The Large Number of Airbnb Apartments Brings a Tough Fight for Bookings

The increase in Airbnb supply in Budapest last year exceeded the growth in foreign tourist arrivals, when overall capacity increased by at least 30%, significantly worsening the average occupancy rate. The increase in supply has already led to a fall in average prices, Világgazdaság reports.

On a year-on-year basis, the number of private accommodations in Budapest has increased by 30%, meaning that Airbnb accommodation supply has grown much faster than demand. In the post-COVID period, the market was at its lowest point with 7-8,000 apartments, but now there are more than 16,000.

The number of foreign tourists in Budapest increased dynamically last year, but not as much as accommodation capacity.

Many were encouraged by the fact that prices in the long-term rental market have already reached the threshold for tenants to be able to pay – although there has been a significant increase in recent months. As a result, occupancy rates in accommodation have fallen by five percent, while accommodation providers’ revenues have fallen sharply after adjusting for inflation.

It is not helping the market that guests continue to book at the last minute, and in the oversupplied Airbnb market in Budapest there is no pressure to book earlier, as there are always empty rooms available now.

Even with the increasing number of guests, profitability has deteriorated due to more players in the market.

“The quality and composition of the accommodation brought to the market by new entrants is also very mixed, returning to the pre-pandemic situation of high turnover in the sector,” said Balázs Schumicky, President of the Hungarian Apartment Rental Association (MAKE).

While the change in Airbnb accommodation prices in Budapest has been far below what was needed due to inflation, Hungary and Budapest as a whole has become more expensive, with restaurants, spas, taxis, theaters, and food prices no longer at the level that would make the Hungarian capital a truly good value for money, attractive tourist destination. In many respects we have already reached or exceeded Western European prices, claims Balázs Schumicky.

In addition to all this, Hungarian tourism, including tourism in Budapest, had a good year, but at the individual level, many Airbnb owners are facing a very difficult year due to vacancies caused by the increase in supply. Significant price rises would be needed in the sector, but for those experiencing four to six percent inflation in the eurozone, a rise above that may seem excessive.

In a market of thousands of players, there will always be those who will try to lure customers with unrealistically low prices.

Currently, apartments in the city center can be rented for as little as HUF 5-7,000 (EUR 13-18) per person. Most landlords will have to follow these price reductions if they want to remain competitive, which could easily trigger a negative price spiral, while the profitability of the properties will radically deteriorate and the costs for landlords will increase.

This year, Budapest will see fewer high-profile events that attract tourists, such as the World Athletics Championships and the World Aquatics Championships in previous years. For the time being, Formula 1 is considered to be a high season for advance bookings, and there are already bookings for the Coldplay concert in Budapest.

Via Világgazdaság, Featured image: Pixabay