From bust to boom

According to the Poland Hotels & Chains report by Horvath HTL, the previous year was a very successful one for the hospitality sector. “In many ways, 2022 witnessed an extraordinary recovery. RevPAR levels in many destinations reached pre-2019 figures, and for the first time in a very long time, a significant amount of this was driven by increases in room rates. Hoteliers have for many years responded to any kind of crisis by dropping their prices, but this time it was different. A combination of the incredible pent-up demand, supply that was still limited, and a series of large-scale events saw travel go through the roof. Rarely have we seen such a surge in rates, so clearly the industry is back,” reads the report.

Hotel chain operator Accor is also ebullient about the perceived recovery, while also admitting that we are not quite there yet. “The pandemic was definitely one of the most unprecedented situations to affect the hotel sector. It should be noted, however, that the hospitality market is constantly evolving and is one of the few that can quickly adapt to ever-changing circumstances. We are already seeing the industry gradually recover and return to 2019 levels, both in terms of guests and our development activity. We can assume that in the years ahead of us the market will not only fully recover, but will even surpass pre-pandemic levels. Importantly, this recovery is not something that is going to happen overnight and is likely to vary region by region and by market segment, as we can already see. According to what we are seeing and our research, including the Travel Trends Report published last year, there’s a great deal of interest in travelling and a desire for new and memorable experiences,” points out Małgorzata Kalinowska-Klimek, the vice-president of franchise operations for Eastern Europe at Accor.

And this is not the only chain feeling upbeat about the future. “While concerns about the macroeconomic environment persist around the world, booking trends to date remain robust and there is significant momentum in our business. In fact, demand continued to rise across all customer segments in the first quarter, and our occupancy levels now surpass those of 2019, June to August included, with higher average room rates. With the recovery well underway, we are committed to delivering consistent and positive guest experiences as well as driving margins and efficiencies for our owners,” claims Marriott International in a statement we received.

Although the hospitality sector is well on its way to recovery, it is not what it once was. “The hotel market has changed due to the Covid-19 pandemic, but the changes have been uneven in terms of supply and demand. When it comes to demand, business and tourist traffic has returned to hotels for good, as the numbers of guests staying in hotels in Poland have returned to their pre-pandemic levels, with higher average rental rates. The return of foreign tourists has been slower, but everything indicates that this segment will also return to normal. The investor appetite for constructing hotels is now also reviving, but much of this potential investment is being hindered by the difficulty in obtaining financing,” claims Katarzyna Tencza, the associate director for investment and hospitality at consultancy Walter Herz.

Not so virtual

During the pandemic many people learnt to get by with video conferences, but this has not resulted in business travel falling away, as the business community has since proven eager to discard such online working practices. “Technology is a powerful tool, as has become very evident in recent years, but in business it will never replace direct human contact. Our research on the subject of business meetings shows that around 30 pct of employees complain about not being able to see the body language of the other person and picking up on non-verbal cues. Digital solutions in business are with us to stay, but the importance of face-to-face meetings, especially when it comes to finalising business transactions, will also remain. Regardless of the industry, business is also about contact, relationships and trust. The hospitality sector understands these challenges and has been treating them as an opportunity to respond to the needs of business customers. The new reality is a place where digitisation is combined with the need to restore the meetings we are used to and feel good about,” insists Małgorzata Kalinowska-Klimek of Accor. This point is also echoed by Katarzyna Tencza of Walter Herz: “The pandemic resulted in a decrease in business traffic, as such global expenditure in 2020 fell by a half. Last year saw a significant rebound, as business slowly returned to its situation before the pandemic. Personal contact is the key to doing business and face-to-face meetings are still necessary for closing deals. It’s highly likely that business traffic will not be as big as it would have been if the pandemic had never happened, but it will still be a significant component of traffic in general. Tourist traffic was also severely damaged by the pandemic and is currently in the recovery phase, but ultimately the share of tourism in total traffic should increase.”

According to Karolina Stanisławska-Balcerzak, a member of the management board of Budizol, which recently opened the Hotel Verte in Warsaw: “Of course, online meetings have changed the way that we communicate. However, travelling is also about experience and networking – and such benefits are not provided by online conferences. An evident trend has emerged for more prolonged stays after business meetings and conferences. Combining work and leisure travel could be seen as part of this new trend. This also shows that guests will choose more unique properties as their destinations,” the company told us in a statement. Karolina Stanisławska-Balcerzak also emphasises that the pandemic was not the only factor that changed the market: “Our hotel opened on November 15th 2022, and at the beginning of that year the war in Ukraine started, which caused shortages and delays in both supplies and employees. In addition to that, the economic factors changed. But taking into account that the construction work took four years, which for a listed building is considered to be quick, we believe that we opened at the right moment. And at that time we did not regard the pandemic as such a crucial factor.”

Not such a sure thing

Although guests are now coming back, the situation for the investment market has been looking a little shakier. “The pandemic has changed the investment side of the hospitality sector much more. Many investment funds put their hotel real estate acquisition strategies on hold during the pandemic, and a lot of this is largely still in place. The pandemic changed the assessment of this type of asset to being more risky in the long run, with a similar or higher development cost per square metre than, for example, offices,” explains Katarzyna Tencza of Walter Herz. She adds that: “In Poland, we are currently seeing the return of investors to projects that were suspended during the pandemic. Some of those that were planned, however, will never be completed. Greater interest in the construction of hotels will return when cheaper financing returns. In addition, due to the persistently high inflation, as well as the still unstable situation beyond Poland’s eastern border, we will not be seeing a hotel investment boom similar to that in 2015–2019 over the next few years. Hotel construction that was begun before the pandemic has in most cases been completed and the hotels have been opened. On the other hand, some of the projects planned have not been launched, due to investors’ fears and the lack of financing. There is a shortage of new supply, especially in business destinations – a situation that is not going to change radically in the near future. Rather perversely, the reduced supply is having a positive impact on the performance of existing facilities, as a result of which hotels have been able to boast good operating results.”

This point is reiterated by the Horvath HL report: “Following Covid-19, the number of chain hotels in Poland grew by 7 pct (2019 vs 2022), due to projects that had previously been started. According to the original plans of investors, this growth should have been much higher, but many projects have been halted due to problems with financing.”

The only way is up

Although new investment appears to be lacking, the hotel business itself is feeling highly confident. “We believe that the prognoses for the market are optimistic. Poland, for many reasons, is a preferred gateway destination, while it should not go without mention that Warsaw won the vote for the best destination of 2023. The group and corporate guest structure might have changed, but the recovery is still visible. The speed of the recovery – especially for non-city hotels, which do not attract foreign travellers – will be dependent on the general health of the Polish economy when it comes to growth in domestic guest numbers. For foreign guests, the key factors will be a good location, high-quality service, and a great experience during their stay,” believes Karolina Stanisławska-Balcerzak of Budizol.

Marriott International is also in an optimistic frame of mind: “Our occupancy levels are back to the 2019 figures, and we have seen strong Q1 results, driven by solid growth around the world, with particularly robust recovery in the Asia- Pacific region. While the timing of the recovery in demand has varied across regions depending on Covid policies, it is clear that post‐pandemic people still have a deep appreciation for travel– for both leisure and business purposes. We can see that leisure travel will continue to be a focus over the coming years, following the rapid return of confidence in consumer travel that we saw last year. Flexible and remote working patterns will also continue, and we need to ensure that we can cater to changes in travel patterns where people are looking to combine work and leisure travel more and travel for extended periods. Our current development plans in Eastern Europe include more than 30 new hotels that are scheduled to open over the course of the next two years, including more than ten in Poland itself. In the Eastern European region, we also have some key openings in other markets that are important for us, such as the luxury W Hotels brand, which will debut in the capital cities of Hungary and the Czech Republic this year. We have also just entered Albania with our first Marriott Hotel in Tirana.”

Accor probably best sums up the situation now faced by the hospitality sector. “We can already say that for a few years now, as the hotel segment has been rebuilding and recovering from the pandemic, we have been experiencing growth in many markets. This has come along with a constantly increasing desire from tourists to travel and explore the world. This high demand has engendered an optimistic outlook for the future development of the sector, with the prospect of not only recovery but also organic growth, despite the economic challenges. Moreover, the revenues of most hotels have returned or have even surpassed pre-pandemic levels; but it is worth noting that the costs of doing business have also increased at the same time. Therefore, cost discipline, adequate planning and the proper management of revenues and sales are the basis for doing business today. However, it is worth noting that over the past two years, the entire sector has been learning how to operate in a constantly changing environment – a situation that it has not experienced before, and this has been a most valuable lesson. That’s why, without a shadow of a doubt, we can say that we have come out stronger and more prepared for what’s to come,” declares Małgorzata Kalinowska-Klimek of Accor.