Kiev hotel industry still in recovery mode
05 JUNE 2015 6:38 AM
Following a dismal 2014 due to political unrest, the Kiev hotel market is starting to see some of its key performance metrics increase.
GLOBAL REPORT—The hotel industry in the Ukranian capital of Kiev has rebounded slightly in the time since 2014’s Ukranian revolution, which brought to a head months of civil unrest and fighting in Kiev.
In the first quarter of 2014, the market had experienced some loss, with occupancy decreasing 31.7% to 26.9% and revenue per available room down 28.9% to 372.23 Ukrainian hryvnia ($17.68), according to STR Global, sister company of Hotel News Now. Average daily rate was up 4.1% to 1,382.97 Ukrainian hryvnia ($65.70) during that same time period.
In the first quarter of 2015, occupancy for Kiev hotels was 33.5%, a 24.5% year-over-year increase, according to STR Global. ADR in the quarter was up 75.1% to 2,422.02 Ukrainian hryvnia ($115.07), while RevPAR during the same period was up 118% to 811.38 Ukrainian hryvnia ($38.55).
David Jenkins, national director and executive VP of the Hotels & Hospitality Group for JLL Russia and CIS, said occupancy has increased from the 26.9% figure posted for the first quarter of 2014. However, he noted that the figure is still behind the “stable market numbers” the Ukrainian capital enjoyed during the first quarter of 2012, when Kiev hotels posted occupancy at 52.9%.
He said the devaluation of the hryvnia has affected hard currency ADR, with the first quarter closing at nearly $150 (in U.S. dollar terms), down 20% over the previous year. He noted that during the first quarter of 2012, ADR was at $250. Going back further to 2008, the city saw ADR of more than $400.
“So overall in RevPAR the city is down 7% in the first quarter of 2015 compared to the same three-month period last year, at a lowly $45 (compared to $125 RevPAR in the first quarter of 2012),” Jenkins said.
Market participants say that in 2014, the Kiev hotel industry was hit by numerous factors that contributed to the declining metrics.
“The main performance indicators of the hotel market during 2014 decreased significantly compared with 2013,” said Maryna Rymarenko, strategic development director of DEOL Partners.
“The segment (was) affected by the same factors as the as in a whole: political instability, worsening of the situation in the east of the country and, accordingly, reduction in tourist flows,” Rymarenko said.
Thus, she said the number of passengers in the Ukraine during 2014 decreased 30% compared with the previous year, citing data from airlines.
“The lack of political and socioeconomic stability and the concomitant decrease in business activity significantly affected the hotel market in Ukraine in 2014. Today hoteliers are focusing on optimizing operating costs, and at the same time we also see the trend toward unification of the hoteliers, which are joining forces to find ways out of the crisis,” said Alexander Nosachenko, managing director of Ukraine’s division of Colliers International. “Operators are jointly developing the concept of development of Kiev as a tourist destination to attract major events to the capital, as well as travelers of all categories.”
Experts said the crisis mostly affected international hotel chains, which are mostly in the 5-star segment.
“First of all, the current crisis has affected the luxury segment,” said Vladimir Goraschenko, president of hotel operator Double W. Six of what Goraschenko calls Kiev’s “international or quasi-international hotels” operate at the 5-star level and account for 60% of all rooms. “In a developed and balanced market, this figure is not higher (than) 10% to 15%,” he said.
Goraschenko noted that if key performance indicators of 5-star hotels in 2014 fell by 40% to 50%, then the 4-star segment’s decline would be less significant at 20% to 30%, while the 3-star segment would see declines of 10% to 15%.
“Thus, even with the average drop of 30%, the 3-star segment remains the ‘healthiest’ due to the lower competition here and greater attractiveness,” he said.
At the same time, Russian business left Kiev’s market.
“Clearly demand is still impacted. There is essentially no Russian business, which was the major driver of business to hotels previously, so this has literally been taken out from the market but not replaced,” JLL’s Jenkins said.