Poland's hospitality market has been booming recently and has even outpaced Western Europe. The country recorded 11.2-percent growth in 2016, almost twice as high as that of the West.
Due to rising visitor numbers to the country, hotel performance is improving, with average accommodation rates, which are at PLN282.59, and hotel occupancy, which is at 70.1 percent, increasing. With the help of Poland, the CEE region is becoming a target destination for hotel investors as developed Western markets grow stagnant. Poland also offers the advantage of steady economic growth since 1992, which is highly attractive to hotel investors. During this year's Spotlight Hotel Investment Poland & CEE, Rupert Simoner, CEO of Vienna House, said, "In comparison to other countries in the region, Poland is unique. You have as many as 6 to 7 large urban centers where we would like to be present. There are Prague, Budapest… and not much more in the Czech Republic or Hungary." Louvre Hotels Group is also planning to capitalize on these appealing factors by doubling its hotel portfolio in Poland.
Selecting a Location
According to the hotel companies attending the conference, choosing the right location is one key to success in the hotel industry. "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," Dominik Sołtysik, member of the Board of Orbis S.A. & CIDO Worldwide, explained. Frederic Le Fichoux, partner, head of hotel transactions, Continental Europe at Cushman & Wakefield, also highlighted the connection between the hotel industry and the current 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."
Developers are especially attracted to Central Eastern Europe as a destination for new investments, as there is an increased draw to restore bankrupt hotels. However, these investments depend particularly on local personnel, who are aware of the local issues and the legal stability and clarity necessary for entering a 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," Laurent Bonnefous, CDO at B&B Hotels, stated.
General contractors must also face a dynamically changing market in Poland. Wioletta Fabrycka, CRM at RD bud, questioned what the near future of the industry will look like, "The market will change dramatically. I am curiously looking at, for example, modular hotels, which have already started in Poland."
Facing hotel investment funding's worsening issues
Panelists at the conference explained that investors must prepare for the investment, even in the most favorable market conditions. "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.," David Nath, head of CEE Hospitality at Cushman & Wakefield, stated. Panelists and the discussion moderator, Tomasz Ostrowski, partner at White & Case, discussed growing competition in acquiring land for new investments and how to minimize growing interest rates. Participants focused on the conditions banks imposed on funding hotel investments, which is still considered risky by the industry.
Devising New Local Strategies
Marcin Chmielecki, head of development and investor support division, Gdynia, revealed a new strategy for the city’s development by 2030. Chmielecki remained focused on business tourism. "We want Gdynia to become a tourist destination, not only during the holiday season," he explained. The panelists for this discussion spoke of the risks of raising the VAT too frequently while promoting the benefits of introducing a tourist tax, which would be charged on each hotel night. According to the panelists, a solution that has proven successful in most European countries would help restore indigenous tourism, which has not seen much investment at the moment.
The Future of CEE's Hotel Industry
The latest hotel industry trends and challenges were the main topics of the second conference day. Hotel group representatives of companies with contrasting development strategies shared their perspectives on the near future. "We want to develop our portfolio of budget, three-star hotels that seem to be our safest investment," Adam Konieczny, director of development for Eastern Europe at the Louvre Hotels Group, said. Małgorzata Łagodzińska, DPM of the French B&B Hotels chain, explained that her company is also aiming to service a growing market demand and shortage. She said, "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 discussed the lack of lifestyle brands. She explained, "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." Meanwhile, Valerie Schuermans, SD of business development at The Rezidor Hotel Group, revealed her company’s expansion strategy for Poland. "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," she explained.
The groups continued the discussion of new investments with a focus on contracts preferred by investors. "We see a strong increase in interest in lease agreements," Maria Zielińska, senior hospitality adviser in the Polish branch of Cushman & Wakefield, stated.
Working to Meet Visitor Needs and Emotions
In the Newcomers session, a series of case studies of Western investors were presented. Western investment has experienced a growing interest in hybrid solutions with combined office, home and community functions. Many of the speeches focused on the growing attention to hotel design and visitors' individual expectations. "The hotel industry departs from selling a product itself and starts selling emotions," Zofia Kubit of Hotel Gateway Consultants explained.
Participants of the architecture and design session agreed with Kubit's perspective. "For small networks, like ours, it is much easier to focus on the quality of interior finishing than for large players," Tomasz Piórkowski, RD at Vienna House, said. According to Romain Perrot, director of strategy, synergy & procurement Orbis & AccorHotels Eastern Europe, smaller local markets have an even stronger need to stand out the competitive market. He explained, "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, stated that there are many 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," Wuczyński explained.