Kyiv's ho­tel mar­ket re­bounds

Kyiv Post Legal Quarterly - - Contents - By Josh Koven­sky Koven­sky@kyiv­post.com

For Kyiv’s hote­liers, there's good times and bad times in the mar­ket.

The May 26 UEFA Cham­pi­ons League fi­nal football match, which drew thou­sands of for­eign guests, con­fronted price goug­ing. It was a rare mo­ment of beauty for a mar­ket that suf­fered a mas­sive drop in tourists and busi­ness­peo­ple fol­low­ing the 2014 Euro­maidan Revo­lu­tion that drove Pres­i­dent Vik­tor Yanukovych into Rus­sian ex­ile.

Nei­ther feast nor famine to­day, de­mand is ris­ing and sup­ply is stay­ing flat, giv­ing the city’s hote­liers an op­por­tu­nity.

“It’s not about tak­ing ad­van­tage, I don’t see it that way,” said Levent Cen­giz, gen­eral man­ager of the newly opened Aloft Ho­tel in cen­tral Kyiv. “It’s pretty nor­mal. You can sell a room for maybe 20,000 eu­ros.”

Aloft opened in Fe­bru­ary, and be­longs to Star­wood Ho­tels, a sub­sidiary of con­glom­er­ate Marriott In­ter­na­tional. The ho­tel added 310

rooms to Kyiv’s mar­ket tar­geted at, as Cen­giz said, a younger, mil­len­nial de­mo­graphic.

“There is an op­por­tu­nity here, but we’re not forc­ing any­body to pay this money. It’s there. Take it or leave it,” Cen­giz said. “It’s the free mar­ket.” Re­bound But Cham­pi­ons League fi­nals are few and far be­tween. Other big events that drove tourism in­cluded Euro­vi­sion 2017 and the Euro 2012 football cham­pi­onships.

Still, ho­tel oc­cu­pancy rates are re­cov­er­ing, said Alexan­dra White, an ex­ec­u­tive at STR, a com­pany that con­ducts mar­ket re­search in the hos­pi­tal­ity sec­tor. “Kyiv is gain­ing back the im­age of a safer city, and is quite at­trac­tive, not only for tourists but also busi­ness­peo­ple,” White said.

Av­er­age daily room oc­cu­pancy rates hit 50.9 per­cent in 2017, up from 44.8 per­cent in 2016 and 49.9 per­cent in 2013.

Hos­pi­tal­ity as­so­ci­a­tion Hote­liero’s CEO An­driy Skipyan of­fered a less san­guine view, say­ing that “we still re­main be­hind the ma­jor­ity of Euro­pean cap­i­tals, where oc­cu­pancy is be­tween 60–70 per­cent on av­er­age.”

And thanks to the hryv­nia’s mas­sive de­val­u­a­tion, prices have dropped since 2013.

Ac­cord­ing to data pro­vided by STR, the av­er­age price of a ho­tel room in Kyiv in 2013 was Hr 1312 ($164) per night, ac­cord­ing to the ex­change rate of eight hryv­nia to the dol­lar.

But in 2017, the av­er­age price has changed to Hr 2,706 ($103) per night, a drop of around $60 from the 2013 av­er­age.

Ac­cord­ing to Michal Rao, an STR an­a­lyst who cov­ers the Kyiv mar­ket, “It's not un­usual for the ho­tels to be charg­ing much higher rates dur­ing these events.”

“In coun­tries like Rus­sia and Ukraine it’s much more vis­i­ble be­cause the (reg­u­lar) rates are gen­er­ally lower in these markets.”

Stag­nat­ing sup­ply

In spite of the im­prove­ments in the coun­try’s im­age and the steady growth in de­mand and oc­cu­pancy rates, al­most no new ho­tels are planned to be built.

Aloft Kiev was restarted at the end of 2016 af­ter be­ing put on hold by Star­wood in 2014, Cen­giz said.

“The idea was to open the ho­tel in 2013,” he said. “The events of 2014 in Ukraine, in Kyiv post­poned the open­ing once again, so we were (only) able to achieve it in Fe­bru­ary of this year. There was un­cer­tainty with the po­lit­i­cal sit­u­a­tion in the coun­try, so it was on hold.”

The Park Inn by Radis­son Kyiv re­cently opened, as did the Ibis Kiev Rail­way Sta­tion ho­tel.

“To­day Kyiv has a deficit of mid­dle-mar­ket ho­tels,” said Skipyan, adding that some brands — like Best Western — are in­ter­ested in the mar­ket as a space for “fur­ther de­vel­op­ment.” Best Western only had one pro­ject in Ukraine’s Sev­astopol, a city in Ukraine’s Crimea cur­rently oc­cu­pied by Rus­sia.

But most of the city’s re­cently opened ho­tels were ini­tially planned be­fore the events of 2014, sug­gest­ing a drop in in­ter­est lately.

“There is not much sup­ply com­ing into the mar­ket, so that’s par­tially driv­ing oc­cu­pancy,” said White. “We don’t see huge ad­di­tions in the pipeline, it’s rather flat.”

Rao said that cor­rup­tion per­cep­tions are still pre­vent­ing new in­vest­ment.

“There’s been a huge thing about cor­rup­tion, bribes and things like that,” Rao said. “With all of that in mind from the past, it’s still hard to change minds of peo­ple to con­vince in­vestors to come into the coun­try and build new ho­tels and in­vest into the lo­cal in­dus­try.”

The 310-room Aloft Kiev ho­tel opened in Fe­bru­ary, in time to en­joy an in­dus­try on the re­bound. (Oleg Pe­tra­siuk)

A ho­tel room in the Aloft Kiev. The 310-room ho­tel is man­aged by Marriott In­ter­na­tional. The is cen­trally lo­cated near the corner of Bas­seina and Es­planada streets, near Olimp­isky Sta­dium and the Guliver shop­ping mall and busi­ness cen­ter. (Oleg Pe­tra­siuk)

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