Ukraine’s hotel industry begins recovery
Ukraine’s hotel industry begins recovery
25 JANUARY 2018 8:53 AM

Hotels in Ukraine and its capital city Kiev are on the rebound, according to performance numbers and industry analysts.

GLOBAL REPORT—The performance of Ukraine’s hotel industry improved for the second consecutive year in 2017, which resulted in the return of international investors to the country with the first new projects since the beginning of the economic crisis in 2014.

Key to that recovery is the hotel market of Kiev, Ukraine’s capital, according to Tatiana Veller, head of hotels and hospitality for Russia and CIS at JLL’s Hotels & Hospitality Group.

Kiev hotels have “been quite persistent on continuing along the path to recovery,” she said. “The occupancy has almost climbed back up to the normal for Kiev levels of 48% year-to-date for the period from January to November, 8% higher than the previous year so far.”

Both Kiev City Hall officials and analysts said the city’s hotels strongly benefited in 2017 from the Eurovision Song Contest, which the city hosted in May.

“The international, (meetings, incentives, conventions and exhibitions business) and cultural events are starting to fill up the city again, bringing in big groups and guests to the hotels, and tourists seem to return, thus driving the positive changes in operational results,” Veller said. “We (expect) the year will close with a gain in occupancy of about 7% to 8% versus 2016.”

For full year 2017, Kiev hotel occupancy rose 13.7% year over year to 50.9%, according to STR, parent company of Hotel News Now. The 2017 increase followed a 19.9% occupancy increase in 2016 over 2015.

In the first half of 2017, 6.3 million tourists visited Ukraine, according to the country’s Ministry of Economic Development and Trade. The total number of visitors is an 8.7% increase over the first half of 2016. Over the course of 2016, 13.6 million tourists visited Ukraine, which was a 5.6% increase.

Dmitro Velichko, the spokesperson for the ministry, said Kiev is one of the most “underestimated European capitals” in terms of tourism. The number of visitors in the city most likely will keep growing in the next several years, he said, primarily thanks to the visa-free regime with the European Union and the growing number of the tourists coming from Asia/Pacific countries, led by China and Vietnam.

This will no doubt lead to improving operational performance of the hotel industry and the rising demand for new hotels, Velichko said.

Prices follow the general trend
Kiev’s ADR increased by 5.1% in local currency from 2016 to 2017 to $2,716.08 Ukrainian hryvnias ($93.87). The market’s revenue per available room rose by 19.5% to 1,382.54 Ukrainian hryvnias ($47.78) during the same period. Growth numbers were moderately more tempered in U.S. dollars.

The Park Inn Kyiv Troitskaya by Radisson was the first hotel to open in Kiev in three years. (Photo: Park Inn Troitskaya by Radisson)

“The USD rates in quality hotels in Kiev, mainly upscale and luxury, have been relatively stable, so far having only lost ¬¬¬($3) off the ADR since the beginning of the year, and in January – November having reached $148,” Veller said. “We suspect that this is more an artificial loss, due to the local currency fluctuations, rather than a real drop in rates.”

Veller added online travel agencies are also playing a factor on hotel rates in local currency, which is “slowing growth, but still show a positive trend.”

“Trying to book a room on the touristic portals like shows that the intentions of the hotel managers are set on keeping prices high, especially now, when the demand started to recover,” she said.

New hotel openings
After a three-year hiatus, global hotel brands opened or began construction on new projects in Ukraine in 2017, Veller said, including Park Inn by Radisson, Aloft, MGallery by AccorHotels, Ibis and Best Western Hotels & Resorts.

“(2017) is also the first time in three years that we should witness any internationally-branded hotel openings in the Ukrainian capital,” Veller said, “and this shows that the investors trust that the bottom of the economic cycle has been reached, the stability settled in, and that it only looks up from here.”

Kira Prutko, senior analyst of CBRE Ukraine, said global hotel companies are taking advantage of the rise of business tourists to Ukraine, as the occupancy of convention halls in Kiev hotels in 2017 was above 75% and brought additional profit to hoteliers.

Provinces mostly keeping well
In 2017, the key tourist regions of Ukraine recorded a rise of tourist flow and consequent improvement of the operational performance of their hotels, sources said.

The regions of the Black Sea cost, in particular, have received around 8.5 million tourists from May to September 2017, according to Lilya Krukovskaya, the director of the tourist department of Odessa Oblast. This is roughly 6% higher than during the beach season of 2016, through the final count could be even better if most of the weeks in May and June were not so cold, she said.

As the result, the average occupancy during the season reached 92% in the key destination of Odessa, and ADR was by 8% higher, as compared to the previous year.

Crimea was the only region where the hotels experienced performance declines during 2017. According to the regional Ministry of Tourism, in the first half of the year, the number of visitors dropped to 1.3 million or by 30% over the first half of 2016. Average occupancy also collapsed to 52% from more than 80% registered a year earlier.

Those numbers would market the lowest visitation levels since 2014, when the region was annexed by Russia.

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