra cash. Similarly, Airbnb was designed to help someone easily rent their extra space in their home. Both incredibly successful, Uber and Airbnb have become poster children of the sharing economy.

In little over 10 years in operation, Airbnb has become a force to be reckoned with in the giant global hospitality industry. According to the most recent data, the U.S. company boasts close to 5 million listings in 81,000 cities around the world. Based on Forbes’ interactive model, Airbnb is currently valued at USD38bn.

Such a tremendous success has been made possible by the company’s business model. Unlike many other hospitality companies, Airbnb’s business model does not require investment in any real estate. Instead, the revenue comes from the commission both the host and the guest have to pay for their booking. The current rates are somewhere around 3 per cent of the booking amount for the host and anywhere between 5-15 per cent for the guest.

Airbnb in Europe

In 2014, the old continent became Airbnb’s largest market with more than half of total stays. According to the company’s website, the growth in many popular European cities have been in three digits. Cities like London, Berlin, Paris, Rome or Copenhagen have more than 20,000 listings on the site. According to the company, these hosts use the site to make some extra cash by renting out an unused space in their apartments. However, the data show otherwise.

InsideAirBnB, an initiative run by digital activist Murray Cox from New York, publishes information on Airbnb activities in major cities across the globe. By scrapping the data from Airbnb’s own listings, the site helps to decipher the nature of the company’s lettings.

For example, between 47 and 87 per cent of all listings in major European cities are the rent of entire houses or apartments. This means that these listings are not offered by people that actually live in the property. This is further demonstrated by the “high availability” of these listings, indicating that a listing is available for three months or more. In Berlin, almost 40 per cent of all listings have high availability, in Paris its around 35 per cent. This can be taken as a further prove that people don’t just rent out their places while on holiday, but rather live in a completely different property.

Moreover, it is often the case that Airbnb hosts have multiple listings, meaning that they rent more than just one apartment/house. While some hosts might just list separate rooms in the same apartment, hosts with multiple listings are much more likely to be running a highly profitable real-estate business. In Lisbon, 66 per cent of more than 20,000 hosts in the city have multiple listings, 40 per cent in London, 53 per cent in Madrid, and 61 per cent in Rome.

There are instances when individual hosts have 5 or more separate listings. This is happening because, in most cases, it is far more profitable for property owners to rent out to tourists than to long-term residents. As a consequence, tens of thousands of houses and apartments are taken off the regular rental market. While it is hard to determine the exact impact of such a development on a city’s housing market, many European cities have already been taking action against the “sharing” platform.

Barcelona, one of the world’s most visited cities, is leading the trend. The city administration requires apartment owners to register and Airbnb to provide data on the renters under penalty of USD680,000. Many European cities also limit the amount of days for which an Airbnb host can rent out their place. In Denmark, residences are limited to 70 nights. In Paris, short-term lettings are limited to a maximum of 120 nights a year. Berlin banned short-term rentals altogether back in 2016, only to overturn the decision a few months later. Currently, the German capital requires a 90-day-limit on short-term rentals alongside a need of getting a permit.

Regulations in Prague

According to Euromonitor International, in 2017, Prague was the 5th most visited city in Europe with a total amount of 8,55 million tourists. The Czech capital was thus ahead of popular European destinations such as Vienna, Amsterdam, Milan or Barcelona. There are currently over 14,000 Airbnb listings in Prague, with the popular application getting larger and larger share of Prague’s accommodation sector every year. In 2017, that share was up by 4,7 per cent to 14,7 per cent, which amounted to 1,79 million bookings.

In mere two years, the average price of a 60 square meter apartment in Prague has gone up by more than 20 per cent. This particularly applies to some of Prague’s central districts where many local residents can no longer afford to live. Although it is hard to prove that there is a direct correlation between the increase in use of the accommodation service and the skyrocketing property prices in the Czech capital, there are many voices putting part of the blame on Airbnb.

In October 5th, 2018, during the municipal elections in Prague (conservative Civic Democratic Party (ODS) won for the fifth time), there was a consensus reached by political parties across the spectrum to introduce some sort of regulatory measures. Some political parties were calling for applying the same kind of regulations that are already in place in cities like Amsterdam or Berlin. This would mean a mandatory registration of any Airbnb host, as well as a limit on the amount of nights an apartment can be rented for.

Filip Brokeš is an analyst and a journalist specializing in international relations.

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