Competition Rises as Airbnb Apartments Multiply
The Airbnb supply in Budapest has increased dramatically in the past year, exceeding the growth in foreign tourist arrivals. This has resulted in a significant increase in overall capacity, by at least 30%, leading to a decline in the average occupancy rate. Due to the increase in supply, there has also been a fall in average prices for accommodations.
Statistics show a 30% year-on-year increase in the number of private accommodations in Budapest, indicating that Airbnb accommodation supply has outpaced demand. Despite the dynamic increase in the number of foreign tourists, the increase in accommodation capacity has been more substantial.
As a result, occupancy rates have fallen by five percent, while accommodation providers’ revenues have also declined significantly after adjusting for inflation. The oversupply of Airbnb rentals in Budapest has led to guests booking last minute, with no pressure to book earlier as there are always empty rooms available.
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 has been very mixed, resembling the pre-pandemic situation of high turnover in the sector, according to Balázs Schumicky, President of the Hungarian Apartment Rental Association (MAKE).
Furthermore, while Airbnb accommodation prices in Budapest have not increased enough to keep up with inflation, Hungary and Budapest have become more expensive in other aspects such as restaurants, spas, taxis, theaters, and food, no longer providing good value for money.
Amidst all these challenges, Hungarian tourism, including tourism in Budapest, had a good year, but many Airbnb owners are facing a difficult year due to vacancies caused by the increase in supply. The market has seen a rising number of players, some of whom are luring customers with unrealistically low prices.
In the near future, Budapest will see fewer high-profile events that usually attract tourists, raising concerns about profitability. It is expected that more landlords will have to follow these price reductions to remain competitive, leading to a negative price spiral and a drastic deterioration in property profitability.
These challenges come at a time when Budapest will host fewer high-profile events that attract tourists, making it all the more concerning. Formula 1 is considered to be a high season for advance bookings, and there are already bookings for the upcoming Coldplay concert in Budapest.
The outlook for the Budapest Airbnb market may be daunting, but it is clear that stakeholders need to come up with innovative solutions to sustain the sector given this new reality.
