EASTERN EUROPE
REALISING POTENTIAL
Global uncertainty is having a particular impact in Eastern Europe – but investment is showing this part of the world is rising to the challenge
WHEN THE CREDIT CRUNCH HIT, hotel investors retrenched to the familiarity of Western Europe and key markets. Since then, some Eastern European destinations are gaining traction, but it’s not an easy journey. “We are seeing interest in Warsaw,
Prague, Budapest… the more mature gateway cities,” says Sophie Perret, director of hotel consultancy HVS. “Investors feel there is value to be had there and less risk.” But she adds: “We have seen interest and appetite, but not much activity.” The migrant crisis may also have politi-
cal repercussions, as is evidenced by the recent election in Austria, where an extreme right-wing party missed victory by a hair’s breadth. “The East European markets have aspirations to become more integrated, but they if became more anti-EU, there could be a different dynamic,” adds Perret. The barometric progression of the Russian rouble – which has swung wildly between R40 and R100 to the euro, settling (for the moment) at around R73 – has also had a wider spin-off, with instability and rising prices deterring investors in Russia. Meanwhile Russians are travelling to
former Soviet Bloc countries, where in most they don’t need a visa, says Rezidor Hotel Group regional vice-president David Jenkins. “We have hotels in all these places, so it’s very stimulating for business.”
UPBEAT OUTLOOK
Accorhotels gives an upbeat outlook: “The economic conditions in Eastern Europe are positive and we are reporting robust growth in all our markets – with RevPAR [revenue per available room] up 10.6 per cent in 2015 over the previous year,” says Gilles Clavie, CEO of Orbis Group, business partner of Accorhotels in Eastern Europe. “If you look at Warsaw, Gdansk, Buda- pest or Prague, it becomes clearer every day that Eastern countries offer more value for money but also high level MICE [meetings, incentives, conventions and exhibitions] services. There is an immense undiscovered incentive potential.” And according to the HVS 2016 European
Hotel Valuation Index (HVI): “We note that 2015 was a particularly good year for the Eastern European market, which was able to bounce back from declining values in
2014 to reach a 5 per cent increase in room values and match the European average for the year.” Many Eastern European countries are
heavily influenced by their Western neigh- bours. “Germany has a lot of influence in Poland and the Czech Republic, as has Austria; and the Scandinavian countries in the Baltics,” says industry consultant Melvin Gold. Scandinavian companies are relocat- ing to the Baltics for cheaper payrolls, lower rent and the well-educated population. The hotel scene in Eastern Europe is still
largely populated by core brands and the majority of the pipeline is in the midscale segments, with 24 per cent occupied by upper-midscale and 8 per cent midscale, according to hotel data analyst STR. This leaves great opportunities for budget hotels and lifestyle brands.
Above: Warsaw, Poland Main picture: Prague, Czech Republic
RUSSIA After Russia annexed Crimea, ensuing European Union sanctions left Russian
82 BBT JULY/AUGUST 2016
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