Market brightening: Short-term accommodation in Sofia rises by at least 15%

Short-term accommodation in Sofia will become at least 15% more expensive as a result of the new European regulation, which puts an end to anonymity on apartment rental platforms. From May 20, 2026 giants such as Airbnb and Booking will be required to carry out direct and automated data exchange with the state. This change will reduce the thousands of unregistered properties that have been operating outside the law to a minimum while at the same time bringing transparency to the business and calculating the taxes due in the final prices for tourists.

Against the backdrop of the Bulgarian capital’s ambitions to finally host a Michelin star, the market is undergoing a profound transformation – from a “hobby” for individual hosts to a professional battlefield where international consortiums and local boutique companies are fighting for the new profile of the solvent guest.

This is the prediction of Zahari Milenkov and Hristiana Petkova from Rentify.bg, a company that manages this type of property in Sofia. Our team spoke with them in an attempt to understand what the effects will be for tourists, for the owners of such properties and for the sector itself.

The EU Regulation

The basis for the upcoming change is Regulation (EU) 2 024/1 028, adopted by the European Parliament and the Council in April 2024. The deadline for the two-year transition period for platforms and member states is May 20, 2026. After this date tech giants such as Airbnb and Booking will be required to have full software integration with national authorities. In Bulgaria this means a direct link between the platforms and the Unified Tourist Information System (ESTI).

Until now control over short-term rentals has been fragmented and relied on the good faith of owners or cumbersome “on-site” checks. The new regulation changes this through three key pillars:

Automated data exchange; Platforms will send monthly reports to ESTI on the number of overnight stays and guests for each registered property. It will no longer be possible to declare 5 overnight stays if Booking’s software has recorded 20.

Validation of the registration number: Each host will be required to have a unique registration number issued by the municipality.

Currently many people enter random numbers in the registration field and the platforms accept them because there is no way to verify them. After May 20, 2026 a software filter will perform automatic real-time verification. If the number is not valid the ad will be automatically deactivated,” explains Zahari Milenkov.

“Blind” ads: If a property does not meet the requirements the platforms will not delete the profile immediately but will deactivate the photos and the booking option. The ad becomes invisible to tourists until it is brought into compliance with the law.
Unlike directives, the regulation is a directly applicable act — it does not require a special vote in the Bulgarian National Assembly to enter into force. Its main purpose is to harmonize the fragmented rules in the EU and create a “single digital gateway” for data.

The city of apartments

How did this type of property become so popular and sought after? Platforms such as Airbnb and Booking certainly helped. They have not only provided a showcase for accommodation but, combined with the rise of low-cost flights over the past 15 yr, have turned Sofia into an easily accessible and attractive destination for a new type of tourist.

Airbnb and low-cost flights are the two main factors that have led to the global tourism boom, and Bulgaria, albeit with a delay, is no exception,” explains Zahari Milenkov.

The platforms offered flexibility that traditional hotels cannot achieve – the ability to rent an entire home with all the amenities in a central location at a price that is often significantly more competitive than that of a hotel room.

According to Petkova much of the success is due to the experience. While in a hotel the guest is often just “another number,” with vacation properties the personal touch is key.

As hosts we strive to create an experience – from small compliments and personalized guides to the fact that we offer breakfast in the apartment. These are details that make people come back,” she adds.

From the owners’ point of view the popularity of this model is dictated by the sustainability of the investment. Contrary to the widespread belief that short-term tenants “ruin” the properties, practice shows exactly the opposite.

Depreciation in short-term rentals is almost zero. We have apartments from 2017 in which we have not done anything because the mutual review system disciplines both parties – the guest takes care of the property to get a good rating and the host keeps it in perfect condition to stay on the market,” reveals Milenkov.

This combination of high returns and preservation of the property’s condition has turned vacation homes from a “hobby” into a preferred asset for investors looking for a secure business, not just passive income. But it is precisely this success and mass appeal that led to the point where regulations became inevitable.

The scale of this segment is most noticeable in the central part of the city: while only three large hotels operate in the ideal core of Sofia, many more vacation apartments are on offer in the same perimeter.

However this dominance also has a dark side, which becomes apparent when comparing public data on the market. While specialized market analysis platforms such as Beyond and Price Labs report over 4 300 active listings in Sofia, the official registers of the Tourism Public Enterprise show only 3 033 registered properties – a number that includes traditional hotels. This drastic discrepancy means that nearly a third of the market in the capital operates in the “gray zone.” This lack of control is not just an administrative oversight, but a massive financial loss for the city.

The price of “light”

The projected increase in the price of overnight stays in Sofia by at least 15% is not the result of speculative margin increases. These percentages represent the sum of taxes and fees that nearly one-third of the market has so far saved at the expense of the treasury.

This 15% is the minimum required to balance the market. This includes corporate tax, patent tax and all associated administrative costs, broken down by month,” explains Zahari Milenkov.

According to him the market will be cleared of “unhealthy competition” – owners who undercut prices because they do not pay a single € in taxes. When everyone starts playing by the same rules the price level will naturally level up.

To understand why legalization “weighs” 15% we need to look at the administrative fragmentation of the sector. According to Zahari Milenkov, owners are currently faced with two radically different paths, each with its own financial pitfalls.

Individuals fall into the most complex scheme. They are required to register for VAT (Article 97a) because of the services they use from foreign platforms. This is a specific registration without the right to a tax credit – the owner cannot recover VAT on the purchase of equipment but is required to pay 20% on the commission of Booking or Airbnb. Added to this is the patent tax, which varies according to the size of the property (approximately €128 for a one-bedroom apartment and up to €383 for a three-bedroom apartment per year), tourist tax and 10% income tax.

However the biggest burden for individuals is social security contributions. If you are not at the maximum social security threshold (around €2 300) you owe nearly 42% in social security contributions on your income. This makes renting as an individual almost unprofitable for small owners,” explains Milenkov.

On the other hand legal entities often choose the model of renting through a company with a lease agreement. In this case they avoid the patent tax and the social security burden on the specific income and apply the preferential VAT rate of 9% for tourism.

Milenkov illustrates the inequality between the “white” and “gray” sectors with an example of two identical apartments in the same building.

Imagine that you have invested €300 000 in an apartment in the city center and another €150 000 in its renovation and design. You are a law-abiding owner with a company, accounting and paid taxes, so your price is €150 per night. At the same time your upstairs neighbor owns the same apartment but has not registered it. Since he saves at least 25% on taxes and administrative costs, he decides to undercut the market and set a price of €115,” says Milenkov.

The result is predictable: the illegal apartment will be 100% occupied while the legitimate owner will lose customers because of the artificially low price of the competition. It is precisely this market absurdity that is expected to disappear after May 2026.

For many owners, “coming clean” may prove to be a painful process, not because of future taxes, but because of past omissions. The entry into force of the regulation may motivate the National Revenue Agency to conduct audits for the past period.

Tax audits generally go back five years and check all related parties,” warns Milenkov.

This prospect is already deterring some owners, who prefer to exit the market or transfer management to professional firms rather than risk a large-scale audit.

Short-term versus long-term rentals

Against the backdrop of all these costs the question arises as to whether it will be profitable for owners of this type of property to continue renting out their apartments on a short-term basis. Milenkov explains that if an apartment in the center of Sofia generates €1 000 in monthly revenue, the net profit for the owner varies depending on the management model. If they take care of everything themselves, they can keep 60 – 80% of the amount, but this requires enormous personal resources – 24/7 communication, laundry and physical cleaning, monitoring when to change prices, etc.

With professional management, after taxes, management fees (around 18%), bills (electricity, water and internet) and cleaning, the net balance is around 60%.

Short-term rentals remain 30 – 40% more profitable than long-term rentals, with this margin depending directly on the location and condition of the property,” says Milenkov.

With long-term rentals the owner loses flexibility and risks heavier depreciation, while with short stays the owner keeps constant control and maintenance over the property. The change in regulations and technologies effectively marks the end of the small owner who does everything themselves.

The future of the sector

While individual owners are facing an administrative shock, at the corporate level the market in Sofia is already being reshuffled. Currently there are three major management companies operating in the capital, but one of them is already owned by a large Polish consortium that controls properties throughout Eastern Europe.

The strategy of these giants is volume – they manage portfolios of 600 apartments using a purely corporate method, where the personal touch is lost. The goal is to grow large enough to be resold to an even bigger international player,” reveals Zahari Milenkov.

He adds that international consortiums have attempted to acquire Rentify.bg but the owners are betting on boutique quality and a personalized approach rather than aggressive expansion. To date the company manages 60 properties in the capital.

Although demand for vacation properties is growing it is currently almost impossible for new management companies to enter the Sofia market. Milenkov says that “the price of a night’s stay in Sofia has been almost constant for six years while inflation in the sector is over 50%.” According to him margins have shrunk dramatically and only companies with accumulated experience and optimized processes can turn a profit.

Professional rental is no longer possible without an expensive software arsenal for dynamic pricing (MegaData). These tools monitor flight occupancy, city events and competitor prices 24/7. Investment property owners no longer accept trial and error from new and inexperienced companies as the administrative risk from 2026 onwards is becoming too high.

In this new reality the future belongs to so-called “hotelization” – a model in which staying in an apartment will be an experience, not just a place to sleep. We are no longer talking about handing over keys, but about a stay that combines the comforts of home with the impeccable standards of a five-star hotel. From personalized guides and breakfast with local products to “smart” homes and 24/7 corporate support – the line between renting and hospitality is blurring. From personalized guides and breakfast with local products to “smart” homes and 24/7 corporate support – the line between rent and hospitality is blurring in favor of quality.

The effect on the giants

The change will hit the tech giants themselves hard. For Airbnb and Booking the new rules mean a direct loss of revenue as they will only be able to collect commissions from a significantly smaller number of properties.

The platforms have no interest in taking on the role of “digital police”; they are simply obliged to comply with the European Commission’s rules,” Milenkov commented.

This economic reluctance also explains the different behavior of the two leaders. Booking already took action in November, taking advantage of its local office in Bulgaria and easier traceability. Airbnb and its headquarters in Dublin will probably wait until the last possible date – May 20, 2026 – so as not to lose their 15% commission from unregulated listings until the very last moment.

Translated with DeepL.