Now that international hotel companies and their key brands such as ‘Sheraton’ (from Starwood) are represented in the capitals of the CEE/SEE countries, the roll-out of midscale and economy brands is beginning.
The primary focus of the brands is currently on increasing roll-outs in Poland, Russia and Romania. The primary and secondary cities are of particular significance in these countries. “Midscale products such as Hampton, Doubletree, etc. are the right products for secondary cities like Krakow and Oradea because the products from these brands offer an attractive price-performance ratio”, says Martin Schaffer, Managing Director of MRP Hotels, a consultancy business which focuses on hotel properties.
The quality of the offer is better than the local offering and prices are significantly below the levels of the upscale or upper upscale products in the main cities. “The biggest challenge will be to find qualified franchisees able to guarantee the quality and brand standards”, says Schaffer of the hurdles faced by the hotel chains. Growth in this region is still taking place almost exclusively through management and franchise contracts. Exceptions include established markets like Warsaw where minimal guarantees are achievable. The expansion of these brands is also injecting new life into another sector. There has always been demand for new projects from operators but now investors are starting to seek out new projects too. An increase in hotel property deals is notable. Schaffer: “Not just in countries which escaped the crisis largely unscathed like Poland but also in other CEE countries too.” While opportunities are indeed being identified in the states of Central and Eastern Europe, growth continues to be limited by a lack of financing. Financing in the hotel sector is difficult or impossible to secure in some countries. Despite this, a certain amount of interest in hotel financing has been noted, for example from Italian banks in the Balkans.