What is the future of the hotel market in Poland

In Poland, Boutique hotels as well as those that offer a limited service for short-stay travellers, will continue to be developed, while large cities will continue to attract more investment in mixed-use projects.

Each region has its own specific demand for leisure and business hotel services. Many cities are developing very rapidly and new infrastructure is being built. Among the largest cities in Poland, Gdańsk, Łódź and Wrocław have the greatest potential for further growth. Gdańsk with its former shipyard and docklands as well as its coastal location and excellent transportation links is attractive to both leisure and business travellers all year round.

Łódź is slowly turning from the ugly and forgotten duckling into a pearl, in what is potentially the best business location in Poland. Being at the intersection of some of the most important transportation routes, as well as nearby the planned Central Polish Airport and having easy access to a number of investment areas are all factors that make the area good for the hotel business, especially in regard to congresses, conferences and events.

Despite already having a large number of hotels, Wrocław still has potential for further growth, which should provide returns for those investing in accommodation facilities. The development of the business market in the city, its proximity to foreign markets and the attractiveness of the Lower Silesia region for leisure travellers will allow investors to continue to reap good results.

I think that there is still room for new hotels in Warsaw, but such projects must be well thought out. Thorough and comprehensive market analysis and feasibility studies will show what the best type of facility is and how it should operate in a given location and market environment. One location might be perfect for economy hotels that provide basic services, while a few kilometres away there may be a place that is more suitable for an interesting lifestyle hotel to attract a different group of travellers. Warsaw is still waiting for a true luxury hotel to open, not only in name but in every aspect of how the property is operated. However sometimes real estate prices in the city do not match the investment budget for a hotel development, which can make the profitability of such investments lower than what investors expect.

The hotel market in Poland is developing at different speeds in different locations and frequently it fails to meet local needs. The hotel base in places such as Warsaw and Kołobrzeg is growing quickly and healthily, although how hotels are split into locations and categories could certainly be better. In other towns, such as the largest regional cities, new projects are being planned, but there is still room for more to satisfy both demand from the market and from investors. Most often, the problem is the availability of land in good locations at prices that would assure a reasonable return on hotel investment projects.

The Polish hotel market is a relatively young market, that really dates back to the 1990s. Compared to the UK or American markets, Poland is still learning the hotel craft from both the investment and the operational side. One clear difference is that, in western countries, the use of consulting companies is standard practice, because the specifics of the industry are so complex that they cannot be learnt from a book. What guarantees the success of a project is knowledge and an understanding of the hotel market and this knowledge is needed from the very beginning of the investment process.

In the UK and the US a lot of attention is also paid to the employees and the development of the team, who are treated as a part of the investment rather than as an expense. Unfortunately in Poland employees are still too often treated as a necessary evil, because investors only seem to think that they cost too much.

Investors frequently lack knowledge and understanding of how the industry works and are reluctant to consult people with experience of different hotel markets. This ignorance can be seen in concepts and investments which are far from what is really needed on the market. This often results in such projects being unprofitable, which also leads to frustration, when an investment does not generate its expected returns.

Hotels with no more than twenty or thirty rooms can only be successful in some locations when the entire project is perfectly prepared. Both the cost of the investment and fixed operating costs mean that the size of a hotel is an important part of the business model. Large conference hotels can achieve above-average financial returns through economies of scale, but this is also dependent on many different factors. This is why it is extremely important to trust good advisors who will look at an investment from its practical commercial and operational sides and have the necessary know-how to prepare every aspect of an investment project.

The factors that need to be considered particularly carefully when preparing a hotel project are its location, location and – once again – its location. Everything depends on this: the demand for hotel services, the access to properly trained employees, access to the required technological systems, the ability to provide a diverse and interesting range of hotel services, etc. Creating a hotel with 500 rooms in the middle of nowhere and then selling the rooms as condominiums with a guaranteed return, with no other support for the project than good intentions, cannot and will not bring profits. A project needs to be properly thought through.

The office segment seems less complicated than hotels when it comes to the number of products and services on offer, from which revenue can be derived. A hotel is not a building where space is rented out to a few large companies for a number of years. There may be several hundred thousands of ‘tenants’, that is to say hotel guests every year. Every guest arrives on a different date with different needs and under different circumstances. This makes the organisation necessary to run a hotel completely different from what it required on the office market. Effective management of a hotel requires a greater understanding of everything that is taking place on site.

When looking at current trends, boutique hotels are likely to make up a larger proportion of the supply in Poland. Despite their smaller number of rooms, such facilities generate high returns because of the type of guests they attract. More hotels that offer a limited range of services are also to be developed in Poland to meet the demand from short-stay travellers. In large cities, more mixed-use projects are to be be constructed. Combining office, hotel and retail space in a single building is a way of diversifying the investment risks. It also enables a flexible approach to doing business, allowing for such things as the number of rooms to be changed in response to future needs.