The hotel market was by far one of the most affected by the COVID-19 pandemic and is expected to reach a full recovery, in this context, by 2024. In Romania, the net occupancy rate for 2020 was 11.3 percent smaller than the one recorded in 2019.
Although the hotel segment has been the most affected by the restrictive measures imposed by the health crisis, very few projects have been abandoned. Delays and postponements in new hotel deliveries were recorded but developers and operators seem to have an optimistic perspective on the future.
For 2021-2023, 17 new hotels with over 2,000 rooms are expected to be delivered in Romania, with almost half of them located in the capital city. “Furthermore, the new stock is mostly comprised of 4 and 5-star hotels. The new deliveries include the reconversion and refurbishment of historic buildings, such as the reconversion of Marmorosch Blank Bank building into a luxury 5* hotel (Autograph Hotel by Marriott) and the full refurbishment of Athenee Palace Hilton and Corinthia Grand Hotel du Boulevard, all located in central Bucharest,” Ilinca Timofte said, Research Analyst, Crosspoint Real Estate.
As expected, 2020 has seen a decline in numbers in the hotel market, both in terms of supply (-17 percent YoY) and occupancy (-11.3 percent). Given that in Romania the tourism industry has a relatively low contribution to the GDP (around 5 percent in 2010-2019 compared to the EU average of 9.9 percent), the economic impact of its sudden decline has been less obvious. However, the pressure has had a spill effect into a drop in the average net salaries for industries like hospitality and air transportation, which have registered a decrease in the average salary of 12.9 percent and 28.38 percent respectively. Additionally, despite efforts to retain their employees, the closing down of hotels and restaurants has led to a significant number of layoffs in the hospitality industry. According to INS data, over 200,000 people (3 percent of the total working population) were employed in the industry in 2018 and 2019. In 2020 the number of employees dropped to 150,000.
Additionally, the restriction of business travel all throughout the year has had a hard impact on hotels located in Bucharest and major cities, as it was the main driver of demand for inner-city accommodation. Overall, the net occupancy rate has dropped to 22.9 percent in 2020 from 34.2 percent in 2019.
According to HVS, based on previous events which had a major impact on the hotel industry, such as the 9/11 attacks in 2001 and the global financial crisis in 2009, it took the market about 6 years to recover fully, both in terms of ADR and occupancy. In a recent survey, hotel owners expect a full recovery of the market by 2024. As regards the short term rental market in Bucharest, this had a similar fall as the hotel market. While regulations on such properties were far more permissive than those regarding the hotel market, the drop in demand has led to some owners’ decision to take their properties off the short term rental market and list them as long term accommodation.
“This resulted in a smaller number of available properties. 651 fewer properties were listed on airdna.com and vrbo.com in Bucharest in 2020. In terms of demand, while 449,403 listing nights were booked throughout 2019, the number of nights booked in 2020 was 51 percent smaller,” Timofte concluded.