The recent attempt by the Romanian tourism authorities to re-establish the seaside as a main holiday destination for both locals and foreigners, along with increasing investments in seaside hotels and infrastructure, could be a winning recipe if all parties work together. As far as hotel investment opportunities go, there are plenty to pick from. The Romanian seaside holds a mix of old, lower-star hotels and newer units, either built from scratch after 1989, or revamped. Investment opportunities still lie in the old facilities, some of which are up for sale and could use a makeover, and even in newer ones which are also on the market.
Smaller investors that own two-star hotels of up to 30 rooms are more inclined to sell this year, say some. “On this segment, the price of a hotel room reaches around EUR 40,000,” Adrian Niculescu, business development manager of Crystal KBC Group, tells Business Review. From what he has seen, around 10 percent of seaside hotels are for sale, either officially or unofficially. “Many owners don't plan to sell but would do, should an interested buyer offer a reasonable price,” says Niculescu. KBC is now intermediating the sale of Riviera hotel in Mamaia, a 230-roomed turn-key hotel on the market for EUR 15 million.
Owners shell out on upgrades, hope sales will tide them over
Owners of seaside hotels include THR Marea Neagra, a company owned by SIF Transilvania, the biggest hotel owner on the seaside. The firm has an accommodation capacity of 11,000 units in 35 hotels and villas, as well as restaurants and bars, on the Romanian coast. The total accommodation stock is around 60,000 units. THR Marea Neagra has recently upgraded the Bran-Brad-Bega complex from two stars to four, but many of the hotels in its portfolio are one-, two- and three-star properties.
The European Drinks group, owned by businessmen Viorel and Ioan Micula, also holds a handful of old hotels on the Romanian seashore, some of which it acquired in 2002. Unita Turism, another Romanian hotel owner, owns 1,345 hotel rooms in holiday resorts Mamaia, Olimp, Tulcea and Cap Aurora, which bring around 35 percent of the company's hotel revenues. Unita Turism is one of the companies investing in upgrading some of its hotels while selling other assets to cover the investments.
While revamping Panoramic hotel in Olimp, which should be ready in 2010, Unita Turism put Onic and Safir hotels in Cap Aurora, which in total contain 342 two-star rooms, up for sale a year ago. The firm says it is now in negotiations with potential buyers. “There is interest but at prices which don't reflect the value of the assets,” Tiberiu Dima, commercial manager at Unita Turism, tells Business Review. The starting price for the two units is EUR 6 million, says Dima.
Smaller hotels a shore thing for low-season profits
Occupancy rates in the hotel industry are not at their highest this season, but a hotel investment started now would begin to generate money next year at the earliest. Tiberiu Dima expects seaside hotels to see an average occupancy rate of 60 percent this year, a drop on the 75 percent last year.
While there are plenty of possible purchase targets, buyers could be found among those who hold liquidities, even at times like this.
“Some of the investors are looking for distressed assets which they could buy at a 50 percent discount, while others are looking for cash flow businesses, office buildings with leasing contracts or hotels already known on the market and with the potential to be affiliated to international chains,” says Adrian Niculescu. Potential buyers may come from the Russian Federation, the Anglo-Saxon area or even from the United Arab Emirates.
Coastal purchase opportunities are not limited to completed hotels. Land is now at attractive prices, says Niculescu, especially plots right by the beach or water. Plots of land which could host hotels of up to 50 rooms should be popular because smaller hotels could also bring their owners profits outside the summer season through conferences. The short duration of the summer holiday season is one of the major setbacks for the Romanian seaside, says pundits. But even so, during this year's season peak, there are fewer tourists filling existing hotels and as an effect some hotel owners have slightly reduced their tariffs. All this will be mirrored in their revenues at the end of the summer, although the decline may not be equally spread across all categories of hotels on the Romanian coast.