Following several years of stability, the Polish apartment hotel/condo hotel market has been growing dynamically since 2016, with numerous new projects of this kind springing up in both holiday resorts and big cities. The sector is increasingly attracting large listed developers who have, until recently, been mostly active in the residential market. It is also becoming more and more professionalized, with hotel experts now typically involved in the planning and management processes.

UPWARD TREND

The apartment hotel/condo hotel market in Poland is hardly regulated. Generally speaking, both types of projects offer hotel units that can be held by individual owners and that are managed by the developer or an external entity specialized in short-term rentals. Originally, apartment hotels predominantly comprised apartments with their own kitchen, while condo hotels most often offered single hotel rooms. Today, those distinctions are blurred, and the names are, more or less, used interchangeably depending on the developer’s choice.
Due to the lack of clear definitions, specific and widely available data regarding the size of the market is hard to come by. However, according to Colliers International, approximately 70 projects of this kind are currently under construction across the country. “There is an upward trend – we estimate that the supply grows by over 2,000 units y/y, with many of the units being located in multi-phase developments,” said Agnieszka Topczewska, a senior associate in the company’s hotel advisory department.

INVESTMENT ALTERNATIVES

Also, according to Marlena Kosiura, an expert at InwestycjewKurortach.pl, an industry website, the market – which traces its beginnings to the years 2007-2010 – has been growing particularly fast since 2016. From the buyer’s perspective, the purchase of a unit in an apartment hotel or a condo hotel is an interesting investment alternative in a situation when the more “standard” forms of allocating capital – shares, bonds and bank deposits – do not bring satisfactory returns.

Developers respond to the demand, especially since this allows them to diversify their business. Some of the projects are built on sites that cannot house a residential scheme – the construction of a hotel with individually owned units may then be the only viable option. Topczewska pointed out that if a developer includes medical services (for example a spa or a rehabilitation facility) in an apartment hotel or a condo hotel investment, such a development can also be built on sites zoned for healthcare-related functions.

Interestingly, the market is increasingly attracting developers (many of them listed on the Warsaw Stock Exchange) who were, until recently, mainly focused on the residential market, with examples including Arche, Atal, J.W. Construction, Marvipol Development and Robyg. Compared to regular hotel projects, the investor of an apartment hotel/condo hotel scheme is able to launch the commercialization process along with the start of construction, thus securing funds that are an alternative to bank financing.

URBAN GROWTH

The development of apartment hotels and condo hotels in cities is a new trend; at the moment, more than ten such projects are under construction or in the pipeline in such cities as Warsaw, Wrocław, Gdańsk and Lublin, Kosiura said. In fact, it is big cities where the supply growth dynamic has been the most impressive as those locations previously featured no apartment hotels and condo hotels at all. Of course, some of the popular holiday resorts also continue to attract new investments.
In general, locations with the biggest number of new projects include Warsaw, Gdańsk, Kołobrzeg, Szklarska Poręba, Zakopane, Międzyzdroje and Świnoujście. In Kosiura’s opinion, in some places within those destinations one can already talk of oversupply. Among promising markets there are smaller resorts that have a lower saturation level, but which – due to their poor existing hotel infrastructure and improving transport infrastructure – are becoming more popular. They include Szczyrk, Wisła, Szczawnica, Zieleniec and the Hel Peninsula.

DEMAND GENERATORS

Defining so-called “generators of demand” for hotel services is key when selecting the optimal location for an apartment hotel/condo hotel development, claimed Maria Zielińska, a senior hospitality advisor at Cushman & Wakefield. Meanwhile, location is the crucial factor guaranteeing the operational success of such a project. It determines the ease with which the developer is able to exit the investment, as well as the return on investment for the individual investors, she stressed.
According to Zielińska, Warsaw and Kraków are some of the natural choices, with the former being a popular business destination and the latter offering an ideal business mix of weekday demand generated by business travelers and weekend demand generated by leisure travelers. Demand in big cities tends to be more stable in that it is not defined by major seasonal fluctuations. Additionally, business travelers often decide on relatively long stays, lasting from several days to even a few weeks.
Securing a well-located plot in large cities, including Warsaw and Kraków, is now difficult. When it comes to holiday resorts, those continue to predominantly attract local investors, with the activity of international companies there remaining limited. The seasonality of the offer is a challenge in holiday destinations. In such locations, it is worth combining many functions in one complex so that it also remains attractive for guests during the off-season, Zielińska maintained.

MARKET PROFESSIONALIZATION

The boom in the apartment hotel/condo hotel market – with its sizable supply and growing competition – means that the sector is becoming more and more professional. Kosiura argued that just a few years ago hardly anyone saw such projects as types of hotels. Developers were simply focused on the construction and sale of the units. Today, in contrast, they increasingly seek the advice of hotel advisors and contract professional operators to manage their schemes, Kosiura said.
Indeed, apartment hotel and condo hotel projects have appeared in the market which will operate under international brands. A Staybridge Suites-branded (a brand of the InterContinental Hotels Group) scheme, for instance, is now being developed in Warsaw. Another Staybridge Suites-branded development will be built in Gdańsk. It will be developed by Marvipol Development and will be combined with a Holiday Inn Express-branded hotel. A condo hotel belonging to the Best Western chain will soon be completed in Wrocław.