A survey launched in April 2020 by Cushman & Wakefield and the Romanian Hospitality Industry Federation (FIHR) targeting Romanian hoteliers showed the COVID-19 pandemic had a very rapid and drastic impact on the Romanian hotel sector. According to the industry survey, 64% of hotels were already impacted within the last week of February, when the virus was confirmed to have reached Romania.
Romania declared state of emergency on March 14 and the number of hoteliers impacted increased to 98% in the third week of March, ultimately reaching 100% in April.
As international demand disappeared, the occupancy of Romanian hotels rapidly decreased to single digit numbers, causing a significant loss of income. The loss in demand resulted in average losses of EUR25.9 per room per day in April 2020, indicating a 178% decline compared with the same period in the previous year.
Following government orders to temporarily close borders and ban public gatherings, the vast majority of hotels across Romania closed. According to the survey, 75% of hotels were closed by the end of March. With restrictions being eased many hotels are reopening again but 2% of hotels that are only planing to reopen in 2021.
To deal with the unprecedented crisis, hoteliers took drastic cost-cutting measures, including staff layoffs. According to the survey some 29% of the workforce has been made redundant.
Considering the current market conditions and limited government aid provided, 80% of hotels indicated they would be able to financially survive up to fourth months under the crisis conditions. As the survey was conducted between the months of April and May and as demand has not yet returned, the survival threshold for the majority of hotels will be reached in August. Although considerable efforts have been made by hoteliers to reduce operational costs, governmental support is urgently needed to protect employment in the hospitality sector.
Similar to other countries across Central and eastern Europe, COVID-19 required hotels in Romania to shift priorities towards reducing overall operational expenses alongside sales and marketing costs in parallel to managing the influx of booking cancellations. From a human resource perspective, 80% of respondents focused on utilizing the subsidized leave provided by the government to address the COVID-19 crisis. Overall, Romanian hoteliers reduced headcount by 29% compared with a 24% average across CEE.
Despite borders having reopened to the European Union as of June 1, the difficult first half of the year for the industry calls for further staff reductions, reaching a 398% headcount cut.
Romanian hotel respondents expressed the highest level of dissatisfaction among CEE countries with 85% of hoteliers saying national authorities gave unclear information. While satisfaction with government support was relatively low, at 15%, it was higher than in other CEE countries where just 10% of hoteliers were satisfied with their national government aid.
In the weeks between April 24 and May 25, 75% of hoteliers said they were ready to reopen their properties and 87% said they were confident they could ensure the safety of both guests and employees. As hotels have reopened and others continue to prepare for reopening, hoteliers in Romania said the safety of guests and employees is central to their strategies towards recovery. With COVID-19 causing major concerns among travelers and hotel personnel, the vast majority of respondents indicated being in favor of a new health and safety certification being established in Romania.
The opening of European borders and lifting of travel restrictions has enabled the majority of hotels to reopen and enter the recovery phase despite the limited support provided by authorities. While very low demand remains of most concern, hoteliers will also face challenges caused by increasing supply with several notable additions expected to open throughout the summer season.
Compared with other markets in CEE, Romanian hotels are less depended on international demand as nearly 80% of arrivals are domestic. While this factor will certainly help with the recovery, the slow anticipated return of business travel remains a concern, due to corporate demand acting as a major driver of occupancy in Romania. Nonetheless, multinational companies have recently expressed interest in relocating to Romania which will contribute towards boosting business demand on the medium to long term.
While likely to primarily impact hotels in Bucharest, the European Football Championship planned for next year is hoped to have a positive impact on hotel performances and mark the recovery process towards driving healthy occupancy.
The long-term outlook for the Romanian hotel sector remains positive, underpinned by the healthy tourism growth in recent years as well as continuous attractiveness of the country for international businesses, driving corporate and conference demand.
According to Oxford Economics, the number of nights in paid accommodations in Bucharest is expected to reach pre-crisis levels only between 2023 and 2024, but show a healthy growth in the following years.