How is Poland’s rental market responding to Covid and the Ukraine war?

Poland: Mateusz Sabak, co-founder of Warsaw-based short-term rental property management company RentPlanet, explores the impact of the Covid-19 pandemic and the war in Ukraine on Poland’s short-term rental and tourism industries, as well as how the market is beginning to recover.

Pandemic as a chance for success

The freezing of the economy, lockdowns, the stay-at-home warrant and restrictions on the movement of tourists around the country caused shock and anxiety in the industry. Extremely difficult conditions forced some to capitulate and withdraw from the market, and spurred others to growth. How is it possible?

The condo- and aparthotel market in Poland continued to grow until the beginning of the pandemic in March 2020. Most of the holiday rental operators and developers offered investors attractive terms, guaranteeing a steady profit, on average at the level of seven to eight per cent. The owners of rented premises were promised a guarantee of a monthly fixed payment, regardless of the occupancy of the apartments and real rental income.

Business model verification

The pandemic has painfully exposed the deficiency of this model of settling income with property owners. In 2021, the inwestycjewkurortach.pl portal prepared a report on this subject. According to the expert of the portal, Marlena Kosiura, only a quarter of operators paid investors money on time and in the promised amount.

In many cases, operators were behind with payments, and investors reacted nervously to the lack of transfers. Tensions and frictions appeared, mitigated by renegotiating contracts and postponing payments.

According to the above-mentioned report, 32 per cent of investors agreed to the renegotiation of contracts and adopted less favourable terms of management and payment of profits. In the case of more than half of the premises [52.4 per cent], there were often significant delays in the payment of guaranteed profits.

According to Kosiura, the previously common model of fixed and guaranteed profits is now becoming a thing of the past.

The standard is a commission on revenues

The operators who, from the very beginning, focused on a clear, transparent and fair system of sharing the actual rental income with the investor did better.

In this model, in a pandemic, open communication with investors and even meticulous care for their interests turned out to be extremely important.

“We have reached all investors. We talked to everyone. Our employees visited each apartment, limited the heating to the maximum, turned off electrical appliances, and took all possible measures to reduce the cost of maintaining the premises. At the same time, taking advantage of this time, we thoroughly cleaned the apartments we managed, removed all defects and prepared them for the resumption of operations. Investors appreciated such action.”

Business process analysis

This does not mean that the commission-based companies did not have any problems. For example, RentPlanet focused on maintaining qualified staff, and the entire team agreed to a temporary reduction in salaries. At the same time, the management board carefully analysed the costs incurred at each stage of the activity.

It turned out that there are areas where costs can be significantly reduced. Decisions were made to significantly increase the use of modern technologies in the booking and guest service system, including the implementation of RentingLock electronic locks or SmartHotel as a tool to optimise check-in and communication with guests.

Take advantage of development opportunities
The pandemic disturbance of the short-term rental market, the bankruptcy of some operators, the lack of mutual understanding and friction between the owners of apartments for rent and their operators, prompted many investors to look for a more trustworthy and proven operator.

“It’s hard to imagine, but only word of mouth marketing worked. Thanks to good opinions, investors contacted us. Only during the first lockdown in Poland, we acquired 120 new apartments in attractive locations. However, from 2020 until now, our portfolio has grown by 269 per cent, approaching 1000 managed apartments and flats.”

Cleanliness in the foreground

The expectations and requirements of guests regarding the standards of maintaining cleanliness and disinfection of the apartments have definitely increased. Operators are aware of this and are introducing new standards in contracts with cleaning companies. They require the use of certain cleaning agents and disinfectants. They put much more emphasis on the quality of work of cleaning companies.

Time for new technologies

Guests expect modern solutions that allow them to go through the entire booking process, check-in and settlement of stay in the apartment without physical contact with another person. Some companies still maintain traditional reception areas, however.

“Despite the great popularity of the application and the possibility of dealing with many issues online, we still see that some guests do not feel comfortable in the digital world and prefer contact with the receptionist, which also has a positive effect on the user experience.”

Poles want to travel

Poles appreciate the freedom of staying in an apartment for short-term rental. After a period of forced isolation, many think about the possibility of resting in the so-called “second house” in an attractive location. And often not only for relaxation, but also for work. The pandemic has revolutionised the approach to remote work and Poles want to use it:

  • Before Covid-19, half of RentPlanet’s guests were tourists from Western Europe, Scandinavia and even Japan. After the first wave of the pandemic, our premises were used mainly by Poles.
  • The current holiday period has shown a significant improvement in the results of short-term rental operators. At RentPlanet, we achieved a revenue increase of 102 per cent [year-on-year] in July, and, in August, by 73 per cent. Average daily rates [ADRs] increased on average by 24 per cent, while the average monthly rent paid to the owner increased by 70 per cent compared to the same period in 2019, i.e. before the Covid-19 pandemic.
The impact of war in Ukraine

Certainly, the war in Ukraine and hundreds of thousands of refugees staying in Poland have had a significant impact on the situation of the short-term rental industry. Demand increased and rental prices increased by an average of several dozen per cent [depending on the location] compared to the period before the conflict broke out in our eastern neighbours. Another change is related to the length of stay [LOS] index, showing the average length of stay in apartments, Ukrainian citizens rent apartments for an average of seven to ten days or more.

There were concerns about the reliability and payment capacity of guests from Ukraine. They turned out to be unjustified.

“The apartments we manage are equipped with intelligent electronic locks of the RentingLock brand. If our system does not record the payment for the stay, the guest will not receive the opening code. If the date of stay expires and the guest wants to stay in the apartment, the code loses its validity and the entry is impossible. At the same time, we use the SmartHotel application, which, in addition to optimising the check-in process, also allows you to freely communicate with guests in different languages, which also improves the comfort of staying in our apartments.”

Summary

The pandemic has verified business models in the short-term rental market. The model of dividing the real rental income between the apartment owner and the operator turned out to be more effective.

As the market has largely become orderly and civilised, the structure of guests is changing – more and more Poles are using apartments for rent, and the so-called “second home” becomes the target of many of them.

At the same time, the standards of maintaining cleanliness in apartments have increased. Modern technologies, which allow you to book and stay without physical contact with other people, have gained more importance.

The increase in rental prices in recent months, caused in the first phase by high internal demand and in the second phase by the influx of guests from Ukraine, allows the industry to be moderately optimistic.

As the length of stay indicator has increased – the duration of booked stays has increased to seven to ten days on average, the booking window indicator has been significantly shortened.

After the complete lifting of Covid restrictions, we observe a clear tendency of Poles to get out of the house and an increased influx of guests from Ukraine and Western Europe, ensuring apartment occupancy in large cities even after the holiday season.

2022 was a shock for the industry and it is now finding itself in a new reality.

 

Mateusz Sabak is co-founder of RentPlanet, a Warsaw-based property management company operating over 1000 apartments in Poland.