International hotel chains slow to conquer Poland
The development of hotels operated by international chains in Poland lags behind other real estate sectors, with investors worrying about high costs and slow returns.
"The market is not growing very quickly," said Gerard Greene of London-based Hotel Valuation Services (HVS).
Most international hotel chains, such as the Marriott, the Sheraton Warsaw Hotel and Towers or Radisson SAS have only one or two locations in Poland (see the List). Some well-known operators, such as the Hilton, have no presence at all.
The international chains have been slow to arrive despite record occupancy figures at existing international hotels in the mid-1990s, when flocking business travelers had few high-quality hotels to choose from.
The number of foreign business travelers declined after the Russian crisis in 1999, with overall tourism falling to 17.95 million, some 4% less than in 1998, according to Tourism Institute figures.
The slowdown, combined with the bankruptcies of modern Warsaw hotels such as Hotel Sobieski and Hotel Mercure, prompted many developers to be very cautious before they invest. "The gold rush is over," Greene said.
"It's a long-term, $12 million-$16 million investment that pays back in 10 to 12 years," said Marceli K. Krol, president of the Global Hotels Development Group, which has a license to develop Holiday Inn hotels here.
Because of that, any new hotel development comes only after detailed market analysis, feasibility studies and sound financing, Krol said. "Pre-investment research is the most important stage," he said.
Developing a modern hotel room in Poland costs $80,000-$95,000, Krol said. For that investment to pay back, the hotel needs an average yearly occupancy rate of 40-50% in the first couple of years and 65% thereafter, sources said.
But despite current costs and revenue worries, Poland will need an increasing number of hotels, sources said. "Various mid-range options that's what Poland needs," Greene said.
The prospect of European Union accession has kept many hotel developers busy finding sites and closing financing deals for their hotel projects.
Hyatt has been building a five-star hotel near Lazienki park in Warsaw. Hilton, another five-star heavyweight, has backed off from its earlier plans to jointly develop a hotel with the Swedish Skanska, but is still said to be considering a development in Warsaw.
At 55 hotels and more than 10,000 rooms, Orbis, the largest local hotel operator, plans to modernize its existing base and construct new facilities after having been acquired by the French giant Accor. Accor itself plans to invest $96 million over the next three years to develop its Ibis and Novotel chains.
Global Hotels, which operates the Holiday Inn, and Prima, operator of Best Western, both plan to open eight new hotels within three years, all located in large cities.
Most international hotel chain operators are focusing their development plans on big cities such as Warsaw, the Tri-city area, Krakow, Lodz, Poznan, and Wroclaw. "Location, location, location is the core of the hotel business," Krol said.
But some developers, such as Hotel 500 and Qubus, prefer to go to smaller cities or big city suburbs.
"It's because of economics," said Steffen Okland, president of Qubus Polska, a Norwegian-owned company that operates five hotels in smaller cities in western Poland. "Lot prices are lower," he said.
Hotel sources believe that each city with a population of at least 150,000 has room for two or three hotels managed by international chains. "There is much room for internationally branded hotels," Greene said.
