While some cities throughout Europe are evergreen in terms of traveler demand and hotelier interest, others are gaining ground as the region begins shifting toward branded properties and away from independent hotels.
The biggest buzz around emerging markets is focused on a particular country. “Many hotel chains are highlighting Poland as an area of opportunity,” said Michael Grove, director of hotel intelligence and customer solutions at HotStats. “Supply growth has been incredible for the last four or five years. They see it as an exciting area for growth.”
Primarily, Grove said, companies are looking to target business travelers in larger cities like Krakow, Warsaw and Gdansk. Wroclaw also has seen some notable supply growth, he added, and the city’s pipeline is strong.
“The Polish economy has been growing and supply has really rocketed over recent years, as has demand,” said Thomas Emanuel, director at data and analytics company STR. “We've seen a significant increase in demand over recent years, so the pipeline is still aggressive there.” Emanuel cited development in the Tricity area, which consists of three Pomeranian cities: Gdańsk, Gdynia and Sopot. As of November, he said, supply in the area had grown 6.4 percent while demand had grown 6.5 percent. “That's off the back of similar increases in the past couple of years,” Emanuel added.
As of December, STR calculated Poland had 1,010 hotels open, 19 of which opened “recently,” and a further 81 hotels in various stages of development across the country. “It’s not a huge leisure destination,” Grove said, adding a lot of the inbound corporate business for Polish hotels comes from other Central and Eastern European (CEE) markets. “There’s a lot of travel from Germany and other Eastern European countries,” he said. “It’s not a big international destination.”
According to an October report from Cushman & Wakefield, Warsaw alone had 6 million overnight stays in 2017.
“This would be probably, a further example of the global brands really looking to expand their portfolio offerings and to go to cities that they may not have otherwise been in,” said Bruce Ford, SVP and director of global business development at Lodging Econometrics. Hilton and IHG are “leading the pack” in terms of development throughout Poland, he added, with “a number” of Hilton Garden Inns in Poland’s pipeline. Marriott has several projects with an Autograph and an AC coming up, he said, “but I'm not seeing nearly as many as I do of the Hilton select service, the Accor select service and the IHG select service.”
See CEE Grow
Beyond Poland, other countries in the CEE region are attracting attention. “There’s been a huge amount of attraction in Georgia over recent years, certainly from a gaming perspective but also from a business and a leisure perspective as well,” Emanuel said, noting the numbers might belie that attraction: Occupancy declined in Tbilisi last year and rates were flat. “But that's really a supply-driven decline because supply was up 10 percent in Tbilisi in November 2018 year-to-date,” he said.
At the same time, demand was up nearly 5 percent. Developers have already started building: Tbilisi got a Moxy in June and the city’s pipeline includes a Radisson Red, slated to open in late 2020.
Emanuel also sees good things for Belgrade, Serbia, which also suffered an occupancy decline last year. “But again, that was supply-driven,” he said. “It's really seen an influx of internationally branded hotels over recent years and a big increase in airlift as well, not just from the low-cost carriers but also from some of the legacy carriers.”
Similarly, Emanuel has heard insiders express interest in Albania and Bosnia, both of which have little in the way of branded hotels. “It is sort of the most untapped market in Europe,” he said of Albania’s prospects for development.
Some emerging destinations may be better described as re-emerging. “Moscow, I think, is emerging a little bit on the back of the World Cup,” Emanuel said. “And you can say that for the wider Russian Federation as well because the World Cup was such a success.” During the year, RevPAR in existing Moscow hotels was up 48 percent year-over-year, all driven by average rate, he said.
Years after terror attacks caused travelers to cancel their trips to Paris and Brussels, the two destinations are recovering, and Grove expects both will see significant demand growth over the next two to three years. “There has been very limited supply growth in those two cities in particular,” he said. “The economy continues to grow and the impact of Brexit may mean those two cities thrive from business being relocated.”
And while Germany has Europe’s largest pipeline at 272 hotels and 51,531 guestrooms, Ford noted major cities like Frankfurt, Hamburg and Berlin make up only a portion of that, with 28, 27 and 22 properties, respectively. The rest are going to smaller markets like Baden-Württemberg, with 25 projects in various stages of development, including a Hilton Garden Inn, and NH Hotel, a Niu and several Ibis-brand hotels. “We are definitely seeing a high rate of branded assets, particularly in the lower end of the market,” Ford said of the region’s pipeline. “The branded [sic] revolution is coming to Europe.”