New hotel brands are preparing to enter the next year on the Romanian market, through rental or partnership agreements with real estate developers, as an alternative to management or franchise agreements, according to Colliers International real estate consultancy company.
New entrants can help revive the local hotel market and give real estate developers the opportunity to diversify their portfolios, according to Colliers consultants.
“Although the hospitality industry in the capital has steadily increased both in terms of occupancy and average room prices over the past three years, according to market analyzes by Colliers International, few new projects have been opened. This was caused by the desire of strong brands to extend exclusively through management contracts or franchises with developers. These contracts are perceived by developers as less predictable in terms of cash-flow generated and therefore more risky, “says Colliers.
Recently, however, German, Austrian and Polish young brands, which have already covered the hotel’s home market, have begun to look for opportunities to expand to emerging markets in South East Europe. On the Romanian market, such brands have started discussions with real estate developers, even proposing the co-financing of projects. This is especially true for developers who already have industry experience or who have enough land to want to diversify their portfolio through development or rental partnership contracts.
“There is currently a gap between the desire to expand brands and the low appetite of developers for hotel properties. Taking into account the new trends, we expect that this gap will gradually decrease, which will favor the entry of new players, the development of new projects and, consequently, the re-launch of the hotel market, “said Raluca Buciuc, associate director of valuation Services and hospitality advisory services at Colliers International.
In Bucharest, the areas favorable to such projects are the Old Center, Floreasca-Barbu Văcărescu or Victoriei Calea. The Old Center offers the advantage of old buildings that can be reconverted, while Calea Victoriei still has available land, but at a high price. In turn, the Floreasca-Barbu Vacarescu area attracts both its consolidation as a major office block of the capital and the possibility of acquiring land available for development at prices still feasible.
“From a cost point of view, hotel brands’ choice to rent buildings in such areas is cost-effective. For a hotel, the rent equals about 20% of the turnover and may be similar to that paid by tenants in office buildings, “said Raluca Buciuc.
The number of tourists in Bucharest experienced an advance of 63% over the last 5 years, and the occupancy rate of hotels, especially four and five stars, reached an average of about 75%. “The development of the main office poles continues to influence the potential of the hotel industry in the context of the construction of a new affiliate Mariott Courtyard in the Floreasca-Barbu Vacarescu area this year,” according to Colliers consultants.