Hotel opportunities await in Western Balkan region

The Western Balkan region is seeing some notable hotel investment from U.S., international and local companies, indicating solid opportunities to gain a foothold in a growing travel destination. 

Over the summer, Balkan Insight reported that Croatian and foreign tourism companies have been investing billions of kuna (the local currency) in the country's hotels, more than in the last decade. “The large number of new hotels opening this summer is partly a result of two years of investment in the sector...which started in 2013 with a total of €230 million to last year’s figure of almost €410 million,” tourism minister Darko Lorencin told the paper. 

Upscale hotel chains are also investing in Sarajevo, the capital of Bosnia and Herzegovina that was devastated by war in the early 1990s. Marriott chain now has two properties in the city, the Residence Inn and its most recent addition, the Marriott Courtyard. Asja Hadziefendic-Mesic, Spokeswoman of the Tourist Association of Canton Sarajevo, noted that Sarajevo has only three five-star-hotels.

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Earlier this week, InterContinental Hotels Group announced the signing of the Crowne Plaza Novi Sad in Serbia’s second-largest city. The new-build hotel will operate under a franchise agreement with Plaza AGNS DOO Novi Sad, and is the Serbian company's first hotel development with the U.S.-based operator. The 144-room hotel is slated to open in 2016 in Novi Sad's business district. 

Marriott, meanwhile, announced plans last month to open between four and five hotels in Croatia under various brands by 2020. Ivica Čačić, regional VP of development for Marriott in Eastern Europe, told Total Croatia News that the company wanted to open "at least one hotel in every capital city in the region," as well as resort destinations along the coastline. "I am trying to show investors that the costs [of joining the brand] are justified by increased revenues of individual hotels and by significant improvement of brand identity of the destination in the global market. We should not underestimate the fact that Marriott has 50 million loyal members who prefer to stay in Marriott's hotels," Čačić added.

International developers are also looking to get in on the region's action: In the spring, the Serbian government and Eagle Hills, a UAE-based private investment and real estate development company, signed a joint venture agreement to build up the Belgrade Waterfront at a total estimated cost of $3 billion. According to AlArabiya.net, the completed development will have eight hotels, one of which will be the country's first W.

Last year, Luka Kaić's Novodom company took over Podgora Hotels. Today, Total Croatia News reports that Kaić is set to start a new investment cycle in the hotel complex together with new partners—Dubravko Grgić, Emil Mihalin and Auctor company.

Novodom will remain the majority owner of Podgora Hotels, while the new co-owners will invest 14 million kuna in the company. Early next year will likely see new investments in the hotels that operate under the Menora Hotels brand. The board of directors and supervisory board propose to increase the market capitalization by issuing new shares. Their decision proposes to increase the capital by 14 million kuna.

Prior to the takeover, Kaić committed to investments reportedly worth at least 112 million kana. The paper suggests that this would be difficult to accomplish with his own funds. "Our main activity is finding investment opportunities which fit into the investment profile of our company," one of the investors told the paper. "The company manages its own assets and is continuously achieving consistently high-quality results. Given the state of the current tourist facilities which are located in Podgora, it is necessary to have capital and management support of professional investors in order for the destination to take its proper place on the Croatian tourist map."

Of course, as an emerging destination, the region has its challenges for development. In Bosnia and Herzegovina, private businesses must fight through a "complicated and lengthy business-registration procedure" that can test the patience of investors. “If someone wants to start a company, they have to go through 11 procedures that last 37 days and if one wants to get a construction permit, such as for building a hotel, they have to go through 17 procedures that last 180 days,” Hadziefendic-Mesic told Balkan Insight.

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