Bucharest’s leisure market starts to pick up

After the Howard Johnson Grand Plaza Bucharest increased its business by almost 5 percent last year, in 2014 the target is to at least double the 2013 growth, Sonia Nastase, the hotel’s general manager, told BR. business travel has remained constant, meaning that growth is coming from increased tourism to the capital.

Simona Bazavan

Have market conditions for four- and five-star hotels in Bucharest changed since the beginning of the year?

Yes, there have been changes, and this became noticeable last September when the George Enescu Festival was held. Actually since September last year occupancy rates have increased to levels we hadn’t seen in years. We are once again getting occupancy rates of 80, 90 percent on weekdays. As a result, last year’s overall growth was mainly generated by good results in the last months of the year. And this came in addition to the fact that September, October and November are generally good months for the industry. Last year we saw revenues go up by approximately 5 percent, but growth in the last quarter was more consistent.

The first half of this year has also been good for business in spite of the fact that January and February are slow months in this industry. We and the entire market reported growth. Bucharest posted growth of some 5 percent in arrivals and 8 percent in accommodation nights in the first four months of 2014. The average daily rate still has some catching up to do but there is good news in terms of occupancy. There is a higher volume of tourists and as of last year rates too began to stabilize and I expect them to pick up over the next period.

And where is this growth coming from?

In our case, and I think this applies to the entire segment of four- and five-star hotels In Bucharest, it has come from increased leisure activity. And I am talking mostly about foreign tourists coming from countries such as Israel, Germany, Spain, Portugal, Japan – although a bit less than before – and the UK. There was a 10 percent increase in the first four months of this year compared to the same period of last year. And again, bear in mind that January and February are slow months, so March and May were mostly responsible for this.

Why are more tourists coming to Bucharest?

It is the result of some long-term efforts that are now bearing fruit. Back in the good old days, so to speak, meaning 2007 and 2008, Bucharest was not attractive in terms of rates. So tourists preferred other destinations which were more price-friendly. Over the following years things changed as promotion and lower rates, triggered by competitiveness, started to produce effects. Bucharest has become more affordable. Accommodation is more affordable and there are more and cheaper flights to and from Bucharest. Travel agencies which we have been working with for years are reporting more tourists and higher business because of this.

What about the contribution of business travel?

This has been constant. We’re seeing the same levels as last year, which means that the growth since the beginning of the year has been generated by leisure. For example, today (e.n. Wednesday, June 18) our occupancy rate is above 90 percent and this comes both from guests travelling for business and several tourist groups. It is promising. Over the summer we expect a similar evolution given the number of reservations we have for tourist groups. And summer is a slow period for tourism in Bucharest.

Is Bucharest an actual destination for leisure tourists , or are they in transit?

Bucharest continues to act as a hub. It is included in tours for organized travel groups. They stay in the city for one or two days and the rest is spent in the country – travelling to Brasov, Sighisoara or the monasteries to give just a few examples. The capital is also included in tours to Bulgaria.
Bucharest is not yet a city-break destination for individual travellers. This still needs some effort, but I think that in a year or two we will get there.

What are the top Bucharest destinations you would recommend to a foreign tourist visiting the capital for the first time?

There are many places and a lot of activities to do. First of all, I would recommend the Old Center which looks great and is similar to what can be found elsewhere in Europe. Then, I would recommend the Romanian Village Museum and the Museum of the Romanian Peasant, which are great places to see and there aren’t many similar ones abroad. The city bus tour is also a popular option. At the weekend I would recommend several clubs. There are art galleries to see, such as Galateca. And besides all this, there are all sorts of events taking place – art, cultural and street events such as the recent Street Delivery. Marathons are also popular among foreigners. All this gives Bucharest a dynamic and vibrant feel.

What is the ratio between leisure and business travel in the hotel’s accommodation?

In the year-to-date, business travel generated 40 percent of the room nights, events and conferences generated 15 percent and the rest comes from leisure. Leisure has increased its share since last year. Again, this came from a higher number of leisure tourists and not by drops in the other segments. The market mix is changing and the outcome is positive. For example, at industry level, between January and May the average daily rate was down by 4 percent due to a higher number of leisure tourists, but occupancy was up 15 percent. This led to the revenue per available room increasing by 10 percent. This increase was generated by this different market mix compared to last year.

As the contribution made by business travel has remained constant, the only opportunity was for leisure and the MICE industry (e.n. meetings, incentives, conferences and events), two markets which have not yet reached maturity, to grow.

Health tourism is another opportunity because of lower costs. We are currently looking into this. And we are also looking at new markets and targeting Asia, Latin America and the Nordic countries. We want to develop these markets by attending travel fairs and creating packages for agencies which are themselves focusing on these markets. Already there are positive signs.

The hotel industry is complaining that the local MICE market is considerably underdeveloped. Do you see things changing?

It is very far from reaching its potential. MICE represents a huge opportunity and there is room for growth. Someone travelling for an event such as a conference will spend more than a tourist travelling for leisure. At EU level, a MICE participant spends an average of EUR 430 per day, whereas in Romania the figure stands at EUR 250. So, costs provide an opportunity.

There have been more events than in previous years, but these were strictly connected to EU affairs and were mostly conferences organized by the authorities. In the private sector, there haven’t been events such as company-organized congresses as was the case a few years back. This is because business has been slow, but also because the existing infrastructure is an issue compared to other cities in the region such as Budapest, Prague or Athens. There aren’t high-capacity event halls in Bucharest. The good news is that lately there has been some promotion of Bucharest as a MICE destination and several companies are relocating administrative activities to Romania. In time all this should produce effects and we should see more MICE activity.

What was the hotel’s turnover last year and did it post a profit?

It was around EUR 8 million, up by 4 percent compared to the previous year. Out of the total revenues, about 55-60 percent was generated by accommodation and the rest by food & beverage.

So far this year, revenues are up by 8 percent and we expect this trend to continue to yearend. We won’t have the George Enescu Festival this year but given that growth has been stable so far, this should not be a problem.
Yes, we’ve been posting a profit. After rates stabilized last year and volumes went up, profit went up as well.

How has the hotel’s occupancy evolved so far this year?

In May and June, on weekdays, occupancy increased to around 80 percent. It drops to approximately 40 percent at the weekend. For the whole of 2013 it stood at around 50 percent. This year we are heading towards 60 percent.
To sum up, what are your objectives this year?

To optimize the business and maximize opportunities. On the corporate segment we are working on retaining our clients, but growth can only be minimal given the general business context. On the leisure segment, growth can be more consistent and we are being flexible and trying new things. We are attending international fairs and being flexible in our relations with travel agencies. And we’re seeing results. Of course, our downtown location is an advantage and we maximize this with an attractive price policy. And as I’ve said, I am looking at developing new markets, growing the MICE segment and developing the health tourism segment.

CV – Sonia Nastase
Has served as GM of Howard Johnson Grand Plaza Bucharest since 2009.
Her career in the hospitality industry goes back over 15 years, both in the operational area and in consultancy.
Nastase began her career at World Trade Center Bucharest in 1996, as event and international fair organizer, then moved on to sales and marketing at Athenee Palace Hilton Bucharest between 1997 and 2003. She later joined Howard Johnson Grand Plaza Bucharest where she served as director of sales and marketing from the opening of the hotel until 2006. Nastase later entered consultancy as senior associate at Trend Hospitality.
She is a graduate of the Polytechnic University of Bucharest and of the Romanian-Canadian MBA program.

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