Warsaw's future sky has three stars in store for inn keepers
Warsaw's future sky has three stars in store for inn keepers
Charles Ward
With construction of a new Hyatt hotel underway and the Hilton's soon to start, Warsaw will see the opening of two new five-star hotels in 2001. But luxury may soon be passe in the capital's hotel industry. (See also The List, pages 16-17)
Instead, hotel operators will look to the less upscale, but still lucrative middle market. That's the plan, at least, for hotel chains Orbis, Accor Polska and Marriott. These companies hope to move into the three-star market, filling what they believe is a huge gap between supply and demand.
"There is a great need for quality three-star hotels," said Marc-Henri Saillon, a hotel consultant at KPMG Axe Consultants in Paris. "Travelers nowadays are more budget conscious and the average businessman might not want to stay in a five-star hotel ... the three-star market is where there is the most room for growth."
In developing cities, five-star hotels are the first to arrive, and from then on hoteliers move down a level, he said. "In Warsaw, the five to four-star (market) is pretty much covered," Saillon said.
While there is "enough room for a couple more," the Hyatt is due to open in May 2001 and the Hilton by the end of that year, said Gerard Greene, a consultant at London-based hotel advisers HVS. But, "for the five-star (market), that's it now," he said.
In terms of published rates, luxury hotels' rates are about $200 a night compared to about $100 a night at a three-star hotel. A true four-star hotel averages about $150 a night. But the difference in services between a four-and three-star hotel is less clear cut, Saillon said. (In Warsaw, the situation can be different because many four-star hotels are actually five-star establishments that removed a star for tax reasons.)
In terms of expansion, the most active hotel chain recently has been Orbis. With a five-year, $300 million nationwide investment program started last year, the company has been upgrading its more prominent Warsaw sites. After extensive refurbishments to its five-star property, Victoria Intercontinental, and its four-star hotel, Holiday Inn, as well as its projected four-star location, the Forum, the company has started extending its three-star Novotel hotel, which it franchises from French group Accor, said Ireneusz Weglowski, Orbis' vice president for development.
While it still intends to raise $89 million to complete its program, $213 million has already been raised from its initial public offering (IPO) and from internal cash flow.
"The Warsaw market is very competitive, to keep our position of 49% market share we need to upgrade," Weglowski said. "Each property we have has a five-year modernization program."
The Novotel, which has a 70-80% yearly occupancy rate, will be extended by 120 rooms, while Orbis will also build a new 200-room, three-star hotel by a planned convention center near Warszawa Zachodnia rail station. The expansion is expected to cost $16 million-$20 million for the rooms alone. Last year, the average occupancy rate for Warsaw's top five and four-star hotels was 67.5%, according to KPMG Axe Consultants. "In Warsaw there is room for new hotels especially with the (Sept.-Nov. and March-May periods), when you can't get a room," Weglowski said.
Activity after the summertime is strongest with September the busiest month in the hotelier's calendar, Weglowski said. With many of the city's guests pressed for space and looking for budget accommodation, this short-term community does not have many alternatives at its disposal, which opens up a three-star niche, he said.
Accor too has seen a gap in the market, said Magdalena Tobola, marketing and public relations manager at Accor Polska. Having acquired the three-star Mercure Fryderyk Chopin on Aleja Jana Pawla II in February, as well as refurbishing its lobby and two restaurants, Accor is currently constructing an Ibis hotel to be opened in April 2000. This is part of a 10-year, nationwide plan to bring 30 such hotels to Poland, she said. The company also owns the Orbis-franchised Novotel in Warsaw, and there are further Mercure projects in the pipeline as well as a plan to develop a Sofitel hotel in the capital, she said. Tobola would not disclose potential locations.
In addition to these initiatives, the Marriott chain, best known for its five-star tower on Aleje Jerozolimskie, also has three-star "courtyards" in the pipeline, said Greene. "There are definitely investors in America who are interested in the product," he said. "It would position itself around the $100 average rate (per night)."
Officials with the Marriott were not available for comment.
KPMG's Saillon said Marriott is looking to develop this two-to-three star package, known as "limited service." The scheme would entail basic reception, smaller rooms, no room service, no meeting space, one restaurant and standard facilities, he said. In the long-term, Marriott and Orbis plan to develop "extended stay" hotels in the form of flats with built-in kitchens, Saillon said.
