News Article Colliers hotel investment Romania
by Property Forum | Hotel

Considering the market history before the pandemic period, Colliers consultants are optimistic about the capacity of the market to recover and that the investors’ interest in this market will again come back in time, though the next few years will certainly prove difficult ones.

Some developers continued their hospitality projects and found ways to negotiate with the financing banks, highlighting long-term confidence in this market from financially robust market participants. Such examples are Moxy hotel, opened in July 2020, in the Old City Center by Apex group, and Ibis Style City Center, of 150 rooms, located in Stirbei Voda street, opened by Dentotal in collaboration with Accor hotels in June 2020.

Even during the pandemic, the novelty of a brand, the attractive design, or a good balance between quality a price attracted an occupancy of 30-40% during the last quarter of 2020. In terms of future pipeline, there are still few hotels in the pipeline and the brands are still looking for good locations to an affiliate.

For example, Accor chain signed a new management agreement with Alexandra Residence Designed for the construction of a new hotel under Ibis branding, including 144 rooms, SPA, and an event center of 1,000 sqm.

By the end of 2021, Colliers consultants are expected to see the opening of Ibis Airport (85 rooms) and the new luxury hotel Autograph Collection in Bucharest’s Old Town (217 rooms), as they are in an advanced stage of development. Other projects on the radar include a new lifestyle brand, under the Accor umbrella (c. 100 rooms) or Corinthia’s Grand Hotel du Boulevard (50 rooms), or the reconversion of Oscar Maugsch Palace, recently sold by BCR to a group of investors in the hospitality industry, who are expected to announce their strategy in the near future.

“Either way, the medium-term outlook remains challenging. Globally, tourism has fallen in 2020 to a 30-year low in terms of activity. In Europe, as per a World Tourism Organization survey, most tourism experts are seeing the return of activity to pre-pandemic levels of international travel no sooner than 2023. We would expect Romania to follow suit and rebound at a similar pace to other European countries”, says Raluca Buciuc, Partner & Head of Valuation Services and Hospitality Advisory Services at Colliers.

In Bucharest, occupancy persisted at low levels. For instance, a good 4-star hotel in central areas witnessed around 30% occupancy, versus upwards of 80% in 2019. In a decent scenario, the occupancy rate was supposed to increase towards 50% by year-end for established hotels in 2020, but the second wave of positive tests postponed the industry’s recovery. As Bucharest is not a standard summertime vacation option and is more related to the business travel scope, the occupancy rates remained low during summertime, within the level of 10-15%.

The average daily rate (ADR) was also affected but to a lower extent. The average ADR between June and August dropped by 20-25%, compared with the average registered in 2019, in the same period, reaching an average of 250 RON/room/night. Furthermore, the combined outcome of the travel limitations and government guidance on social distancing has resulted in the postponement or cancellation of many high-profile events, conferences, or conventions, which directly drove down travel for business and leisure.

“We see 2021 as a good year for new international brands to enter the market or existing ones to expand their network, as long as the projects under discussions are well located and sizable enough to support the business model. 2022 is expected to be the year of a normalized activity and therefore we see the long-term players preparing the ground for it”, adds Anca Merdescu, Associate Director Investment Services at Colliers.