WBJ: A significant number of new hotel projects have been launched and announced in Warsaw in the last two-three years. Does the city need so many new hotel rooms or is there is a risk of oversupply?
Paweł Lewtak: Warsaw is gradually growing its reputation as a major business and leisure destination in Europe. In recent years,developers have been very active indeed in looking for new attractive hotel sites in Warsaw, which are scarce and in high demand. Even some office projects in the city that were not successfully commercialized have been re-designed as hotel schemes, which always raises the question of whether such developments are actually well-thought-through and not “accidental” in a way. However, these doubts aside, we need to remember that the hotel development boom in Warsaw is relative.
Prague and Vienna have approximately 35,000 hotel rooms and in Budapest the number also stands at more than 21,000. Warsaw, by comparison, currently has around 15,600 hotel rooms. Even if we assume that some 2,000 or 3,000 new rooms – the estimates vary – will be added in Warsaw in the near future, this will certainly not mean a risk of oversupply, at most it will cause some periodic growing pains. The increasing number of apartment hotels and private apartments offering short-term rentals shows that there is the need for more accommodation options in Warsaw.
Where is the growing demand for hotel rooms in Warsaw coming from?
We have been witnessing an increase in domestic demand – Polish tourists have more and more money at their disposal and they increasingly spend their weekends visiting the biggest cities, especially with their families. Contrary to what one might think, they do not always choose the cheapest offers – in Warsaw, many such travelers look for hotels in the city center with on-site perks and amenities where they can experience the genuine heartbeat of the city while finding a retreat from the hubbub in a cozy room. In our case, depending on the hotel, domestic demand accounts for 20-35 percent of the total number of stays.
What are the trends when it comes to the prices of hotel rooms in Warsaw?
There has been an upward trend with regard to the average price of hotel rooms in Warsaw in the last three years. When you look at the biggest hotel city markets in Europe, Warsaw is close to the bottom of the list when it comes to the RevPAR (revenue per available room) performance indicator, with occupancy above the European average and hotel prices 30 percent lower than those of the leading city destinations. At the same time, many developers and hotel chains want to invest in new hotel projects in the city. This shows that there is a general expectation in the market that the prices in Warsaw will continue to grow.
Is the Warsaw hotel market getting more competitive?
Yes, it definitely is. However, it is not that all those new hotels in Warsaw automatically start to steal guests from existing hotels with established reputations as soon as they have opened. It does not work that way – in the hospitality sector you need to be very patient, slowly build your brand and develop a faithful client base. Besides, hotels located in the downtown of the city tend to be more resilient to all kinds of changes and fluctuations in the market as they cater to very diverse groups of guests.
The Polonia Palace Hotel, for example, which is one of the landmark hotels in Warsaw – it dates back to 1913 and was thoroughly renovated in 2004-2005 with a regular refurbishment program in place to keep the hotel fresh and inviting – accommodates more than 100,000 guests every year. It has one of the highest occupancy rates in Warsaw. The hotel is mainly targeted at business travelers, but due to its historic nature and uniqueness it is also extremely popular with tourists. Admittedly, the growing competition means that you need to be proactive and we have been introducing changes at all of our hotels. This is based on talking to our hotel guests, learning from their feedback and online reviews to meet their changing expectations.
The event business seems to be growing increasingly important for hoteliers…
Indeed, hotel meetings and events are a great way to boost revenue in hotels and attract a constant stream of leisure and business travelers. Despite competition from non-hotel conference facilities, the demand for event areas located in hotels has increased significantly in recent years, but only for those who stay tuned to the latest trends and have quality management in place.
It is hard to believe, but right after the renovation, Polonia Palace Hotel housed relatively little conference space. We soon realized that the available area was not sufficient – there was more and more interest in organizing both business events and private events such as wedding receptions; especially in the Ludwikowska Ballroom, a bold example of Louis XVI-style. Now we can accommodate events of up to 700 people on two conference floors.
Of course, there is also a contrary trend emerging in the market, that of limited-service hotels, which focus on room sales only and keep operating costs low by offering a bed and breakfast experience with no event space available on their premises.
Which improvements have you made at the Polonia Palace Hotel of late?
After a long planning and construction process, we have added an area called Ludwikowska Lounge, which addresses the needs of our event guests by introducing the latest technological meeting solutions together with the crafted design and quality materials. It is pretty uncommon to make extensions or layout changes in listed buildings such as Polonia Palace Hotel.
The new space will serve both as a living room and lounge area to complement the Ludwikowska Ballroom, creating a perfect link between enticing history and modern times, ensuring the most effective realization for every kind of gathering and unique event.
What about new investments in Metropol Hotel?
We are just about to finish the process of renovating all the rooms in the Metropol Hotel and remodeling its lobby, bar and dining areas as per latest design trends. The whole purpose of the project is to take a new approach to lobby spaces, which allows for more flexibility with a fireplace as the focal point. We want to complete the project by the end of this year.
Your third hotel – MDM Hotel – has also been under renovation for some time now…
Yes, after the renovation of the guest rooms, one of Warsaw’s leading landmarks, MDM Hotel, will be getting a makeover in late 2018. This will bring out the best of the building’s history that depicts the MDM Hotel’s rich heritage and that is in harmony with the surrounding buildings set in Constitution Square, a location that has been revamped and has become much more attractive in recent times. New restaurants have sprung up in the area, including in the highly popular Hala Koszyki project.
How much do you invest in your hotels annually?
I cannot reveal any concrete figures, but what I can say is that most of the profits that we make on our hotel business – and we are talking about significant sums here – are re-invested in upgrading our hotels.