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 Great potential lies in hotels

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PostSubject: Great potential lies in hotels   Mon Jun 25, 2007 12:51 pm

Great potential lies in hotels


According to a report compiled by Denmark based European Construction Research, investment in hotel construction in Poland will reach c. USD 580 million in 2010. This means that during the coming 9 years investors will spend a little over USD 300 million in the Polish market. They will be encouraged by factors such as Poland’s likely admission into the European Union, a robust economy, more business travellers, rising living standards and the long term development of the road and motorway systems. Forecasts concerning tourism are also favourable. According to the World Tourism Organisation (WTO), Central-Eastern and South-East Europe will see the fastest tourism development in Europe.

Poland is a country where there are still many opportunities to invest. Existing hotels, although they are being modernised, generally don’t meet international standards. There are still not many new developments. This shortage is particularly true outside Warsaw and in economy class hotels. Seeing this, many foreign companies have entered the market in force, while others are simply monitoring the situation and limiting their plans primarily to Warsaw and other large cities such as Kraków, Poznań, the Tri-City, Wrocław, Łódź, Katowice and Szczecin.

"Western hotel chains, when they came to Poland, brought their know-how", said Krzysztof Milski, director of the Polish Hotel Association. "For example, the French are teaching us to save money. Domestic hotel managers are used to having too many customers. Now, with the 50% occupancy, they have to learn how to manage their money reasonably in order to stay in the market".

Tourist, 3-star

To a great extent the development of economy hotels will be influenced by the development of tourism. The prospects for this market, assessed by the World Tourism Organisation (WTO), look promising. According to their forecasts, proceeds from tourists will quadruple by the year 2020 making Central-Eastern and South-Eastern Europe the fastest developing region in Europe. The average number of visits to Poland in the coming 20 years is projected to increase at the rate of about 4.4 % per year.

A report prepared by Radosław Biadoń, an analyst for Bankowy Dom Maklerski PKO BP, however, says the next two years could be difficult for tourism due to a worldwide economic slowdown. The number of business trips is also expected to fall in this period. A revival ought to start around 2002-2003, related not only to an improvement in the economy, but also to the country’s approaching EU admission: "Then we will become the border of the Union and visited more often by businessmen from the East", said Krzysztof Milski.

Chances and tenders
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PostSubject: Re: Great potential lies in hotels   Mon Jun 25, 2007 12:51 pm

European Construction Research, which has been carrying out research in the Polish construction market for many years now, stresses several other issues which will influence the development of the hotel sector. These are:
• The growth of foreign investment (spurring demand for higher class hotels, which are scarce outside Warsaw).
• The growing expectations of domestic tourists concerning the quality of hotels.
• The existence of the ‘Polish diaspora’ - people of Polish origin in the USA and Western Europe. The size of this group is thought to be around 10 million people.
• The inevitable development of roads and motorways, leading to the development of a motel network.

In its report "Hotel Construction", ECR also lists threats to the market, which include:
• The discouragement and loss of customers caused by low quality services
• Relatively low living standards in Poland (70% of Poles say they don’t have money for a holiday, or prefer to spend their money on something else),
• Competition from foreign tourist resorts. Compared to them, Polish hotels are often more expensive but offer a lower standard.
• The fact that foreigners employed in Poland are moving from hotels to flats.
• The slow pace of road and motorway construction.

Poorly researched market

The Polish hotel market is not among the most well-researched sectors. The most recent statistics, compiled by the Central Statistical Office (GUS), concerning numbers of hotels and rooms, and their standard, were published in 1999. While waiting for the figures to be updated, interested parties have to get information from hotel chain operators individually, who are usually unwilling to go into their plans in detail for fear of the competition.

In 1999 there were 906 hotels (48,100 rooms) in Poland, of which the biggest number were three-star hotels (331). 2nd place was taken by the lowest, one-star, standard (276). There were 263 two-star hotels but a lot fewer 4-star hotels. The Marriott was the only 5-star hotel.

According to the data, the largest number of hotels was located in the following districts: Śląskie (113), Dolnośląskie (97) and Pomorskie (76). Mazowieckie (in which Warsaw is located) was 7th with 67 hotels, but was the leader in terms of the number of high class hotels (4 and 5-star).

Data concerning annual percentage occupancy of rooms is illuminating. According to these numbers, rooms in 4 or 5-star hotels were most frequently used. Accommodation in the 1-star hotels was the least popular.

Warsaw for prestige

According to Jones Lang LaSalle Hotels, which recently published its report "Digest Europe", the annual rent index of high class hotels in Warsaw fell in 2000 by 3,8 % to 62 %. Arthur de Haast, managing director of JLLH, says that the greatest demand for rooms comes from businessmen, meaning that the majority of customers stay at hotels from Monday to Friday, with the number decreasing at weekends.

Both as a result of this and because of growing competition, average room prices fell from a high of USD 158,86 in 1999 to USD 151,22 last year.

Rising supply in the Warsaw hotel market is caused by the increasing importance of Warsaw as the "gate-city" in this part of Europe. 1,225 hotel rooms are currently under construction, due be completed by 2003, which will increase supply by around 16,8 %. In the long run, another 1,360 rooms is the figure being mentioned, which will increase supply by a further 19,7 %. To catch up with Prague, the fastest growing capital in Europe in this respect where only last year the number of rooms increased by 28,3 %, will take a long time however.

"Plans to construct expensive hotels in Warsaw at the moment are often as much about the prestige of a Warsaw location as much as any other reason," claims the director of the Polish Hotel Association.

Schlossle Hotel Group. Schlossle Hotel Group policy in Poland is to adapt listed tenement houses into 5-star hotels. The company has started by purchasing a baroque building at the Stary Rynek in Kraków and plans to spend approximately USD 8,5 million on its renovation. The hotel, which will open in August next year, will have 74 rooms. Paul Oberschneider, Director of Schlossle Hotel Group, says that at present the company is looking for an appropriate location in Warsaw, but it is difficult to find a suitable 3,500 - 4,000 sqm building in the Old Town.

"We focus on cities important from a historical and cultural point of view", said Oberschneider. "Within 3 years we want to open three more hotels under our name"

Hotel 500. The company Hotel 500, associated with the well-known Polish developer, JW Construction, builds economy hotels described by Anna Tomaszewska, Product Manager, as two-star hotels of enhanced standard.

Right now the company is managing hotels in Tarnowo Podgórne, Strykowo (near Łódź) and in Zegrze. The firm claims to be preparing to construct three hotels (2,000 rooms) in the Królewski Port Żerań complex. In Kraków, Hotel 500 will have 408 rooms, and in nearby Głogoczów, 300 rooms. Further plans include Sopot, Międzyzdroje, Licheń, Częstochowa and Bielsko-Biała. The average cost of each investment will be around USD 7 million. Customers of Hotels 500 can be divided into two categories, according to the company. The minority are tourists and the majority are companies organising training and conferences.

Hyatt Hotel Regency. According to their ‘pre-opening office’, the Hyatt Hotels & Resorts chain has no plans to further develop in Poland once their 5-star hotel in Mokotów, Warsaw, is opened in September: "We are more interested in capital cities, and we think that the local market is becoming more and more crowded", according to a source in the company.

Inter Continental and Westin. In the space of a couple of months it was announced that two top-class hotels are to be built in Warsaw. Bass Hotels & Resorts will build a 400-room, 150-metre high Inter Continental hotel on Emilii Plater at a cost of EUR 110 million, and Swedish consortium Skanska has signed Starwood Hotels & Resorts to operate their 22-storey hotel in the Atrium development on Aleje Jana Pawła II in Warsaw. The 366-room investment, part of Starwood’s Westin chain, will cost around PLN 275 (USD 70) million and is expecting to receive its first guests in spring 2003.

Best Western International. The Best Western hotel chain in Poland co-operates with a company named Prima. Their only hotel here, the 3-star Best Western Hotel Prima, was opened in Wrocław in 1999. At the end of this year the company will open another hotel, in ¸ódź, with 200 rooms. According to Prima, sites for future investments have been secured in Gliwice and Poznań. Construction at the two sites could start as early as next year.

Qubus. The Norwegian chain is making its presence felt in the Polish market. At present it has hotels in Gorzów Wielkopolski, Zielona Góra, Legnica, Głogów, Złotoryja and Wałbrzych, and plans to invest around PLN 70-80 (USD 17.5 - 20) million in Kraków and the same in Warsaw. Qubus hotels in Łódź and Poznań will be built in two years time. "From the beginning we have focused on cities with over 100,000 inhabitants", said Bogdan Paszkowski, President. "We have always concentrated first and foremost on businesspeople and sales representatives travelling around the country. One can also earn on tourists but their visits are seasonal. Accommodation for business people is still insufficient".

Envergure Hotels. According to Magda Fałczyńska, a spokesperson for French group Envergure, the company had watched the Accor group carefully before it too decided to enter the Polish hotel market. The results of these observations must have been encouraging because today the Campanile chain has 2-star hotels in Katowice (80 rooms) and in Kraków (106 rooms). The company has already announced that hotels in Szczecin (85 rooms) and Wrocław (100 rooms) will be opening soon. "We have a plot in the centre of Warsaw, where we are planning to build a complex of three hotels, the 1-star Premiere Classe, the 2-star Campanile and the 3-star Bleu Marine", revealed Magda Fałczyńska. "During the coming 5 years we plan to open in Poznań, Gdańsk, Lublin, Częstochowa and Opole".

Radisson-SAS. For Radisson-SAS, Poland is the most important country in this region. Its one 369-room 1-star hotel is open in Szczecin, and construction at its Grzybowska site in Warsaw is close to completion. The company is already aiming to build in more cities, starting with Kraków (200 rooms) and Wrocław (170 rooms), where it has already purchased sites.

"Poland is the fastest developing country", is how Arild Hovland from the headquarters of Radisson-SAS described the country from his company’s viewpoint. "Apart from Warsaw there are at least 10 other cities worth investing in. The Czech Republic and Hungary are ‘one city’ countries, where only Prague and Budapest are important in the hotel market".

Jurys Doyle Hotels "We are continuing to research the Polish market and trying to understand how it works", said Niall Geoghegan from Irish operator Jurys Doyle Hotel Group. "Right now we are considering an investment in Warsaw, probably an economy class hotel. However, we are also looking at cities of over 250,000 inhabitants".

Dorint. Wrocław is the first Polish city with a 4-star hotel belonging to German chain Dorint. As Małgorzata Domańska explained, this is because it’s one of the best known cities in Poland. The company decided to rent a building from Financial Invest Group, who built it for c. DM 40 million. Within the coming 2-3 years Dorint plans to open 4 - 5 new hotels in Polish ‘business’ cities such as Katowice, Kraków, Poznań, Warsaw and Gdańsk. According to the company’s policy, hotel buildings will be leased from investors, whose construction will cost in the region of DM 300 million.

Global Hotels Development Group. GHDG was one of the earliest foreign hotel companies in Poland. Based on an agreement with Bass Hotels & Resorts, the company manages and invests in Holiday Inn hotels. The company has announced plans to open 20 Holiday Inn hotels in Poland within 10 years at a total estimated cost of around USD 700 million. For the time being the company has two hotels in Gdańsk and Wrocław, and is finishing a project in Kraków. It will also construct a hotel at Okęcie airport in Warsaw. As well as this, the group has announced plans to construct a network of economy class hotels under the name of Express by Holiday Inn. The first two are scheduled to open at the end of May / beginning of June next year in Kraków (180 rooms) and Warsaw (70 rooms). In the future, further hotels will be built in Warsaw (a second one), Katowice, Poznań, Łódź and Kraków (a second one). The construction cost of one Express by Holiday Inn hotel is c. USD 5-7 million.

Orbis & Accor The development of a network of economy hotels was announced some time ago by Orbis. The project was to be closely linked to motorway construction but due to its slow progress their plans have also been delayed. 20 % of shares in Orbis are owned by the French chain Accor, which currently has 12 hotels in Poland, including 5 Ibis, 2 Mercure and 5 Novotel hotels.

In the middle of last year the French giant signed a franchise agreement with Orbis. Based on this agreement, within 4 years 29 Orbis hotels will change their name to Accor and be adjusted to Accor specifications. So far this has taken place at the Forum in Kraków and the Victoria in Warsaw. Now the hotels are called respectively Sofitel Kraków and Sofitel Victoria. Accor’s strategy in Poland is to have 46 hotels by the year 2004. New investments include Ibis hotels in Rzeszów, Białystok, Gliwice and Lublin.

Hotels waiting for operators

Foreign operators who wish to start up or develop further in Poland can choose from a number of possible projects.

Hochtief Project Development is planning to construct a 4-star hotel at Rondo ONZ in the centre of Warsaw. The building is still at the design stage.

So it can react to market conditions. Hotchief wants to build a flexible development. The building can be turned into either a hotel or hotel apartments for companies to rent for employees.

Negotiations with several operators are being conducted by ING Real Estate for a 5-star hotel in their Złote Tarasy development in downtown Warsaw. The company with which ING eventually signs will manage a 106,000 sqm project with 350 rooms.

The investor behind the office-hotel centre Eurocentrum on al. Jerozolimskie in Warsaw is also at the negotiating stage for management of their 4-star 380-room hotel.

Construction of two hotels is also planned by Tishman Speyer. The first stage of the Nowe Miasto project in Kraków foresees a 4-star 240-room hotel. In the second stage, a 3-star 300-room hotel is to be added.

"We are not thinking about negotiating with operators yet", said Katarzyna Deja of Tishman Speyer. "Right now we are preoccuppied with solving land ownership issues".

Soon possibilities to invest in Poznań and Katowice will appear on the market. According to Iwona Kamysz of Healey & Baker, the investor of Stary Browar in the capital of Wielkopolska has put aside c. 11,000 sqm for hotel space.

In Katowice, at UNI Centrum, which is under construction, (the investor Business Center 2000 is affiliated with Mostostal Zabrze), there will be 2,400 sqm hotel. The developer, like Hochtief, is considering reserving space for hotel apartments.
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