Investment strength in Central Europe’s capitals now seeping into peripheral markets

The first Radisson Red in Central Europe will open in Krakow in 2019.

According to the latest stats from Cushman & Wakefield, there were more than €350 million of hotel transactions in Poland in the first half of the year, with 16 deals completed. In comparison, there were just €4 million worth of deals during the same period in 2016. 

It isn't just Poland's hospitality sector that's thriving. The wider central and Eastern European area is catching developers' eyes, and observers are anticipating an influx of international capital, while demand for hotel beds will be driven by both the leisure and corporate markets. 

For the total CEE region, Cushman & Wakefield described an 11-percent rise in volume to €700 million. 

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“Increasing interest in the region by both local and international investors was particularly visible in the CEE tourism and hospitality industry, which caught investors’ attention by generating strong income returns,” David Nath, head of CEE Hospitality, Cushman & Wakefield, said.

“This has been of great importance in initiating a virtuous circle of investments, which had a positive impact on initial yields in the past few years, particularly in capital cities, such as Budapest, Prague and Warsaw. Regional cities are now starting to benefit from the positive cascade effect and we see interest in these markets growing.”

“There is no doubt that so far this year Poland has been the top-performing country in the CEE region both in terms of investment volume and number of transactions,” Maria Zielińska, senior hospitality advisor, Cushman & Wakefield, Poland, said. “With the hotel industry continuing to perform strongly, generating high-income returns, the appetite for hotel investment among both international and local investors is set to grow. The investors are eyeing well-located internationally branded hotel products.”

Cushman & Wakefield was not the only brokerage with an eye on the region. “Tourism is booming and underpinned by strong economic indicators, the region’s hoteliers expect this positive trend to continue,” said Lukas Hochedlinger, managing director, Central & Northern Europe at Christie & Co. 
 
“Hotel investors are taking note and increasingly looking to unlock value in CEE capitals. The prospect of hotel assets with higher yields, increasing tourism demand and significant economic growth are proving to be highly attractive for a wide range of international investors. Early adopters are positioned to benefit from an upswing in these relatively immature investment markets.”

The international brands are responding. Rezidor Hotel Group has signed a deal for the first Radisson Red in the Central Europe in Krakow. The hotel is expected to open in 2019. “With an average GDP growth of 3.6 percent in 2015, Poland is an important economic player in Europe,” Henryk Gaertner, co-founder of developer GD&K Group. “The addition of Radisson Red is a key pillar in delivering our development strategy for Poland, a market where we are present with 12 hotels under the Radisson Blu and Park Inn by Radisson brands and signal our commitment to Poland, Rezidor’s focus growth market. Radisson Blu is Poland’s largest upper-upscale hotel brand, both in number of hotels and number of rooms in operation.”

Vienna House has also announced plans for a new 164-room hotel in Warsaw’s Mokotów business district, to open in the summer of 2018. Positioned as a four-star business hotel, the property is proof that the country’s image as one of the poor men of Europe is becoming rapidly outdated. 

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.

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