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Gdańsk, Łódź and Wrocław with the largest potential for the hotel market growth

Andrzej Szymczyk, Associate Director of Hospitality Department at Walter Herz, says that boutique hotels as well as limited service hotels aimed at short-stay travellers, will continue to emerge in Poland. Moreover, large cities will continue getting more mixed-use investments.

Andrzej Szymczyk joined the Walter Herz team in March, 2019. He is responsible for strengthening relations and developing the company’s business line related to the hotel real estate sector in Poland. He is also overseeing projects and research related to this segment of the market. The hospitality professional has over 15 years of experience in working on the hotel real estate market, which he got in the United States, United Kingdom and Poland, working, among others, for the largest hotel chains and companies providing services for this segment. Andrzej Szymczyk shared his insights on the specifics and possibilities of the hotel market growth in our country.

Which regions have the greatest potential for the development of hotel investments?

– Each region has its specific demand for hotel services, both in leisure and business. Many cities are developing very dynamically and building new infrastructure. Gdańsk, Łódź and Wrocław have the greatest potential for growth among the A-cities in Poland. Gdańsk with its former shipyard and docklands area, proximity to the sea and excellent transportation links is attractive for both leisure and business travel all year round.

Łódź is slowly turning from the ugly and forgotten duckling into a pearl, in the potentially some best business location in Poland. The intersection of the most important transportation routes, the vicinity of the planned Central Polish Airport and wide access to the investment areas are factors that make a good hotel business, especially in sector of congresses, conferences and events.

Despite its already substantial hotel supply, Wrocław still has potential for further development, which will provide a return on investment in accommodation facilities. The development of the business market in the city, short distance from foreign markets and the attractiveness of Lower Silesia for leisure travellers will continue to be help investors obtain satisfying results.

 

Is there a room for new hotels in Warsaw? What facilities are missing? – I think that there is still room for new hotels in Warsaw, but these investments must be well thought through. A thorough and comprehensive market analysis and feasibility study will indicate the best type of facility and its operational model in a given location and market environment. One location will be perfect for economic hotels providing basic services. Few kilometres away there may be a place for an interesting lifestyle hotel which will attract another group of travellers. In Warsaw, we are still waiting for true luxury hotel, not only from the name but in every aspect of the property operation. However sometimes the real estate prices in the city are inadequate to the expenses that can be allocated to the hotel development, which might make the profitability of such investment lower than expected by investors.
Is the development rate of the hotel market in our country adequate to the needs?  – Hotel market in Poland is developing at different speeds depending on location, quite often without a deeper analysis of the local needs. Accommodation base in places such as Warsaw and Kołobrzeg is growing quickly and efficiently, although certainly the split into locations and categories of hotels could be better. In other urban locations, such as old voivodship cities, new investments are emerging, but there is still room for more, which will satisfy both the market and investors’ needs. The problem is most often the availability of land in good location and the price interesting enough for a reasonable return on hotel investment projects.. What are the main differences between the way the hotel markets operate in the UK or the US and the hotel market in Poland? – Polish hotel market is a relatively young market, because its real beginnings fall in the 90s of the last century. Compared to the British or American market, we are still learning hotel craft from both the investment and the operational side. The visible difference is that in western countries the use of consulting companies is the standard, because the industry is so specific that one cannot learn it from the book. Knowledge and understanding of the processes taking place in the hotel market is a guarantee of the success of ventures in this segment and this knowledge is needed from the beginning of the investment. In United Kingdom and United States a lot of emphasis is also put on employees and the development  of the team, who are treated as an investmentrather than expense. Unfortunately there are still many cases in Poland where the employees are treated as the necessary evil, only because one would think thath they costs too much. What is the proverbial Achilles heel of our hospitality? What aspects related to the functioning of hotels in Poland should be improved? – Investor’s ignorance, lack of understanding of the the industry specifics and reluctance to consult people with experience in various hotel markets. The ignorance shows itself in creating concepts and conducting investments which are far from real market needs. This often results in the lack of profitability of the projects, which then leads to frustration, when the investment does not bring the expected results.
Hotel facilities with not more than several dozens of rooms have a chance to be successful only in some locations, provided that the entire business project is perfectly prepared. Both the cost of investment and fixed operating costs mean that the size of the hotel is an important aspect of the concept. Large conference hotels can achieve above-average financial results thanks to economies of scale, but it is also subject to many different factors. That’s why it is so important to trust good advisors who look at the investment from the practical commercial and operational side, providing the necessary knowledge to properly prepare the investment in every aspect. What factors should be considered particularly carefully during the hotel projects preparation? – Location, location and once again: location. Everything depends on it: demand for hotel services, the ability to provide enough properly trained employees, access to necessary technological solutions, diverse and interesting hotel offer, etc. Creating a hotel with 500 rooms in the middle of nowhere, sold in the condo model with guaranteed return, when the investment is supported only by good intentions, cannot and will not bring good results. The project must be really carefully thought through.
What is the difference between the investment consulting process for the hotel and office segment?  – The office segment seems to be less complicated than the hotel one when it comes to the number of potentially offered products and services, which are then the source of the revenue. The hotel is not a building where the space is rented to few large companies for several years. There can be several hundred thousands of ‘tenants’, that is, hotel guests every year. Every guest arrives at a different date with different needs and under different conditions. This makes the organization associated with running such organization completely different than in the case of the office market. Effective management in the hotel segment requires an understanding of the greater number of processes taking place on site.
What trends are visible on the Polish hotel market? What is ahead of us when it comes to the global trends?  – Boutique hotels are likely to become more popular supply in Poland. Despite the smaller number of rooms, these facilities will generate adequate returns due to their guest profile. The limited service hotels will also keep emerging in Poland, satisfying the needs of short-stay travellers. In larger cities, more mixed-use investments will be constructed. Combination of office, hotel and retail space in one building is a way to diversify the investment and the risks associated with it. It also enables a flexible approach to doing business, allowing i.e. to change the number of rooms depending on the future needs.

 

 

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