we look to cooperate with well established local operators who have local market ex- pertise that we can combine with our global marketing and distribution capabilities,” says Choice Hotel’s European corporate sales director, Brian Garvan. Similarly, IHG sees a gap in the Poland and Russia markets for Holiday Inn and Holiday Inn Express, and taps into local knowledge. “The key is to speak the lan- guage. For example, in Russia, our develop- ment team is made up of Russians, who are based in Moscow and who know how to do business in Russia. We also have local resources across the region,” says IHG’s European chief development officer, Rob Shepherd.
STAND-OUT APPEAL Mature markets Warsaw, Prague and Buda- pest still stand out as having greatest appeal to investors. “Performance has recovered and there is value in those propositions because price-per-key hasn’t gone back to peak levels,” says HVS’s Perret. This is backed up by James Parsons, head of business development at STR. “They
Mature markets Warsaw, Prague and Budapest still stand out as having greatest appeal to investors
have all performed very well over the past 18 months, which is attracting the interest of investors,” he says.
Budapest has bid for the 2024 summer Olympics and Paralympics, and is hosting the Fina (swimming) World Champion- ships in 2017. “Hungary has a dynamic new minister of tourism and Budapest is focusing on upgrading from backpackers to more diversified upscale or midscale sustainable tourism,” says PWC’s Mayer. Broadened hotel infrastructure will follow. And a recent revision in the country’s Fitch rating from BBB- to BB+ suggests
its financial troubles are on the wane. “The improving financial stability pro- vides a better backdrop for investment decisions and the lower costs of financing the country’s borrowing should result in more funding being available for invest- ment into infrastructure projects that improve Hungary’s competitiveness,” says Mark Hennebry, hotels director at CP Holdings. Budapest is already a successful meetings and incentives destination, but the airport is disproportionately poorly connected com- pared to the importance of the destination. “They are working on that but it will take another two or three years. They could offer a ‘Paris experience’ at half the cost, but they need to make it easy for event organisers to bring 2,000 people from across the world,” says Mayer. In short, the potential for Eastern Europe is huge and, in some cases, is being fulfilled, but the largest uncertainty lies in “the esca- lation or deterioration of relations between the Eastern and Western blocs”, as Nicolas Mayer puts it. And one thing investors don’t like is uncertainty.˜
Baltic paradox
BECAUSE THE THREE BALTIC CAPITALS, Riga, Tallinn and Vilnius, are in the EU, cash is available and at low interest. “Hotels remain a very attractive asset class in the Baltic states,” says Rezidor’s David Jenkins.
Rezidor has 18 hotels in the
region, plus an active pipeline, and the young, well educated, tech-savvy population is
ideal for the group’s lifestyle property, Radisson Red. “Tallinn, Riga, Vilnius are targets,” Jenkins says. Hilton is also targeting
the area. “Hilton Worldwide is seeking opportunities in the Baltics to build on June’s opening of Hilton Tallinn, which will become our first property in the region,” says regional
vice-president Mike Collini. “We feel Hilton Garden Inn has particular potential as a mid- market proposition.” However, since NATO
threatened to deploy four battalions (approximately 4,000 troops) in the
Baltic countries (and Poland) – which had the Russians up in arms, literally and figuratively – these states
have been a less sure investment prospect. “When I speak to people in the Baltic region, they are truly concerned about political stability,” says PWC’s Nicolas Mayer.
But although this may deter institutional investors, who are conservative in their approach, that potential gap could still be filled by local or foreign interests.
Hotel pipelines in Eastern Europe
IN 2016 AND 2017, Marriott is opening Courtyard by Marriott Brno, Czech Republic; Marriotts in Voronezh (pictured) and Nizhny Novgorod, Russia; Moxy Tbilisi, AC Hotel Wroclaw Old Town, Poland; Krasnodar Marriott Hotel, Russia; and Renaissance Warsaw Airport, Poland. It recently announced Bulgari Moscow, Russia, 2019. By the end of 2016, Accor will have opened six Ibis properties across Poland, including an Ibis/Novotel, and an Ibis and a Pullman (separately) in Riga, Latvia. In 2017, a further eight Ibis hotels, including a joint Ibis/Novotel, will come on line in Polish cities.
Carlson Rezidor has 13 hotels in different stages of development in Eastern Europe – Radisson Blu hotels in Russia, Armenia, Georgia and Belarus; and Park Inn by Radisson hotels in Latvia, Georgia and Ukraine.
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