Romanian Hotel Industry – Reverse Trend
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Aprilie 2009 |
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EFG EUROBANK FINANCE S.A. |
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Bucureşti, Sector 1
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In 2008, a forecast released by the World Travel & Tourism Council (WTTC) estimated that the contribution of travel and tourism industry to world GDP is expected to reach 9.9% (USD 5,890 bn) and for the next 10-year to rise up to 10.5% (USD 10,855 bn). Although the long term forecast will probably hold, a downward revision for the next two to three years will be appropriate. In a January 2009 summit held in Lisbon, World Travel & Tourism Council acknowledged that preliminary estimates indicate that Travel & Tourism Economy GDP increased by only 1% in 2008, 2 percentage points below from the previous assessments. Moreover, Travel & Tourism Economy GDP is expected to even contract by 3.5%, but this figure could suffer alteration. As the entire global economy, there is no question that in the following period Travel & Tourism Industry will face serious challenges.
Regional overview
For 2008, the Statistical Office of the European Communities, Eurostat, reports a slight decrease in nights spent in hotels and similar establishments, whether for business or leisure, throughout the European Union 27, representing a drop of 0.5% compared with 2007. However, this is a trend reverse after a string of relatively constant growth rates previously recorded in 2005 (+4.6%), 2006 (+4.3%) and 2007 (+3.1%). Similar to the previous year, the biggest contribution to this figure was made by Spain (270 mn), followed by Italy (247 mn) Germany (219 mn), France (204 mn) and United Kingdom (173 mn). These five countries accounted for about 70% to this number. While in 2007, the number of nights spent grew throughout EU27 except Cyprus, in 2008 the number spent in hotels increased in 14 and fell in 12 member states. The fastest growth was recorded in Slovakia (+7.7%), Poland (+4.7%), Latvia (+4.6%). Amongst the countries recording the biggest declines were Cyprus (-4.8%), Greece (-4.6%) and the Netherlands (-4.1%). Even though during the months of January to April the total number of nights followed an ascending trend with a 1.6% increase, the reverse started between May to August, when hotels and similar establishments registered a slight fall of -0.5%. As a result of the financial and economic crisis which started to reveal its effects in the fall, the nights spent in hotels for the following months, September to December continued the descending trend with a steeper decline of -3.2%.
In a previous forecast, referring to the Central and Eastern Europe region, World Travel & Tourism Council considered that the tourism and travel industry weight in the GDP will rise from 8.1% (USD 260.3 bn) expected in 2008 to 8.7% or USD 607.1 bn by 2018. In terms of employment the CEE T&T industry is expected to grow from 10,389,000 jobs in 2008 (6.9% of total employment or 1 in every 14.5 jobs) to 11,263,000 jobs or 7.5%, while the real GDP growth is expected to be 5.3% in 2008 and to average 6.0% annually over the next 10 years. The exports earnings generated by the foreign visitors are expected to produce 9.8% of total exports (USD 139.4 bn) in 2008 and to reach USD 284.4 bn (9.4% of total) in 2018. Among the 13 regions monitored by the WTTC, Central and Eastern Europe Travel and Tourism economy is ranked number 4 in absolute size worldwide, 10 in relative contribution to national economies and number 4 in long-term (10 year) growth. Even though the long term implications of the current global financial and economic crisis are not yet weighted, the actual results for 2008 will probably suffer serious corrections from expectations.
Despite being part of a promising emerging market, the hotel industries in Central and Eastern Europe are starting to be affected by the global crisis. As it is the case with numerous multinational companies, many brands are postponing their projects in the region. Harsh financing conditions forced developers and investors to focus on current projects, while performance indicators in the region started to deteriorate comparing with the previous years. Hence, it is not surprising that leading European hotel companies, although considering the emerging markets in Central and Eastern Europe having a great potential for growth, decided to delay their projects. Industry experts cited in a recent article published by Bucharest Business Week, report that among these postponed projects are a Sheraton managed hotel (200 rooms) near Romexpo, a Meridian Hotel on Calea Victoriei, and a Ramada Inn in Baneasa Business Park. Other delayed developments include Bulevard hotel, a Starwood managed property, located in the heart of Bucharest near Casa Armatei, Lebada in the outskirts of Bucharest, a Golden Tulip with 140 rooms close to DN1 and a complex including a conference center, hotel and office near DN1, also managed by Starwood.
In spite of the presence in the region of low cost carriers such as BlueAir of Romania, Centralwings of Poland, MyAir of Italy, SkyEurope of Austria/Slovakia, GermanWings of Germany, Rynair of Ireland, Wizzair of Hungary and others a number of international airports in CEE region reported a decrease in passanger numbers in the latter part of 2008. Overall, the hotel performance for 2008 recorded a setback across the CEE region form the previous year. According to a recent study released by CBRE Hotels CEE, occupancy rate dropped 6.7% while average daily rate (ADR) increased by 7.4% leading to a small rise in RevPAR (revenue per available rooms) of 0.2%. Amongst the worst performing capitals in the CEE region, Bucharest and Prague recorded a drop in RevPAR of more than 11%.
Romanian hotel market at a glance
After registering a constant increase in the total number of nights spent in hotels for several years, according to Eurostat, Romania recorded a timid 1% rise in 2008 compared to 2007 when ranked second in the EU27 with a growth rate of 8.8% (total number of nights spent in 2006, 2007 and 2008 amounted to 18.1 mn, 19.7 and 19.9 respectively). While in 2008 in EU27 the number of nights was almost evenly split between non-residents (46%) and residents (54%), Romania registered the lowest percentage of nights spent by nonresidents (16%), followed by Germany (21%), Sweden (23%), Finland (30%) and Poland (31%). This is a decrease of nonresident spending nights from the previous year of 5.7% when the foreigners accounted for 18% of the nights spent (3.5 mn in 2007 and 3.3 mn in 2008).
In terms of accommodation facilities Eurostat reports that Romania posted a modest 4% increase in the total number of tourism accommodation facilities for 2008 from 4,694 establishments registered in 2007 to 4,884 in 2008. This represents though a positive factor considering that from 2006 to 2007 the total number of touristic establishments slightly decrease from 4,710 in 2006 to 4,694 in 2007.
During the last years, while hotels accounted for about 22-23% in the total number of lodging facilities, the rest being made up by the motels, inns, tourist villas and other establishments, in terms of the number of beds hotels represented between 57.83% in 2005 and 59.62% in 2008 of the total number of beds.
Local trends
At the end of 2008, the number of Romanian hotels by comfort level was still dominated by the 2-star hotels holding the majority market share of 40.94%, followed by the 3-star category with a 31.61% of the total (almost unchanged from the previous year of 31.63%).
The high-end categories of 4- and 5-star hotels represented in 2008 more than 10% of the overall market share, rising by more than 1% from the previous year (9.21% in 2007).
