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Domestic demand buoys Poland amid euro crisis
September 27 2012

Still in its relative infancy, the Poland hotel market has developed a stable base of domestic demand despite several ups and downs during the past few decades.

Highlights
  • The Poland hotel market is still in its relative infancy, having only emerged after the fall of communism in the late 1980s.
  • The market has seen a number of ups and downs during the past few decades that have accelerated its growth onto the world stage.
  • The market, which boasts a solid base of domestic demand, is largely undersupplied.
By Lisa Francesca Nand
HNN correspondent
lfnand@hotmail.com

LONDON—Though comparatively in its infant stages, Poland’s hotel market has seen more than its fair share of ups and downs during the past few decades—experience that has helped accelerate its maturity, sophistication and emergence as a viable conduit for investment on the world stage, according to panelists during the Hotel Investment Conference Europe.

Though the country itself has a storied history dating back hundreds of years, Poland’s hotel landscape only began to solidify after the fall of communism in the late 1980s. The Warsaw Marriott Hotel, which opened in 1989, was the first major success, said Alex S. Kloszewski, partner and hospitality director of real-estate company Colliers International, during a session titled “A focus on Poland.”

And after a few decades of slow growth, the market erupted in the early 2000s, he said.

“We had a three-year period where everyone came in at the same time: (Hyatt Hotels Corporation), Radisson … We added something like 75% 5-star rooms in (those) 18 months,” Kloszewski said.

Alex S. Kloszewski
Colliers International

But the road would prove tumultuous, he added.

“Then we had (severe acute respiratory syndrome, commonly known as SARS) and Germany in recession, and this proved to be an absolute nightmare. It was very, very tough for years.”

The most recent turning point came when Poland joined the European Union, which proved a boon to corporate business, Kloszewski said. Strong performance helped insulate the country from the tragic April 2010 plane crash that took the lives of then-Polish president Kaczynski and several top political and military leaders. “There were a lot of us that thought this would take down Poland. Nothing of this magnitude happened.”

Poland’s hotel market also has stood up to the global recession reasonably well, said David Heijligers, development director of Poland and Eastern Europe for Louvre Hotels Group.

“We’ve been present (in Poland) since 1998, and between then and 2008 we had huge growth in Poland in terms of (average daily rate),” he said. “Obviously the crisis impacted Poland; 2009, 2010 and 2011 were very difficult. But compared to what happened in Western Europe, it was only a slight decrease and we maintained average daily rates.”

Heijligers said Louvre’s concentration in the strong budget and midscale segments, which drew 80% domestic travelers, helped stabilize performance during the downturn.

An affiliate of Groupe du Louvre, which is owned by Starwood Capital Group, Louvre Hotels now has 13 of its worldwide 1,000 hotels in Poland with another 15 in the pipeline.
 
Strong domestic market
The strong domestic market also was seen by Kloszewski as being key to comparative buoyancy and providing a certain level of immunity from the ongoing recession.

“With 38 million inhabitants, Poland’s strengths are in small- and medium-enterprise companies, which are our prime customers. These companies are growing, and there is a pure Polish entrepreneurship spirit, very daring and very successful,” he said.

“Our segment is quite resilient. It’s not perfect, but we maintain occupancy of 70%, and average daily rate is quite stable and returning to higher levels in Warsaw and other key cities. There is a crisis of course, but we feel it less in Poland than in France, Benelux and other European counties,” Kloszewski said.
 

Andrzej Wojcik
Puhit SA

Andrzej Wojcik, VP of hospitality and real-estate company Puhit SA, agreed there are advantages for home-grown brands.

“As a local company, we are Polish capital, Polish shareholders and Polish operators. Together we have 1,500 rooms, and we have introduced a new strategy providing operating services for Polish investors who want to invest in hotels but not to operate. We have found that this approach right now in Poland is very interesting for Polish investors,” he said.

“For the last two years we have had good progress in the numbers of hotel (revenue per available room), especially in Warsaw, and Krakow has started to progress well too. All advisers feel the budget range segment in Poland has good potential. It’s doing well, and the main driver is the domestic customers. We don’t have over-supply so far, and it looks like domestic (demand) will progress strongly in the next year.”
 
Supply slow to ramp up
The hotel industry’s relative infancy means the country is undersupplied, the panelists agreed.

“If you look at Germany, there are 250 rooms per 10,000 inhabitants. And in Poland, we are at 50 rooms (per 10,000 inhabitants),” Kloszewski said.

David Heijligers
Louvre Hotels Group

“Poland is growing, manufacturing is up, exports are always doing very well, internal consumption has had a dip, but that is not too much of a concern,” he continued. “In 2003, there were 350,000 monthly Polish travelers, and today it is over one million a month. Very little of this is leisure. It’s a country that is still growing. Democracy-wise we are only 22 years old, and we have a lot of catching up to do.”
 
The increased sophistication of Poland’s hotel market has made it easier for investors and developers to plan and forecast further into the future, Kloszewski added.

“It’s acting in a way we can actually predict in terms of timing, developing hotels … something that five years ago was not foreseeable. The market is the strongest it’s been, although we have very little pipeline.”

Still, the major global brands have been slow to make headway.

“There’s a Hilton, a Renaissance, a (Holiday Inn Express) … but other than that, when you look at the big brands, 5-star or upscale hotels, there are very few around,” Kloszewski said.

Growth in 2012 was thought to have been partly attributed to the country’s co-hosting (along with Ukraine) of the UEFA European Football Championship, something which might add to a slowing off for the coming year.

“Expenditure and investment over the last four years in infrastructure, roads and stadiums, was €80 million. Next year we will see only a quarter of this amount. This will have an effect on employment and also the construction sector,” Wojcik said.

“Another problem is that domestic consumption … is also slowing. Investment is slowing because decision makers are waiting for the market situation to become clearer,” he added.
“… We expect next year to be slower. But generally we would not expect big problems, just some sort of adaptation. We are more immune, however, from global and European problems as our product is more driven by domestic demand.”

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