Centre Ville fights to keep over 90 percent occupancy while industry average declines

Newsroom 01/06/2009 | 16:31

Yaron Ashkenazi is one of the very few hotel managers who can report higher than average occupancy rates, even for this year, than any other in the hospitality industry. Last year he saw an occupancy rate of 92 percent at Centre Ville and wants to keep it at a similar level this year, compared to an average market occupancy of around 60 percent.
How does the unit Ashkenazi runs manage to achieve such high occupancy rates? The first and simplest answer is that Centre Ville is an aparthotel, which rents apartments to foreigners doing business in Romania for the long term, and demand is steadier on this segment despite the downturn.
“We have long-term contracts; we have clients here who have stayed with us for more than five years. In every developing country the aparthotel is a winning product. If a guest stays more than 15 days in a month in Bucharest, they find it better to take an apartment in an aparthotel,” Ashkenazi, general manager of Centre Ville hospitality complex, tells Business Review. “If the crisis hadn't started, we would have finished this year with a 97 percent occupancy rate. We start each month with 80 percent occupancy, and the marketing team is working to fill the gap. I hope to finish the year at 91 percent.”
One of the aparthotel's biggest contracts is with the Romanian Parliament, which pays for its MPs to live there, bringing a big portion of the hotel's revenues.
With its 290 aparthotel rooms structured in Centre Ville Elite luxury units and in the Centre Ville Aparthotel hotels, the complex is the biggest of its type in Bucharest and even Europe, says Ashkenazi, who doesn't see any competition on the local market for the product. “There are only 100 units in total in aparthotels in Bucharest,” he says. “Some smaller aparthotels which have been created recently, but an aparthotel needs more than 100 units, and there is none bigger than this,” says Ashkenazi.
Moreover, the aparthotel is the most profitable business in the hospitality industry. It doesn't have public areas which come with high costs, so it can be very profitable. “The aparthotel runs on a 60 percent gross operating margin, which is one of the highest in Europe in the hospitality industry. We finished last year with a 60 percent gross operating profit and we are making efforts to stay within 58-59 percent profitability, which is still very high,” the general manager explains. In the region, a good hotel can make a 45 to 47 percent GOP, and aparthotels should do 55 to 60 percent.
Centre Ville's aparthotel units should bring its owners, the Israeli-owned Bucuresti Turism, a turnover of EUR 8.5 million this year, according to Ashkenazi. A further EUR 1.5 million should come from renting the commercial spaces in the complex, while the Radisson SAS hotel, also part of the complex, is set to bring in EUR 20 million. “In total that's EUR 30 million, which is not bad given the current market situation,” says Ashkenazi.
The aparthotel, which opened six years ago after an investment of EUR 5 million in total, reached break-even point in less than three years, which makes it a profitable recipe on a market with little competition on the segment. Centre Ville's shareholders were initially planning to build a chain of similar units in Romania, but that was before the crisis hit. Plans have changed, at least for the time being. “Two years ago I said we wanted to build a chain of aparthotels, but now we are being very careful. There is demand, in at least one of the big cities. We were also searching for opportunities in developing countries, like Georgia, the Czech Republic and Croatia. After we get through the crisis we can look at a chain of aparthotels under the Centre Ville brand in the region,” says Ashkenazi. “Now the market is different. Two years ago I could tell you that another two aparthotels with more than 100 apartments could have survived. Entering the market with a new aparthotel brand now would be too risky.”
Yaron Ashkenazi is currently supervising the planning of a new aparthotel to be built within the Casa Radio mixed project, a Plaza Centers development, which will also host a hotel unit, for which the operators have not yet been decided.
The hotel is now investing in marketing, sales and publicity, and branding. “If we have low occupancy during a weekend we can close the floors. We are not hiring new people. We are looking at numbers, at food costs – we go to our own suppliers,” says the general manager, listing some of the anti-crisis measures his firm is taking. “We are fighting now like lions, because high occupancy doesn't come easily. The market is much harder nowadays,” adds the businessman. For example, the hotel is selling a romantic weekend in the aparthotel with some services included for 799 lei, or the equivalent of EUR 200, an offer which targets local guests.
The Centre Ville complex includes a Le Bistro restaurant, which was recently renovated at a cost of EUR 2 million, and a World Class unit.

By Corina Saceanu
corina_saceanu@bmg.ro

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