The hotel industry continues to remain attractive for developers and investors, despite uncertainties in the following period. Strongly affected by the coronavirus generated crisis, many hotel operators are counting on reopening during the holiday season to unblock operations and start recovery.
In March, the first official month of the pandemic, Romanian hotels recorded a 68% decline in the number of tourists, according to statistics board data.
In Bucharest, the occupancy rate was only 15% in March and April, and most hotels closed their doors to economically cope with the significant decrease in turnover. The decline is higher compared to other parts of the world, considering that in Europe the number of tourists decreased by only 19% and worldwide the decrease was 57%, according to the World Tourism Organization.
“The good news is that, in Romania, over 50% of the hospitality industry is ensured by domestic tourism, which has all the prerequisites to relaunch faster than international tourism. Regarding tourism in Bucharest, an important share of the demand, of over 60%, is driven by business tourism. Although it is possible for corporate tourists to change behavior, choosing, in some cases, online meetings at the expense of travel, we still expect this market segment to be the first to unlock the demand from foreign tourists, even in the near future,” said Raluca Buciuc, Partner & Head of Valuation Services and Hospitality Advisory Services at Colliers International.
Hotel occupancy in Bucharest could reach 40-45% towards the end of the year.
Colliers consultants believe tourists will migrate from small local hotels to hotels operated by recognized brands albeit at higher prices. The cost difference will be the price tourists pay for an increased degree of safety offered by operators with the financial means to implement strict hygiene standards, they said.
In Romania, a package of specific measures for this industry has not yet been announced, which makes it difficult to implement a business plan for the reopening of hotels, but measures such as exemption from local taxes or the payment of income tax for a certain period aid for the payment of employees’ salaries or the implementation of security measures could help operators get through this difficult period, Colliers International consultants underline.
“Hotel construction sites continued their activity during the quarantine caused by Covid-19. Owners of hotels, however, found themselves in an activity freeze with no clear outcome yet, even if they continued to remain operational or had to close their doors and take drastic measures like reducing or sending home their staff. On the positive side, they were able to benefit from measures taken by authorities to support businesses and from availability and flexibility from creditors that granted repayment deferrals and reformulated the business model in the new context,” said Anca Merdescu, Associate Director of Investment Services at Colliers International.
While there is still a lot of uncertainty driven by the evolution of the pandemic and the implications of traveling, based on the fact that hotels business in Romania were in a growth phase before the current context and their leverage was not too high, the most likely effect we see shortly will be reduced profits, in some cases significant ones, but at least in terms of hotels affiliated with international brands we do not expect more drastic situations like closing down or fire sales, Merdescu added.