Orco introduces boutique hotels to Poland

France-based developer Orco Property Group plans to open a boutique hotel in a 200-year-old building at ul. Kościelna 12, meeting unmet demand in the boutique hotel niche, according to Orco. The company bought the 4,000-square-meter historical building in Warsaw late last month from general contractor Polimex-Cekop for an undisclosed price, with U.K.-based King Sturge, a property consulting firm, assisting in the deal. "We want to change it into a cozy 63-room hotel," said Frank Cisar, Orco's country representative. The four-star hotel, which will include a swimming pool and rooms averaging 30 square meters, will be called Andrassy Warsaw and be part of the Andrassy Hotel chain in Central Europe. The company will look for more opportunities in Poland, Cisar added. "We are interested in other locations in Warsaw - one for another boutique hotel - for an extended-stay hotel and one for an office," he said. The developer is hoping to get the construction permit later this month and start refurbishing work in March 2002. The renovation should be completed within 12 months. "We will renovate the faćade and reshape the interiors, currently occupied as offices," Cisar said. The investor refused to reveal the financial details of the project but said the occupancy should be 5-10% higher than in a typical hotel, which is around 50-60%. "We will have the same quality but with a warmer atmosphere," Cisar said. "When you go to the Marriott or Sheraton, people often feel it's too cold." Market watchers say the new venture could fill a valuable niche. "This type of hotel absolutely has a chance to be successful," said Marceli K. Król, president of Global Poland, a Warsaw-based developer connected with Global Hotels Development Group, which operates Hotel Inn hotels in Poland. "Most of the chains have a boutique hotel segment in their portfolio or under development." Traditional hotel products are aiming at what boutique hotels already have: higher occupancy rates, higher revenue per available room (RevPar) and higher returns, he added. And the boutique hotel's interior design and specific services are perfect for a regular clientele of hotels, according to Król. Andrassy Warsaw will be the only hotel in the Old Town and it will target businesspeople as well as tourists, limiting competition to only a few similar hotels in Warsaw, Cisar said. "There will be a lot of competition in the hotel market in 2003 but this will not be a problem," Cisar said, noting that a boutique hotel provides an alternative to "standardized" hotels. Experts say that boutique hotels can challenge bigger hotels thanks to their lower operational costs and unique character. "The development process is much cheaper than in the deluxe or luxury niche, (making) it competitive thanks to its lower operational costs," Król said. One potential problem with Orco's Andrassy Hotel in Warsaw is its location in a historical building. "During the reconstruction works, the potential budget could be overrun because historical buildings are often full of surprises," Król said. Other concerns are typical of similar developments. "In the pre-development phase you have to take a close look at the location and how the market is going to react to this kind of product," he said. Factory Outlet filling up Neinver Polska, a branch of Spain-based developer Neinver, signed several letters of intent over the last couple of months in Factory Ursus, its first factory outlet located in Warsaw's Ursus district. Major tenants include Adidas, Nike, Reebok, Jackpot & Cottonfield, Simple, Tatuum, Olsen, Tom Tailor, Sunset Suits, Salamander, ReServed and Artisti Italiani. "We're going to finalize more transactions in late January and February," said Władysław Klaczyński, board member of Neinver Polska. He declined to name the companies involved. The first 10,000 square-meter phase is scheduled for completion in August 2002. The total value of the investment, which includes the second 5,000 square-meter stage, is estimated at zł. 60 million ($15.2 million). There will be about 50 shopping sections, ranging in size from 60 square meters to 800 square meters. Factory Ursus will sell end-of-line products and seasonal discount goods. "These products are not going to be damaged items or rejects," Klaczyński said. "It will be brand goods for a discount price." The catchment area of Factory Ursus covers about 3 million people according to Katarzyna Szewczuk, senior property negotiator at Anglo-American real estate consultancy Jones Lang LaSalle. "People care about the brand name and the discount price when coming to a factory outlet, not so much about the distance," she said. Making people aware of what a factory outlet really is - a shopping center that sells brand-name products for at least 30% less than normal retail prices - is the most important task for the developer, Szewczuk added. Neinver will launch shuttle buses from the city center to the outlet in an attempt to attract more customers. Klaczyński said that Neinver plans to expand its operations to another 25 hectares in Ursus. "We should close the deal within a few weeks," Klaczyński said. According to unofficial sources, the company intends to build a leisure and entertainment center neighboring Factory Ursus. Neinver last year announced it would invest in factory outlets in Poznań, Gdańsk, Wrocław and Katowice. In brief: • Germany's hypermarket chain HIT, owned by Dohle Handelsgruppe, will invest zł. 15 million ($3.8 million) in modernizing the shopping center on ulica Górczewska in Warsaw. The old hypermarket will be transformed into a shopping mall, which will be connected to a new hypermarket and a Media Market electronics store operated by Germany's Metro. By the end of 2002, HIT will spend zł. 100 million ($25.3 milion) on five hypermarkets in Piastów, Łódź, Legnica and Włocławek • Sweden's furniture and household appliances producer Ikea will not invest zł. 100 million ($25.3 million) in Bydgoszcz because it failed to reach an agreement on access roads. The project was to cover 23,000-square-meters. Announcements: U.K.-based King Sturge property consultancy assisted in the following deals: • Calrsberg Okocim, a domestic brewery controlled by Denmark's Carlsberg, signed a lease contract to occupy 3,000 square meters in Industrial Park Estate Piaseczno, developed by Metropol Group. The warehouse has 23,500 square meters. • Global consultancy PriceWaterhouseCoopers took 2,700-square-meters in Centrum Biurowe Lubicz in Kraków. The building totals 16,000 square meters.