Hilton plans to build Warsaw conference center

Developers creating room glut in local market With Hilton poised to build a hotel and conference center in Warsaw, industry analysts say the economy needs to grow at least in line with expectations to support the capital's increasingly bloated luxury hotel market. "We should have at least 3% GDP (gross domestic product) growth (in 2003), and rising, for the demand to complement the current supply and that under construction," said Adrian Karczewicz, hotel analyst at property consultancy Knight Frank Nieruchomości. The Democratic Left Alliance-led (SLD) government's rescue package for Poland's flagging economy projects GDP expansion at 3% next year, and 5% in 2004. Hilton Hotels, the U.S.-based global chain, is close to finalizing the terms of a package to develop a 1,800 square-meter lot on ulica Grzybowska, west of the street's intersection with Aleja Jana Pawła II. "We're in advanced negotiations on several projects, but nothing has been signed," said Tricia Fields, spokeswoman for Hilton. Jacob Goldzak, vice president of Grzybowska Centrum, the project's would-be developer, said his firm is waiting for signatures on a 20-year operator's agreement with Hilton. "We expect it will be signed soon," Goldzak said. The $50 million deal would package a four-star hotel opposite a 2,000-square-meter convention center. The project, which includes high-end apartment blocks complemented by various small shops, would be completed by late 2005. Apart from Hilton, Goldzak said the developer has yet to receive commitments from other prospective tenants. "We're hoping to develop the hotel and residential aspects in parallel," he said, adding that architects are just now getting into the details of the 300-plus-room hotel's amenities. Developers are pinning much of the project's success on the planned convention center, to be operated by Hilton, which is also planned to house a fitness club. Conferences are planned to cover 70 days each calendar year at the first-of-its kind facility in Warsaw, said David Fattal, owner of Israel-based Fattal Hotel Management, which is consulting on the project. "(The convention center) should make for big business … you can't find this in any other hotel in the city," Goldzak said. "There will be days when occupancy at the hotel is at 30%, but conferences should bring that to 90%." Market glut Hilton's possible arrival on the Warsaw scene comes amid a flurry of hotel building. Among either planned or finished construction of the Hyatt Regency, Radisson SAS, Westin and Inter Continental, the supply of centrally located hotel rooms is set to increase by 1,471 units by 2004, an almost 28% jump, according to Knight Frank. While certain to drive down prices, analysts said the building frenzy threatens to saturate the city's luxury market also in two to three years depending on a number of factors - notably Poland's targeted accession to the European Union by 2004. "There might be something (Hilton's research) may know that we don't, but from a local angle, it will be oversupply," said Knight Frank's Karczewicz. Still, EU integration could alter today's forecast. "An ‘open-skies' policy by 2004 should generate more demand," he added. As more rooms receive finishing touches, Warsaw's upper-crust hotels have seen occupancy levels decline under the weight of poor domestic and global economic conditions, and the still unfolding ramifications of Sept. 11 on the travel and tourism industry. The Knight Frank report cites a 10% annual decline in occupancy in 2001 among the city's luxury hotels. "We've seen a 10-15% decline in occupancy year on year … with the economy, Polish companies simply cannot afford to stay or organize conferences here," said an official with the five-star Sofitel Victoria, who asked not to be named.