Holiday Inn eyes Wroclaw site for hotel expansion

That's only the tip of the iceberg for Global, whose long-term strategy envisions building 20 Holiday Inn hotels in Poland over 10 years. In the near term Global plans to spend $47 million to build five hotels and extend the Holiday Inn brand to an additional two hotels through management contracts.
The Holiday Inn in Wroclaw, however, will likely be the largest of the hotel projects now under consideration, according to developer Global.
The $14 million "City-Foyer" hotel project in Wroclaw calls for construction of a 165 room, six-floor hotel with restaurant/bar services, business and fitness center and conference facilities for 300.
The site, under construction by German developer AGIB, includes more than 1,100 square meters of ground floor retail shop space, about five floors totaling 2,100 square meters of office space and underground parking.
AGIB is currently working out leasing and loan financing before breaking ground later next month on the $25 million Wroclaw project, said Michael Luke, of Bielefeld-based AGIB.
Once construction begins, it will be a year before the site will be open for business, he said. Time is important to Global's plan.
"We have to start construction in July," said Peter Gee, senior vice president and CEO of the Global Hotels Development Group Poland, Holiday Inn's "preferred" developer in Poland.
Global's near-term plan calls for signing deals and "to be in the process of construction" of five mid-market, three-to-four star, hotels and two additional hotel management contracts by year's end, Gee said.
Funding for this first stage will come from own capital and bank loans, said Dariusz Pronczuk, vice president of Enterprise Investors, which now holds an 80% stake in Global Hotels.
Earlier this month, the venture capital firm injected $5 million into Global. That capital injection helped close the $11 million purchase agreement with AGIB for the group's first Holiday Inn hotel at the City Forum multi-use center in Gdansk.
Financing for Gdansk will be 50% debt, 50% equity, Pronczuk said. "That's a structure we would like to keep."
Enterprise has taken a loan for the Gdansk project with a Polish bank, which is now establishing a consortium of banks to supply credit for Wroclaw and remaining hotel projects, Pronczuk said.
Because Enterprise has pledged only $11.5 million in equity to fuel the $47 million near-term investment plan of up to seven Holiday Inn hotels nationwide, the fund is looking for an outside investor to raise a similar amount of equity capital to meet near-term needs.
"We are talking with another investor who should join in two months," Pronczuk said. To finance the second stage of hotel construction calling for 20 hotels, Enterprise could pledge additional capital, seek new investors or an initial public offering (IPO).
In addition to Wroclaw and Gdansk, Global Hotels has its sights on Katowice, Krakow and the outskirts of Warsaw. Management contracts, under which Global will carry the Holiday Inn brand in existing hotels, are under consideration for Zakopane and lodz, said Global CEO Gee.
Absent from the near-term roster is Poznan.
"Wroclaw is far more interesting," Gee said. "One hundred fair days is not so interesting."
"The most interesting markets, if you talk to LOT (Polish Airlines), are Gdansk and Wroclaw - the most rapidly increasing."
Why study LOT's loading schedules? "The biggest segment we're after is corporate travel," Gee said.
Although Global is following high flyers, the Holiday Inn in Wroclaw will be located downtown on ulica Pilsudskiego, less than three blocks from the main train station. "In Poland, rail travel is very important," Gee said.
Global has also signed a letter of intent with AGIB for a downtown Katowice site, he added.
"Our business is hospitality, so we look to a developer to do it for us," he said. In Gdansk, Global is outsourcing its food and beverage operation with American Bistro Poland, which holds the T.G.I. Friday's franchise for Poland.
But not so for Wroclaw. Gee is currently scouting Poland to find a firm to handle those operations.
"We can't take Friday's, they're already in Wroclaw," Gee said. "So we'll have to find somebody else."