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Tourism, not a walk in the park - Doing Business | DOINGBUSINESS.RO

  |  14.11.2012

Tourism, not a walk in the park

Increased operational costs, lower budgets for travel and corporate events, the endless lack of local infrastructure and overall, a diminished business activity are only several features that shape the scene of local hospitality industry this year in Romania

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However the potential, the tourism industry accounted for an average 1.4 percent of the GDP in the last four years, representing some EUR 6 billion, the amount pales in comparison with countries as Bulgaria, where the tourism accounts for 3.6 percent of GDP, or, in Hungary where the tourism stands for 4 percent of the country’s GDP. According to specialized consultants, tourism in Romania is not to see any soon large investments due to the lack of predictability in economy reforms and fiscal frame.

 

Consulting and management company Trend Consulting issues a yearly report on the hospitality industry of Romania that previews some positive variations in numbers, especially turnovers, occupancy rates and number of clients. However, the study warns that bigger numbers (in turnovers) don’t necessary mean larger profits for a hotel company and sometimes, it may even result in smaller performances, even in the presence of larger sale volumes. It all depends on the average occupancy rate, average room rate and other specific indicators in this industry. “Tourism should not be analyzed out of the global economy,” states the latest report of Trend Hospitality. That is obvious, as the traveling rates and the demand for tourism services are strictly determined by the economic state of three very important markets: Europe, USA and Japan.

 

A glass half full or half empty?

 

The current economic turmoil stated by all the markets, European or more remote, only affected the financial clients’ capacity to travel. In the past 20 years, there were other crisis that directly compromised the willing of clients to travel, due to safety reasons (wars, social conflicts, calamities, epidemics). This time, the affordability is the main factor that decides if travelling will happen in the case of leisure travelers. In the case of corporate travels, it sometimes may also have an impact but more seldom.

 

For this year, at European level, the report of Trend Consulting estimates based on the World Travel and Tourism Council that tourism industry is expected to register an increase of 4.2 percent for 2010- 2020. Regarding the operational indicators, such as average occupancy rate and average room rate, all European regions showed increases so far. But even if these numbers are positive, the profits and revenues resulting from the tourism operations decreased. A mid-year PwC Romania’s study states that revenues of Romanian leisure and hospitality industry declined by 16 percent over the past four years reaching approximately 1.5 billion EUR in 2011. The drop was caused mainly by the diminished number of foreign visitors, who reduced their spending in Romania from over 750 million EUR in 2008 to less than 600 million EUR in 2011. Domestic tourists also reduced their expenses, but the decline was less severe, just 11 percent, from 1.01 billion EUR to 900 million EUR.

 

Large potential, small contribution

 

Romanian leisure and hospitality industry accounted for an average of 1.4 percent of the GDP in the last four years, but adding to that the indirect and induced contributions of adjacent services and related industries , tourism brings almost 6 billion EUR to Romania’s GDP. Even so, Romanian tourism has a low contribution to the GDP, compared with other countries in the region (in Bulgaria tourism accounts for 3.6 percent of the GDP, in Hungary 4 percent, while in the Czech Republic 2.8 percent). Following WTTC data on 2011, Romania ranks on the 67th position from 18 countries as tourism contribution to national economy. The WTTC estimations state that this amount will state an yearly growth of 6.6 percent by 2021, to reach 42.8 million lei. The estimated value for 2011 of leisure industry is 17.3 billion lei, with a growth of 8.8 percent, while business segment (within hospitality industry) is estimated to reach 11.2 billion lei and yearly growth of 3.7 percent. Furthermore, the report reveals that Romania has one of the lowest occupancy rates in Europe, of an average of only 26 percent, with Bucharest hotels having a more than double occupancy rate (62 percent), compared with the rest of the country. However, revenues for available room decreased even in Bucharest during the past four years. Besides the downturn, the increase of the hotels offer in Bucharest is also responsible for the decrease in the RevPAR (revenues per available room) indicator.

 

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