Experts of Cushman & Wakefield expect transactional activity on the Polish hotel market to pick up in 2024 as key performance indicators continue to improve and the pressure on investors to allocate capital builds up. Although 2023’s total investment volume on the Polish market was below that of 2019, it reached nearly €83 million - an 82% increase year-on-year. Warsaw, Vilnius and Edinburg are the only main European hotel markets that reported year-on-year growth in occupancy levels last year. At the same time, Warsaw came third for ADR growth (EUR) in 2023, with an increase of 20.1% year-on-year.
In 2023, Warsaw hotels saw occupancy levels rise to 73% on the back of a recovery in domestic demand and Poland continuing to play a key role in providing humanitarian, military and diplomatic support to Ukraine. This saw Warsaw maintain its position among Europe’s top 10 key hotel markets for occupancy rates, taking ninth spot. The Warsaw hotel market also reported the highest occupancy level among CEE key markets – also above the European average (73% vs. 69%).
"According to data from Oxford Economics, domestic demand accounted for 64% of the number of nights in Warsaw in 2023, marking an increase from 61% in 2019. The growth in domestic nights is expected to continue throughout 2024 and to surpass pre-pandemic levels by as much as 30%, while the number of international nights is likely to be comparable to or just above 2019’s level. It is worth noting that the share of international leisure demand soared from 44% in 2019 to 72% in 2023”, says Maciej Prończuk, Consultant, Hospitality CEE & SEE, Hospitality Expert, Cushman & Wakefield.
A constantly increasing number of flight connections between Polish airports and various countries, especially offered by low-cost airlines, has boosted the number of visitors to Poland. In 2023, the number of passengers at two Warsaw’s airports (Chopin and Modlin) rose by 25% year-on-year, bouncing back to pre-pandemic levels. Passenger traffic is expected to continue to grow throughout 2024 but at a slower pace. This upward trend at Warsaw’s airports is, however, likely to be disrupted by Ryanair’s recent announcement to relocate some flights from Modlin for the summer season. This may, however, open up new opportunities for other Polish airports to increase their number of flight connections in 2024.
Improving profitability in spite of rising costs
HotStats data shows that Warsaw hotels’ average gross operating profit as a percentage of total revenue was at the level of 35% in 2023, below those for competitive destinations such as Prague (37%) and Budapest (36%), but above those for Vienna and Berlin (26% each). Hotel owners and managers also took actions to increase ADR to minimise the negative impact of rising operating costs. ADR growth was also driven by changing the characteristic of hotel demand with an increase in the number of individual leisure guests who usually pay higher room rates than conference groups or guests.
"ADR growth of nearly 25% in Warsaw compared with 2019 (in EUR) was lower than in Budapest (34%) and Europe as a whole (27%), but higher than in other CEE-6 key markets such as Prague, Sofia, Bratislava and Bucharest. It is worth noting that although of all the CEE-6 capitals, Warsaw had the lowest ADR, the average RevPAR (in EUR) for Warsaw hotels in 2023 was above that for Bucharest, Bratislava and Sofia thanks to high occupancy levels", explains Maciej Prończuk.
Hotel investment activity gradually picks up
Despite ongoing geopolitical and economic challenges such as Russia’s invasion of Ukraine and conflicts in the Middle East, the hotel investment landscape in Poland is regaining stability following the COVID-19 pandemic and the energy crisis. In 2023, the hotel investment volume in Poland reached almost €83 million, still below 2019’s level but well above 2022’s figure.
"Although hotel investment volumes in Poland are still well below pre-pandemic levels, 2023’s result was undeniably a positive signal for the coming months. There were four transactions for a total of more than 760 hotel rooms. Although some purchases were made by Polish investors, last year’s headline deal was undoubtedly the acquisition of Crown Plaza and Holiday Inn Express at The Warsaw HUB by a French-based investment fund, which was brokered by Cushman & Wakefield. It heralds more transactions with cross-border capital”, says Maciej Prończuk, Consultant, Hospitality CEE & SEE, Hospitality Expert, Cushman & Wakefield.
In 2023, Warsaw hotel yields moved out by 25 bp compared to 2022. The negative impact on property values was mitigated by strong revenue growth.
"In 2024, moderating inflation is likely to have a positive impact on interest rates and, consequently to stabilise hotel yields,” concludes Maciej Prończuk.
