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The Warsaw Voice » Real Estate » May 20, 2009
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Hotels Doing Well
May 20, 2009   
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Polish cities should invest in world-class multifunction congress, conference and exhibition centers. This is the future of the hotel industry, Alex Kloszewski, a partner at Colliers International and chairman and managing director of the Warsaw Destination Alliance, tells Magdalena Fabijańczuk.

How has the global crisis impacted the hotel sector?
The international economic situation has a negative impact on the hotel industry. Last year, the occupancy rates in hotels in major European cities, such as Vienna, Paris, Madrid, Milan, Rome, London and Lisbon dropped in comparison to 2007, in October by as much as 20 percent. In Polish cities, last year was the fourth successful year in a row for the hotel industry. Although this year we expect a 2.5-4-percent decline in RevPar (Revenue per Available Room), next year the sector should rebound and record a small growth. Fewer tourists and businessmen are coming to Poland, which hits the conference sector. The number of people traveling to Poland by plane has dropped by 18 percent, compared to 27 percent globally. These figures prove that the global recession is also affecting Poland, but the changes are not dramatic.

Will the crisis affect the number of new investment projects in Poland?
I don't expect any slowdown in the development of new hotel projects over the next five years. It should be remembered that in Poland there are only 20 rooms per 10,000 residents. That is a low figure, compared to Western Europe's 200 rooms per 10,000 residents.

That is why four- and five-star hotel projects that developers launched last year are being continued. The difficulty here lies not in a lack of demand, but in the policy pursued by banks, which are demanding much larger security and downpayment.

The biggest demand is in the two- and three-star sectors. We expect that in the next several years, developers will complete 1,000-1,500 new rooms a year.

How do you assess Poland's preparations for Euro 2012? How will this event affect the hotel industry?
The Euro 2012 European soccer championships will have a very positive impact on the Polish economy, mainly due to the construction of many new roads and freeways, but the event itself will have no influence on the hotel industry. In this sector, you cannot invest big money for an event that lasts only three weeks. Building a hotel must be justifiable before and after the championships. The calculation is simple: building a three-star hotel with 100 rooms costs some 7.5 million euros, and revenue generated for such a hotel by the soccer championships will be just 150,000 euros. That is why constructing hotels just with Euro 2012 in mind would make no economic sense.

How many hotel rooms will be available in Poland in 2012?
The new hotels to be built by 2012 for the championships will provide some 3,000 rooms. Today, there are around 80,000 in Poland, so the additional ones built before the championships will be just 4-5 percent of the total. In Warsaw, the number of rooms is already sufficient for the championships. Wrocław, Gdańsk and Poznań will build three new hotels each. In Cracow, 4-5 smaller facilities will be constructed.

What type of investment is most needed in the hotel sector?
The country's largest cities should invest in world-class multifunction congress, conference and exhibition centers. Such facilities will stimulate the development of not only this sector, but all sectors of the economy. There is a need for places where companies can hold conferences, meetings and incentive trips. In the congress and conference sector, we have no good products at all, so Poland cannot compare with, for example, Germany, Spain or Italy. Owing to Euro 2012, new congress halls will be built, and that is a good thing. As I've mentioned before, I see good development opportunities for two- and three-star facilities in most regions, and in big and medium-sized cities.

Are big chains also planning to enter smaller cities?
Large international chains that build two- and three-star hotels willingly enter cities with 50,00-60,000 residents. Meanwhile, four- and five-star facilities are traditionally built in the biggest cities, such as Warsaw, Cracow, Wrocław, Poznań or the Gdańsk-Sopot-Gdynia Tricity-the cities that need hotels of that category.

In relation to the crisis, is demand shifting from five-star to four- and three-star hotels?
This has occurred to some extent in London or New York, but not in Poland. Here, five-star hotel prices are significantly lower, so corporate customers still choose top standard facilities and can afford to pay for them.

How competitive are prices in Warsaw, Cracow or Wrocław in European terms?
Lower standard hotels in Poland are very cheap compared with the rest of Europe, something that will change after we enter the euro zone. But even four- and five-hotels are inexpensive in Poland, if you compare Warsaw with, say, Paris, Madrid or Barcelona. The prices here are closer to those in Berlin, Frankfurt and Budapest.
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