Stay in dorms disproportionately cheap for tourists, says watchdog

Service hotels of educational institutions, or dormitories, tend to offer beds to third parties at a disproportionately low price, the Competition Council (KP) said after market supervision February 5.

The KP launched market surveillance following several complaints about potential restrictions of competition by renting accommodation to tourists at educational institutions' dormitories. Per regulatory enactments, educational institutions may provide paid services, unless this hinders the implementation of educational programs.

The KP has concluded that almost all dorms observe the methodology specified by the Cabinet of Ministers for public institutions that the payment for the service may not exceed the costs related to the provision of the service. Thus, no amount of profit is added.

Such a situation creates a level playing field where public persons compete with private tourist accommodation for an identical service. Most dorms charge 3 to 10 euros for bed space or room per day, and only in some places exceed 20 euros or higher for increased comfort rooms with additional offers, for example, breakfast. Application of the value-added tax rate varies in local governments. Some of the hotels apply a 12% rate and some a 21% rate.

The KP believes that when pricing a paid service, prices should be set according to market principles, including profit. 

To reduce the established restrictions of competition, the KP has invited educational institutions to evaluate whether it would be possible to lease service hotels to a private market participant where it does not concern student accommodation. 

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