Bucharest Hotel Market Maintains Steady Growth

The post-pandemic recovery of the hotel market in Bucharest is almost complete and demand continues to grow, with new projects slated for delivery across all market segments by the end of 2024. In Q1 2023 alone, occupancy in Bucharest hotels increased by 33 percent compared to the same period of last year and it remains about 5 percent below the 2019 level.

By Ovidiu Posirca

The recovery has been strong enough to boost Bucharest to the second position among six capital cities in CEE by their occupancy rates. Bucharest is trailing Warsaw and ahead of Budapest, Bratislava, Prague, and Sofia, according to a report by Cushman & Wakefield Echinox.

“Thanks to the performance recovery, domestic and international investors are renewing their interest in Romanian hotels, albeit remaining cautious due to the high level of uncertainty and high cost of capital. The first transaction already closed in Q1 2023 and we expect that investment activity should further recover in the second half of the year,” says Sevda Cadir, CEE & SEE senior hospitality consultant at Cushman & Wakefield.

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New Hotel Deal in Q1 2023

In mid-spring, the 4-star K+K Elisabeta hotel in the centre of Bucharest was sold to Lorand and Zsuzsanna Szarvadi, the owners of the Balvanyos Resort & Spa in Covasna. The project with 67 rooms and guest facilities was opened by the Austrian-based Koller brothers and had been owned since 2019 by InterGlobe, an Indian conglomerate. Cadir explains that in recent years, the Bucharest hotel market has recorded only a moderate supply increase. The compounded annual growth rate (CAGR) from 2016 to 2021 stood at 1.5%. Overall, there were no new openings on the market in 2022.

“Going forward, the hotel room supply in Bucharest is expected to increase at a 4.9% CAGR until 2024, primarily driven by upscale and upper upscale properties, namely Swisshotel, Corinthia Grand Hotel Boulevard, Novotel Baneasa, and Ibis Syles Bucharest Airport, among others,” the senior hospitality consultant adds.

In Q1 2023, the strong average daily rate and occupancy increase led to a more than 80% rise in revenue per available room (RevPAR) on the Bucharest hotel market compared to Q1 2022, according to Cushman & Wakefield’s Echinox report.

In terms of transactions, Bucharest recorded hotel deals worth EUR 44 million during 2022, while across the country the volume stood at around EUR 75 million. In Q1 2023, transactions with hotel assets amounted to EUR 18.3 million while overall commercial real estate investments reached almost EUR 150 million.

“In the wake of the pandemic, the hotel market has experienced a remarkable resurgence, attracting significant attention from commercial real estate investors across continental Europe. Capital allocation to hotels has increased to 9% in Q1 2023, up from the 3% recorded in 2007,” says Iulia Szabo, investment properties analyst at CBRE Romania.

Talking about trends, Szabo points out that one influential factor shaping the hotel market has been the emergence of “bleisure,” which combines business and leisure travel.

“This trend is expected to enhance the local market’s attractiveness to inbound tourism, as evidenced by the entry of more international brands into the Romanian market. Additionally, hotels serve as an effective hedge against inflation, making them attractive to international investors and fostering increased activity within the sector,” the CBRE Romania analyst adds.

Across the CEE-6 markets, the hotel pipeline for 2023 will bring 25 new projects totalling 3,187 rooms. By comparison, new openings in 2022 totalled 18 hotels with 2,420 rooms, while six hotels with 1,145 rooms were closed for re-positioning.