5 reasons behind Eastern Europe's hotel growth and how brands are taking advantage

Eastern Europe got quite a bit of love from branded hotels this summer, with deals signed for a range of countries (Poland, in particular).

So what makes the region so attractive for investors and developers? In short, numbers. And while Western Europe may have the most visited countries in the continent, Eastern Europe saw the fastest growth last year. Here, then, are five reasons why Eastern Europe is getting notice. 

1. Visitor numbers. Figures from the World Economic Forum show that Romania, Slovakia and the Czech Republic have seen the biggest rise in tourist numbers with a more than 10-percent increase in visitors since 20142

2. Funding. The Balkans have benefited from European Union funding for regional projects. To foster cooperation between different regions. Priority areas of funding include a project for promoting tourism in the Lower Danube Region shared by Romania and Bulgaria 

3. The British. According to the Office for National Statistics, since 2011, the number of visits made by British travelers to Romania has increased by 150 percent, with British tourists spending £243 million in Romania last year alone 

4. Value-for-dollar (or pound, or euro). The top source market for the Balkan regions are mainly neighboring countries Hungary and Germany, but new growth in other source markets include British and Russian tourists seeking a cheap beach alternatives to Egypt and Tunisia 

5. Love of brands. There is a strong appetite for branded properties across the region and hotels are viewed as a viable asset class, attracting external investment and local government support for development.

Brands Move In

In the past few months, several global brands have announced plans to expand their footprints in the region. InterContinental Hotels Group, for example, just announced plans to open four new hotels, with a further 46 confirmed for the pipeline.

The new hotels are the Hotel Indigo Krakow – Old Town, Poland (pictured above); Holiday Inn Dabrowa Gornicza, Poland; Staybridge Suites Baku, Azerbaijan; and the Holiday Inn Plovdiv, Bulgaria. A Holiday Inn in Gdansk's city center was announced last month. 

These are in addition to a rapidly growing presence in the region. As announced earlier, the Hotel Indigo Krakow - Florian Gate will mark the brand’s debut in Poland, and is due to open later this year under a franchise agreement with Hotel Filipa 18 and SAO Investments. In Armenia, IHG will open the Crowne Plaza Yerevan Armenia following last year's signing of the first Holiday Inn and Holiday Inn Express in Yerevan. Opening in 2018, the hotel will operate under a management agreement with Hotel SR LLC. 

“The success of our strategy in Eastern Europe has been fueled by growing domestic travel, tourism from visa-free countries including China, South Korea, India; as well as sustainable level of demand from our customers in Western Europe," Robert Shepherd, CDO for Europe at IHG, said in a statement. "Our outlook for the region is long-term. We are acting in order to ensure we provide options from across our brand portfolio to meet the demand from a range of consumer needs.”

IHG is already represented in the region with its InterContinental Hotels and Resorts, Crowne Plaza, Holiday Inn, Holiday Inn Express, Hotel Indigo and Staybridge Suites brands.

Hilton Worldwide, meanwhile, has 23 properties operating or under development throughout Poland. Phil Cordell, global head, focused service and Hampton by Hilton brand management at Hilton Worldwide, noted that in less than a decade since Hilton made its Polish debut, the company has reached more than 100 hotels open or planned. 

The company is planning to grow its Hampton brand in Poland, with two new properties slated to open in Gdansk and Lublin next year. "The travel and tourism industry is one of the fastest growing contributors to Poland's economy, and is forecast to generate nearly $5 billion per year by 2025," Patrick Fitzgibbon, SVP, development, EMEA, Hilton Worldwide said in a statement. "Hilton's focused service portfolio in Central Europe continues to play a key role in attracting international visitors to its historic cities."

Why Poland?

Over the summer, a report from Christie & Co. found that Poland’s hotel market has seen continuous growth over the last several years.

“Poland’s hotel investment market may still be in its infancy, but there are many reasons why investors are convinced of the country’s potential,” said Adam Konieczny, country head for Poland at Christie & Co. “Investment opportunities arise from both the positive development of tourism in Poland’s key cities, the improvement of transport infrastructure as well as the country’s increased significance as a MICE and business location.

“In general, all kinds of hotels in Poland–from budget to luxury–are in demand. For those looking to allocate capital in an emerging market, where they do not face the level of yield compression they do in Western European key cities, Poland’s hotel market provides an excellent opportunity.”