Ukraine hotels improve performance amid recovery
Ukraine hotels improve performance amid recovery
28 NOVEMBER 2016 9:27 AM

The end of political and economic upheaval in Kiev and Ukraine’s provinces has been good for the hotel industry, as data shows increases in key performance indicators. 

GLOBAL REPORT—In 2016, hotels in both Kiev and Ukraine provinces have enjoyed strong tourist traffic—a recovery provoked by the end of economic and political instability in the country, as well as a stable ceasefire between government troops and pro-Russian rebels in eastern regions.

Ivan Lipluga, head of the tourism and resorts department of Ukraine’s Ministry of Economic Development and Trade, estimates that overall inbound tourist flow this year will rise 15% (to 15.5 million people) compared to 2015. The ministry also expects an increase in internal tourism, since purchasing power of citizens is rising but so far not enough to spur trips in the European Union.

There are serious reasons for optimism since, according to hoteliers, Kiev is regaining its status as one of the cultural capitals of Europe, while Ukraine soon could obtain the status of fully safe for tourists.

Occupancy, RevPAR improving
As a result, all agencies have identified strong increases in the main performance indicators for the country’s hotel industry. According to a report by UTG, Kiev hotels saw a 5% rise in occupancy (to 40%) during the first half of 2016, compared to the same period last year. Data from STR, parent company of Hotel News Now, shows 43% occupancy for Kiev hotels from January to July 2016, indicating an increase of 23.5% in year-over-year comparisons.

“The Kiev hotel market is gradually recovering and starting to increase both occupancy and rates,” said Tatiana Veller, national director of Russia & CIS at Jones Lang LaSalle’s Hotels & Hospitality Group. “Average occupancy of Kiev hotels rose 16% versus the same period of 2015—up to 37%. At the same time, the current result still lags behind the levels of more stable periods. In January to June 2013, about half or 48% of the rooms in branded hotels were occupied in Kiev.”

Occupancy remains even stronger for Ukraine’s provinces, where the metric rose 18.6% (to 47.5%) from January to July 2016, according to STR.

“The main tourists, as usual, are the citizens of Poland and Germany,” said Olga Kurenkova, deputy director of Cosmopolitan Hotel. “Turkey accounts for slightly smaller share, but it is also growing. In terms of new trends, there are growing number of tourists from China.”

“Usually at this time, occupancy falls, but this summer we saw very good results,” said Maryna Rymarenko, director of strategic development for DEOL Partners. “On some of our sites, occupancy was above 70%, which is much better than in the beginning of the year, as we have an increase of 15-20% depending on the certain site.”

However, an improvement in occupancy so far hasn’t allowed hoteliers to raise average daily rate. According to a recent report by Colliers International, ADR fell in the first half of 2016 by 16.1% to €310 ($329.26) per day for five-star hotels, by 6.7% to €118 ($125.33) for four-stars hotels and by 0.8% to €54 ($57.36) for three-star hotels. However, in Ukranian hryvnias, prices rose slightly, partially offsetting devaluation of the national currency.

According to STR, Kiev’s ADR decreased 0.2% to $106.95 compared to the first half of 2015. In Ukraine’s provinces the metric dropped 8.3% to $75.85. However, RevPAR increased 23.2% to $46.01 for Kiev, and grew 8.8% to $35.99 in Ukraine’s provinces.

Optimism is still limited
The decline in ADR could point to a continued lack of confidence in the Ukraine hotel industry. Furthermore, the achievement of 40% occupancy is still not enough to revive interests in new hotel construction, according to Alexander Nosachenko, managing director of Colliers International Ukraine.

“Investment attractiveness of the hotel industry is practically close to zero,” he said. “Several projects have been rescheduled for commissioning for 2016, but it is very likely they will be rescheduled further, until the country’s economy can show stable growth.”

At the moment, there are several huge projects in the pipeline for Kiev, including Sheraton Kiev Olympiysky (190 rooms), Aloft (312), St. Petersburg (50), Ibis 2 (350), Renaissance Kyiv (173), Park Inn by Radisson (196), Azimuth Hotel (235), the Indigo (240), and Best Western Plus (120).

Analysts said the launch of these hotels will increase the overall number of rooms in the city by more than 10% and certainly cause a drop in average occupancy for Kiev hotels. A similar situation is occurring in the provinces, where hoteliers so far have refrained from commissioning previously announced projects.

Colliers International also pointed out that occupancy dropped from 55% in the beginning of 2014 to 30% by the end of the year. Operational indicators suggest a recovery, but occupancy so far has not reached the levels of 2013.

Veller noted that no branded hotels have yet been launched in Kiev. She said the most important factor for previously announced projects to be implemented is the increase of ADR in hard currency. She explained that most hoteliers took loans under projects in hard currency, so increase of rates is necessary for them to feel confident again.

In general, with the continuing of current trends, the Ukraine hotel industry could return to pre-crisis levels of operational performance in the next two to three years.

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.