As the performance of hotels soars above the pre-pandemic levels, regional and international operators are optimistic about the industry’s outlook and keen to expand across the CEE-12 region (Belarus, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Slovakia, Ukraine). While Budapest, Prague, Warsaw, Cracow and Bucharest remain on top of their list, other regional cities are also targeted. However, there are also challenges, with around 28 percent of hotel projects in the pipeline facing delays or being put on hold, mainly due to the increased development costs.
Market Attractiveness
More than 26 senior executives representing regional and international hotel operators active in CEE with approx. 450 hotels with over 72,000 rooms have completed Cushman & Wakefield’s Hotel Operator Beat 2023 for CEE-12.
The most attractive markets for operators are Budapest (4.3 out of 5), Prague (4.2), Warsaw (4.0), Cracow (3.5) and Bucharest (3.5). Whilst Budapest claims the top position due to an increased interest by 10 percent compared to the last survey, the overall most attractive country is Poland with Warsaw, Cracow, Wroclaw (3.1) and Gdansk (3.1) being among the Top 7 markets.
Poland’s capital city, Warsaw being 3rd most attractive market in CEE-12, remains a priority for operators wanting to establish or grow their market presence. Whereas Cracow, Wroclaw and Gdansk experienced a slight decrease in operator’s interest by 5 percent, 5 percent and 6 percent, respectively, compared to the last survey. Nevertheless, these are rather small changes in light of the overall moderate to high interest of the aforementioned three markets for operators.
Performance & Outlook – Poland & CEE-12
According to STR, Poland is currently ranked second in terms of RevPAR recovery in CEE-6 countries (Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia). In H1 2023, the hotels in the country achieved a 23 percent increase in RevPAR compared to H1 2019 and a 35 percent increase compared to RevPAR in H1 2022. This increase was primarily driven by a 29 percent increase in ADR, although occupancy remains 5 percent below YTD H1 2019 level.
Operators express positive sentiments about the future performance of hotels, particularly for the Luxury and Upper-Upscale classes, with 71 percent and 82 percent of respondents being optimistic or very optimistic, respectively. Regarding hotel types, extended stay and urban hotels are perceived to have the most optimistic outlook, according to 79 percent and 75 percent of surveyed operators, respectively.
Pipeline Trends CEE-12
The survey participants collectively operate 140 hotels, comprising over 22,000 rooms in various stages of the development pipeline across the CEE-12 region (Belarus, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Slovakia, Ukraine). Despite the significant development activity, approximately 17 percent of the projects face delays, with an additional 11 percent being on hold. This is primarily to development costs and challenges with debt funding, according to 65 percent and 35 percent of surveyed operators respectively. The most common delay for pipeline projects ranges from 6 to 12 months, according to 40 percent of the respondents.
Conclusion
The overall data suggests that the hospitality industry in the CEE-12 region is experiencing a healthy recovery. Despite the macro-economic and geopolitical challenges, there is a solid foundation for optimism and operators are keen to expand across multiple markets within the CEE-12 region.
“The fact that Warsaw has the highest rate of brand saturation among CEE-6 capital cities, does not deter operators from expanding further in the city or entering the market by operators yet not present on the market. Despite the outbreak of war in Ukraine, a promising recovery in the performance of the Polish hotel market is noticeable. Furthermore, Polish air traffic, in terms of the number of passengers carried, in Q1 2023 surpassed Q1 2019 level, making Poland one of three countries in CEE-6 to recover to pre-COVID levels. All these aspects make Poland the most attractive country in the CEE-12 region for hotel operators, resulting in their interest not only in Warsaw but also in the regional markets,” said Maciej Pronczuk, Hospitality Consultant CEE & SEE at Cushman & Wakefield.