Little room for optimism on inhospitable hotel market

Newsroom 19/06/2013 | 10:37

Local hoteliers are hoping for an increase of about 5-8 percent in the leisure segment this year as more Romanians choose to spend their holidays in their home country. The business segment, on the other hand, is stalling, with growth expected to come mostly from POSDRU-financed training and events, Ioan David, general director of the local Ibis hotel chain, told BR.

By Simona Bazavan

How can Romania attract more tourists, especially on the leisure segment?

First and foremost I think it all depends on promotion. Romania and Bucharest are very poorly promoted compared to other places such as Budapest or Prague. Of course, we don’t have the same reputation on the leisure market as these destinations but, nevertheless, there are a lot of things that could be done. A little goes a long way.

And this does not apply only to leisure tourism but also to the business segment. A very clear example is the Enescu Festival. This is a major event, and yet it is not promoted at all in Europe. You won’t see this happening elsewhere.

Another factor that could help increase the number of foreign tourists is more direct flights to Bucharest. At present there is no direct flight connecting us with Asia. By comparison, Budapest has such flights and Asian tourists, be they Chinese, Japanese or Indians, fly to Budapest and begin their trips to European destinations from there. The city acts as a sort of gateway. Romania too could benefit from this.

Another segment is the MICE (e.n. meetings, incentives, conferencing, exhibitions) market. We are doing very poor business on this segment compared to other countries. And I am not comparing us with Paris; neighboring Hungary fares much better. Last year it had 156 international events while only 32 were held in Romania.

A lot of growth could be achieved if these issues were addressed. Some of them have to be dealt with by the government while others have to do with private players.

But it is very strange that the Enescu Festival gets no promotion either from the Ministry of Tourism or the Bucharest authorities. Even if there aren’t enough funds, something could have been done. There is a huge difference between a little promotion and no promotion at all. Very little is known about it abroad and I’m sure that music lovers who go to Salzburg for example would definitely come to Bucharest if they knew about it. And the entire city would benefit from a greater influx of tourists, not only the local hotel industry.

On the MICE market do Romania and Bucharest in particular have the capacity to host more such events?

Less than 20 percent of the existing infrastructure is currently being used, so yes, we definitely have the capacity. Of course, if in the future we want to enter direct competition with, let’s say, Budapest, we would need something new, not necessarily bigger but more impressive. For example, the Parliament Palace alone has huge space that isn’t used.

Apart from a few important events such as Bookfest, a few fairs and music concerts, is not much going on at present.

Indeed, Bucharest has seen a greater number of concerts in recent years and this has been good for business. Our Ibis Parliament hotel was fully booked during the Bon Jovi concert in 2011 and so were other hotels in the area.

Overall, how do you see the leisure and business travel segments progressing this year and where will the growth come from?

The leisure segment grew by 5 to 8 percent last year and I believe it will post similar growth this year.

Of course it would increase even more if the above mentioned factors were addressed.

On the business segment I don’t see any significant growth in 2013 as I don’t see improvements and other European countries aren’t doing much better.

An important growth factor would be attracting more EU money from the Sectoral Operational Program Human Resources Development (POSDRU). Companies organizing training under this program generated good business for us in 2011. The following year the POSDRU financing was blocked due to irregularities and it was later resumed, but we have seen a very modest development on this segment this year. Should the situation improve in the second semester we will be able to talk about growth on the business travel segment too.

For what share do foreign tourists account in the total number of guests Ibis has in Romania?

While a few years ago foreigners represented the majority, now they account for about half. We’re seeing more Romanian customers, both business but especially leisure travelers, because they now travel less abroad and opt for shorter albeit more frequent stays in the country.

Last year we launched city break packages and we have had good results. In the first five months of this year most of our guests were Romanians, followed by Germans, British, Italians, Americans, French and Turks.

What are Ibis’s expansion plans in Romania?

At present we have a network of four hotels. Two are located in Bucharest, Ibis Gara de Nord (opened in 2001) and Ibis Parliament (2005), and the other two are in Constanta (2005) and Sibiu (2009). The hotels are run in partnership under a form of management contract with Continental Hotels which actually owns the properties.

Land and construction costs have dropped a lot since 2007 and it is definitely a good time to invest in hotels if one has the necessary money.

At present expansion plans are on hold and I don’t think there will be a new opening over the next two years because this is the minimum period it takes from the moment works begin. Now everything is on standby. I am talking exclusively about Ibis and not the entire Accor business in Romania.

Continental Hotels had further expansion plans but then the crisis hit. (e.n. in 2009 after the opening of Ibis Sibiu, Continental announced plans to open seven more units by 2013). For now there aren’t any new developments.

How long does it usually take to recover the investment in the opening of an Ibis hotel?

In general Accor targets a 15 percent ROCE (return on capital employed) which means that the investment could be recovered in about six to seven years. (e.n. The most recently opened Ibis hotel in Romania, Ibis Sibiu, was opened in 2009 following an investment of about EUR 9 million).

What turnover did the four Ibis hotels report last year and what is the target for this year?

Last year we had a turnover of about RON 37 million (approximately EUR 8.3 million), up 5 percent y-o-y. This year we want to grow it by 6 percent and so far we are on target. We also want to increase our occupancy rate from 54 last year to 55 percent. Ibis Parliament alone managed to post a 24 percent increase in occupancy in the first five months of the year y-o-y. We reported growth for the other three hotels too and the most recently opened unit, Ibis Sibiu, is stabilizing three years after opening.

With a 70 percent share of revenues, business travel represents the bulk of our business, especially before May when the summer leisure season takes off.

When do you think the local hotel industry will be able to post similar results to the figures before the crisis?

For us, the best years were 2007 and 2008. We reported a similar turnover to last year but at a different exchange rate. Moreover, in 2008 we reached the same turnover with three hotels as we have today with four.

The occupancy rate was similar but prices were much higher. Back then the average price was EUR 80, now it is EUR 40. And this has happened across the industry, not only for three-star hotels such as ours.

We all had to lower prices, diversify our offers and try to enter new segments – launch leisure packages for example. It is hard to say when it might be possible to return to pre-crisis revenue levels. I don’t see this happening over the next five years.

simona.bazavan@business-review.ro

BR Magazine | Latest Issue

Download PDF: Business Review Magazine March (II) 2024 Issue

The March (II) 2024 issue of Business Review Magazine is now available in digital format, featuring the main cover story titled “BAT DBS Romania Hub: A Vibrant New Office For An Employee-Centric
Newsroom | 27/03/2024 | 17:32
Advertisement Advertisement
Close ×

We use cookies for keeping our website reliable and secure, personalising content and ads, providing social media features and to analyse how our website is used.

Accept & continue