What’s driving hotel investment in Bulgaria

InterContinental Hotels Group has opened Bulgaria's first InterContinental Hotels & Resorts property in the capital city of Sofia. 
InterContinental Bulgaria. Photo credit: InterContinental Hotels Group

Marriott International is on track to have the tallest hotel in Sofia, Bulgaria, under its eponymous brand when the property opens in 2020. The site will be the first for the company in the capital, and comes as the country’s profile as a holiday destination is in the ascendancy and the government works to upgrade the room stock. 

Last month, Black Sea Trade and Development Bank and Bulgaria’s Postbank (a unit of Greece’s Eurobank) lent €58.3 million to I Tower Development to build the 232-room hotel. 

“Our strategy typically in a country is to start with the capital, with the Marriott brand, which is our core brand,” Paul Rosenberg, director of international hotel development at Marriott International, told local press at the loan-signing ceremony. “I think the presence in that location helps us to then support other locations in the country. We’d be happy to look into opportunities in Plovdiv, on the seaside—in Varna, Bansko—in the mountains.”

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Marriott is not alone. While announcing its first-half results, TUI Group reported a “sound increase” in bookings for the coming summer season in the country. Last year, TUI launched a number of direct flights from France after a nine-year break, to compensate for a drop in demand from Turkey. This summer, the group’s openings will include Riu Astoria, a 500-room all-inclusive beachfront hotel. 

And just last week, InterContinental Hotels Group opened Bulgaria's first InterContinental Hotels & Resorts-branded property in Sofia. 

Growing Stock

The agreement came as the government amended its tourism act, hoping to raise the quality of the room stock in the country. “There is a change in the regulation on categorization and re-categorization of accommodation and meals,” Minister of Tourism Nikolina Angelkova said. “Overall, the direction is to ease the regime and increase the requirements to the higher category of establishments.”

At the G20 meeting on tourism ministers meeting in Buenos Aires last month, Angelkova said that in addition to adding more internationally recognized stock, extending the tourism season was an important priority for the country. “We have launched eight cultural and historical destinations, and now we are about to complete the 12 wine-culinary and eight spa destinations, which aim to attract more visitors during the off-peak season.” 

There has, so far, been some success. Total revenue from tourist overnights spent in Bulgaria rose by 12.9 percent year-on-year to €23 million in March, according to the country’s National Statistical Institute. Revenues from overnights spent by foreign nationals increased by 12.5 percent year-on-year in March, while revenues from Bulgarian tourists grew by 13.2 percent. The number of tourist overnights spent in Bulgaria rose 6.4 percent on the year to 832,900 for the month.

The largest increase in the number of overnights, 9.9 percent, was registered by one- and two-star hotels which serviced 20.9 percent of the total number of overnights of international visitors and 32.4 percent of the overnights spent by Bulgarian tourists. A total of 400,400 tourists stayed in what the NSI classed as “accommodation facilities” in Bulgaria in March, up 4.8 percent year-on-year.

Behind Bulgaria’s Appeal

The country has a reputation for affordability, especially in the capital. According to HVS, Sofia's hotel market was still recovering from the setback experienced during the global financial crisis in 2008. Sofia’s hotel RevPAR dropped over 30 percent in 2008 due to decreases in both occupancy and average rates. It was not until 2014 that the city’s RevPAR started to recover, and it has done so at an average of 11 percent per year since. Even so, RevPAR levels by the end of 2017 were still some 30 percent below those achieved in 2007, in nominal terms.

The company said that the positive market trend experienced over the past few years, combined with the improved reputation and level of visitation to the country, had renewed interest in the city from hotel investors. This has led to a high level of new supply entering the market, with the room stock expected to grow 6 percent by 2019. 

The country is trying to sell itself as both a business and leisure destination, marketing its cities, beaches and mountains. But those looking for rate may find themselves playing the long game. 

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

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