Golden Years for Hospitality Industry in CEE Region
Poland at Forefront of Europe
According to the latest STR Global report, in the last year in Poland, 11.2% growth was recorded in the hospitality market, which is almost twice as high as in the West. Optimism is also fuelled by the constantly growing number of tourists visiting the country. It increases the average price of accommodation (which now is PLN 282.59) and hotel occupancy of an average of 70.1%. In the face of stagnation in developed Western markets, the CEE region has become a titbit for hotel investors.
The discussion inaugurating the conference was filled with warm words towards Poland. Rupert Simoner, CEO of Vienna House, the leading Austrian hotel group, said: In comparison to other countries in the region, Poland is unique. You have as many as 6 – 7 large urban centres where we would like to be present. There are Prague, Budapest… and not much more in the Czech Republic or Hungary. Laurent Denis, Development Director Europe, Louvre Hotels Group, shared this opinion and said: In the coming years, we are planning to double our hotel portfolio in Poland. – The advantage of Poland is constanteconomic growth since 1992– adds Lucas Hochedlinger, Managing Director of Central & Northern Europe, Christie & Co.
Where and When to Invest
One of the key aspects for the success of a hotel business is choosing the right location. We consider the political risk. We do not want to put all the eggs in one basket. We want to invest in different countries, but in some places like Bulgaria, we prefer to be present only on a franchise basis. – summarises Dominik Sołtysik, Member of the Board of Orbis S.A. & Chief Investments & Development Officer Worldwide. Frederic Le Fichoux, Partner, Head of Hotel Transactions – Continental Europe at Cushman & Wakefield also draws attention to the relationship between the hotel industry and the geopolitical situation: At some point, many investors have fled Hungary, but now they are back. For investors, a stable economy is more important than the political situation.
The guests emphasised the attractiveness of Central Eastern Europe as a destination for new investments, also based on restoring bankrupt hotels to their former glory, depending on local personnel, who know local realities, and the legal stability and clarity needed to enter a specific market. It seems that in the future in Eastern Europe, there will be many western investors who are no longer able to expect big profits in their own country, adds Laurent Bonnefous, Chief Development Officer at B&B Hotels. The dynamically changing market is also a challenge for general contractors. Wioletta Fabrycka, Client Relations Manager at RD bud, asked about the near future: The market will change dramatically. I am curiously looking at, for example, modular hotels, which have already started in Poland.
Participants in the thematic sessions emphasised that even in the most favourable market conditions, they had to prepare themselves for the investment: If we are thinking of building a hotel, we must consult it at an early phase, know when to go to bank, which bank to go etc. – advised Head of CEE Hospitality at Cushman & Wakefield, David Nath.A lively discussion accompanied a part of the conference on funding hotel investments. Panelists and the discussion moderator, Tomasz Ostrowski, Partner at White & Case LLP, raised the topic of growing competition in acquiring land for new investments. They pointed to the risk of increasing interest rates and wondered how to minimise it. Much attention was paid to the conditions imposed by banks on financing hotel investments, which are still considered risky.
In the debate on cities, representatives of local governments, and tourist and hotel organisations from Poland and Lithuania met. Marcin Chmielecki, Head of Development and Investor Support Division,Gdynia, presented a new strategy for the city’s development by 2030, emphasising business tourism: We want Gdynia to become a tourist destination not only during the holiday season, he said. Panelists also discussed risks of too frequent VAT increases and benefits of introducing the so-called tourist tax, i.e. a tax charged on each hotel night. In their opinion, a solution successfully used in most European countries would help to revive indigenous tourism, which remains under-invested.
The second day of the conference was dominated by the discussion of the latest trends and challenges facing the industry. During the Chain Session, representatives of hotel groups conducting different development policies exchanged views on the nearest future. We want to develop our portfolio of budget, three-star hotels that seem to be our safest investment, said Adam Konieczny, Development Director for Eastern Europe at the Louvre Hotels Group. Similarly, the Development Project Manager of the French B&B Hotels chain, Małgorzata Łagodzińska commented: I see more and more cities that need good quality hotel services at a good price, and we are going to fill this gap. Magdalena Sekutowska, Director of Development for Eastern Europe at Hilton Worldwide, said: In big cities like Warsaw, Budapest, or Prague, it is important to launch lifestyle brands. It seems that our market is mature enough to be in this segment. – We are going to open Radisson Red with a full range of services and great decor in Cracow soon. Hotels in this segment will also appear in Warsaw and Gdansk. – said Valerie Schuermans, Senior Director Business Development at The Rezidor Hotel Group revealing plans of her company.
Frank Reul, Head of Development of Orbis & AccorHotels Group Eastern Europe, focuses on new locations away from large urban centres: I predict that new luxury hotels in coastal and mountain resorts will be built in Poland, Croatia, and Montenegro. On the occasion of discussing new investments, the subject of contracts preferred by investors was raised: We see a strong increase in interest in lease agreements, said Maria Zielińska, Senior Hospitality Advisor in the Polish branch of Cushman & Wakefield.
Closer to Needs and Emotions
The Newcomers session launched a series of case studies of Western investors. In addition to typical hotel facilities, there was a place for hybrid solutions that combined office, home, and community functions. The common subject of speeches was the progressive attention to design and individual expectations of visitors. The hotel industry departs from selling a product itself and starts selling emotions, said Zofia Kubit of Hotel Gateway Consultants.
The participants of the session devoted to architecture and design, which, in the face of intense competition in the hotel market, is gaining additional importance, shared the same view. For small networks, like ours, it is much easier to focus on the quality of interior finishing than for large players- said Tomasz Piórkowski, regional director at Vienna House. Even a stronger need to differentiate itself from the competition was emphasised by the Director of Strategy, Synergy & Procurement Orbis & AccorHotels Eastern Europe, Romain Perrot: In our network, we start designing from scratch. We look for a common concept for guests. We often ask specialists and researchers what the future will be. Tomasz Wuczyński, CEO of the Plus Group Architects, highlighted risks related to not adapting to the needs of the market: A hotel, which wants to be competitive, cannot forget that trends change, and the concept of design is constantly evolving.