The hospitality industry was among the first hit by the coronavirus crisis and will be among the last to recover. Operational changes, particularly related to health, cleanliness and flexibility and the use of outdoor spaces will become key. A focus on minimizing food waste, substantial promotion of vegan choices and locally produced products and a proactive interest for smart devices planned to diminish energy consumption are just a few trends intended to shape a more sustainable future starting 2021, Colliers said.
Considering the market history before the pandemic period, Colliers consultants are optimistic about the capacity of the market to recover and that investor interest in this market will return with time even though the next few years will certainly prove difficult. Developers continued their hospitality projects and found ways to negotiate with the financing banks.
Even during a pandemic, brand novelty, attractive design and a good quality-price ratio managed to create an occupancy of 20-30% during weekdays and of 45-50% during weekends.
In terms of future pipeline, there are still few hotels under construction and brands are seeking good locations for affiliation, the report noted.
By the end of 2021, Colliers consultants expect to see the opening of Ibis Airport (85 rooms) and the new luxury hotel Autograph Collection in Bucharest’s Old Town (215 rooms), which are in an advanced stage of development.
“The medium-term outlook remains challenging. Globally, tourism has fallen in 2020 to a 30-year low in terms of activity. The World Tourism Organization within the United Nations (UNWTO) published recently the results of a survey: in Europe, most tourism experts are seeing the return of activity to pre-pandemic levels of international travel no sooner than 2023. Furthermore, the survey also mentioned that a more material recovery in international travel should come in the second half of 2021, but quite a few see this as rather a 2022 event. We would expect Romania to follow suit and rebound at a similar pace to other European countries. And while Romania as a whole did not rely that much on foreign tourists (the country had one of the lower numbers of international visitors in CEE), Bucharest will suffer, as it did see an increasing amount of both business and leisure tourism in the run-up to the coronavirus pandemic,” said Raluca Buciuc, Partner & Head of Valuation Services and Hospitality Advisory Services, 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% last year. In a decent scenario, the occupancy rate was supposed to increase towards 50% by year-end for established hotels, but the second wave of high number of positive tests did not allow the industry to recover. As Bucharest is not a standard summertime vacation option and is more related to the business travel scope, occupancy remained low during summertime, within the same 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 20-25%, compared with the average registered in the same period in 2019, reaching an average of RON250/ room/ night.
The combined outcome of travel limitations and government guidance on social distancing resulted in the postponement or cancellation of many high-profile events, conferences or conventions, which directly drove down travel for business and leisure.
“In a normal year, at a 4-star hotel which allowed for private events, these services added around 40% of the annual revenue, while for the sought-after 5-star hotels, the share easily jumped the 50% threshold. Interestingly, newer and more flexible hotels may be somewhat more advantaged by this situation, as they tended to place a slightly lower emphasis on restaurants/events. We see 2021 as a good year for the entry of new or exiting international brands. We expect a return to somewhat normal activity in 2022 and we see long-term players preparing in this respect,” said Anca Merdescu, Associate Director Investment Services, Colliers.
The pandemic has fundamentally changed the customer experience and certain types of travel, like summits, which may never fully return to pre-pandemic levels. As it will take some time for international business travel to recover, local tourism will continue to play a significant role more than ever, the report noted.