(AG Real estate) Hotel industry situation in South East Europe

In our previous editions, in this column, we had texts regarding city markets of Bucharest, Budapest and Zagreb, which have formed clear picture of special peal estate markets of mentioned countries. This time, with intention to give complete picture of condition and development of the hotel market in surroundings, instead of Hungarian and Budapest we are presenting Belgrade hotel capacity overview.

Well known is situation in East European countries in the beginning of transition process, in the beginning of 1990. Tourism was, except from very few exceptions, completely postponed. Almost all travels out of region were so to call forbidden, and reception of Western guests was taken to its minimum. This caused reduced and nearly completely stopped development of hotel capacities all around ex “eastern block “countries. This is main reason for appointing of free investments in this direction, in process of transition. Serbia is presently in this group as in recent history Romania was as well.

With further development of new business, new hotel capacities were required for new business tasks. Numerous hotels were constructed in Belgrade. In Croatia, country with very long sea coast, new beginning , in the process of transition was a bit easier and faster, for further d

Belgrade and Serbia

The Hotel market in Belgrade can prepare itself for a period of transition with modernization / refurbishment programmes and new developments of Hotels anticipated in the short and medium term.

Similar to alternative property sectors the market remains underdeveloped with the majority of existing stock providing standards and offer below that experienced in developed economies. Furthermore a false impression is created with the present rating system for Hotels falling below the equivalent rating systems applied internationally.

Few ‘recognized’ international operators are present within the marketplace, for example, Hyatt and Best Western are represented, therefore, great scope and a potential wide market remains available to be tapped. The recently developed In Hotel is an example that should prove to be beneficial to the supply of bed stock within the City.

We are experiencing first hand that appetite and demand is continuing to grow for well located development sites from local and international developers for stand alone, or alternatively, as part of a mixed use scheme whereby the latter development type is often ‘kick started’ by the crucial introduction and agreement with an operator. The supply of land and price are a factor at present thwarting this hunger but opportunities will continue to increase especially following privatization and restitution. Rumors are rife relating to operators entering the market but this industry is often shrouded with confidentiality making it difficult to piece together the full story.

Opportunities will exist for joint ventures, leasehold or managed contracts and growth should initially prevail from mid range offers fuelled by the strong growth in the economy, business travel, tourism and likely growth in air traffic operating to Serbia. Growth in the supply chain and offer should also be witnessed by the lower end budget operators and 5* star offer will be ‘eyeing up’ the best located positions with Boutique offers perhaps looking for something that little bit different. Once demand is satisfied and operators become established the investment market will return.

Outside of Belgrade let’s not forget the prospects and growth in the skiing industry and also the regional centers, for example, Novi Sad will present further opportunity. Overall, these are potentially exciting times for this sector so it is a question of watch this space.

Romanian and Bucharest hotel overview

Looking at the tourist allocation around the country, Bucharest and other large cities are the main destinations (48%), followed by mountain and seaside resorts. An analysis of the distribution of arrivals per each county shows that most of the tourists visited Constanta county, followed by Bucharest.

The number of foreign tourists has posted a significant increase in the last years, becoming an important source of income for companies offering tourist services. In 2005, European tourists were in majority, with most of them visiting from Italy (14%) and Germany (13%).

The main destinations were Bucharest and other county capitals; the preferred accommodation option was three-star hotels, suitable for business trips. At the end of 2005, the total number of tourism accommodation facilities in the country was 2,606 with a total capacity of over 60,000 rooms. Hotels hold by far the largest part (72%) of the total capacity.

In 2005, the largest tourism accommodation capacity was once again provided by the county of Constanta (20% of nationwide total) due to the significant concentration on the Black Sea shores, followed by Brasov county (7.7%), most sought after for recreational mountain activities. The major difference in capacity between these two traditional tourist destinations is given by seasonality. Tourist season on the seaside is limited to the summer, while in the case of the mountain areas, all seasons attract visitors. As the country continues on its path to joining the EU, backed by political and legal stability as well as sustained economic growth, we deem business travel a sector of great potential.

Over the last ten years, business travel has been the main driver of Romanian tourism, as it accounted for 60-70% of the sector's revenues. More than 10 hotels of three and four stars were built in Bucharest alone during 2005; this trend is expected to extend for two and three-star hotels. In 2005, the average occupancy of Bucharest hotels was 69%, up by 5% year-on-year and 2% higher than the European average. Market participants expect private investments of EUR 1 bn in the hotel sector over the next three years, most of it directed towards business tourism. Thus, it is expected that five new five-star hotels and six new four-star hotels will emerge in Bucharest.

It is estimated that, in Bucharest, there is room for approximately 1,100 two-star rooms (a segment not sufficiently covered at present), 600 three-star rooms, 900 four-star rooms and 1,200 five-star rooms until 2009. It is also expected that, until 2010, cities like Brasov, Constanta, Iasi, Cluj-Napoca, Timisoara, Oradea and Sibiu will have at least one four-star hotel. In conclusion, over the next 10 years, tourism revenues are forecasted to grow by an average of 7.9% per year due in part to an expected steady growth in the number of foreign visitors to Romania.

Sizeable investments grafted on a growing demand are also favourable premises for energetic development, with the Bucharest market in particular expected to draw the attention of more international hotel chains.

In terms of the competition from apart-hotel operators in the city at there is a limited stock relative to the likely demand. The Centreville and Elite Apart-hotel operation based in the centre of Bucharest off Calea Victoriei offers a high quality operation with a range of rooms and suites benefiting from amenities and a high class of fixtures and finishes. Bucharest Comfort Suites located in central Bucharest on Boulevard Magheru also operates a hotel and apartments which are available at €115/night with 10% reduction for stays of a duration greater than 10 days. The room rates vary depending on the type of room and the duration of the stay. There are a number of apartments in the older buildings that can be rented on a short term basis which typically quote prices in the region of €35-60 per night depending on location and quality of accommodation, prices being negotiable dependent on length of stay. There are few operations currently in existence that can offer the level of service and facilities required by the increasing number of business travelers staying for extended periods looking for such accommodation.

The most important chains present on the Romanian market we can name Howard Johnson and Ramada Hotels (CENDANT franchises), Marriott, Hilton - Athena Palace,

Crown Plaza and Intercontinental Chains, Best Western, Continental Chain (local), and Accor Group’s brands like Ibis and Novotel Hotels, Golden Tulip and NH Hotels.

Hotel Industry in Croatia

With more than 6,000 km of total sea side, Croatia has great potential for development of Hotel Industry. Considering total ex Yugoslavia territory, in Croatia was built large amount of hotel capacities. In Istra especially, then in central Dalmatia and in South Dalmatia, where is Dubrovnik, the centre of hotel industry today as well. Croatia is now in final phase of unification of conditions and laws which when applied and achieved will lead to EU. In same spirit development of hotel industry is as well.

This conditions we can overview in following example. Two Istrian hotels , Maistrini Hotels in Rovinj, '' Istra '' and '' Eden'' which are in association '' Special Hotels of the World'' , had to fulfill more than 305 conditions of international hotel association , to become members of it. Members of this association have to receive first invitation of ''Great Hotels'' organization which is managing association. Once when they become members, hotels can keep all its special characters, which is one of most famous characteristic of this group. On other hand , hotels are included in all marketing activities of group ( e-marketing , international conferences , distribution of brochures, public relations ), which is , according to representatives of Maistre , already resulted in way that Istrian hotels in following period will be organizing several conferences. According to projections Maistra should until 2009 have fewer beds in hotels, instead of present 34,000 it should have 32,000, but average expenditure per night should increase for 100%.

Very good example is ''Novi Resort'' Hotel. It is hotel complex with 336 luxurious apartments, which is developing in Novi Vinodolski, in '' bay-to-let'' system, while Hypo Alpe Adria Bank offers 70% mortgage credits for buyers of real estates in Novi Resort. These are one, two and three room apartments with balconies, floor heating, plasma TV systems and Internet, equipped with period furniture.

James Lloyd BSc (Hons) MRICS
Head of Agency and Investment

KING STURGE, Serbia

[email protected]

Source :

AG REAL ESTATE