Apart from the crowd

As the debate continues over the state of the economy and the prospects for the real estate market, opinions and forecasts are varying widely. However, there is one point that everyone seems to agree on: the hotel industry in Poland is thriving and nobody doubts that it will continue to develop rapidly

There are a number of reasons why hotel developers in Poland should feel optimistic, one in particular is the current shortage of hotels and other hotel facilities. According to the Central Statistical Office (GUS), there are 153 beds available for every 10,000 people in Poland, whereas in Western countries the number remains much higher. The opening of borders and the continuing development of infrastructure have resulted in increased tourist traffic. Add to this the hosting of the Euro 2012 championships, and the smiles on the faces of hotel industry investors grow ever wider, as they eagerly await football fans followed by hordes of other tourists attracted to Poland after the tournament is over. So the question which should be asked is not will investment in hotel facilities pay off, but how best to invest in order to benefit from the hotel boom.

Hotel, motel, boarding house 
or maybe something different?

Firstly, we need to establish what type of facility we would like to build. A hotel is just one out of many possibilities. In Polish law there are several different types of hotel facilities – in particular hotels, motels and boarding houses – with their own specific characteristics. One of the main distinguishing criteria is the number of rooms. A boarding house, for instance, has around 7 rooms, whereas a hotel or motel (defined as a hotel located near a road) should have at least 10 rooms. Other requirements differ depending on the standard of the building, resulting in the appropriate number of stars. It is worth mentioning that in regard to hotel buildings covered by protection orders as historic monuments, it is possible to obtain exemptions with respect to the requirements concerning equipment and the scope of services on offer.

Apart-hotels and condo-hotels

It is interesting that the act does not refer directly to other hotel facilities that have become a permanent feature of Western hotel infrastructure. The law does not yet recognize the existence of such formats as apart-hotels or condo-hotels, which in a Cushman & Wakefield report published this spring are considered as a steadily emerging trend, in particular in tourist locations. An apart-hotel is a complex of suites for which hotel booking principles apply. The relationship between the user and the owner is similar to that of a short-term lease; however, this is not regulated by a detailed agreement and so the service recipient may check out at any time. In contrast, a condo-hotel is a combination of a hotel and residential units where the owners of the units use them temporarily while the administrator of the hotel maintains and rents them to tourists for the remaining period of time. Given the type of services provided both in apart-hotels and condo-hotels, there may be doubts as to what regulations apply to them. It seems that the most obvious way would be to apply the same regulations as for hotel development. On the other hand, particularly in the case of condo-hotels, most of the emphasis is put on the issue of the ownership structure, as their main function is to offer units for the benefit of individual clients.

One may ask whether the condo-hotel concept is simply another name for timesharing, which has already been regulated in Polish law. But there is a difference. Condo-hotels have separate ownership rights for the premises, whereas in the case of timesharing a weaker right is established, i.e. of usufruct, which by its nature is temporary.

“In Spain, both professionals as well as public media have focused their attention on condo-hotels. However, although everyone is aware of the advantages of condo-hotel development – a good alternative ensuring job creation, countering the seasonal nature of tourism as well as ensuring a rational approach to urban and tourist development – there are still no legal instruments in place to regulate such investments. The lack of any legal regulations creates uncertainty with respect to the development of condo-hotels. Aspects that require clarification include, among others, the possible residential use of land designated for hotel facilities, guarantees that the building can be used for tourist purposes in future, inclusion on the relevant registers, as well as the type of licences required,” explains Carmen Perez Andujar, a Spanish lawyer from Mallorca, and currently senior associate in Garrigues’ Bucharest Office.

When will the plan get the thumbs up?

The next step would be to check whether it is possible to develop the real estate according to the plans. The arrangements for the designation of land should contain the specific designation of the site in question or the framework for its development, as well as a letter symbol to distinguish it from other land. The regulations do not require a separate letter symbol for tourist facilities, hence the land where such buildings may be erected is marked with a letter ‘U’ for ‘usługi’ (services), with specific letter identifications stipulated by the local zoning plan and explained in its glossary. Such wording of the regulations leaves a lot of room for local government units with respect to the adoption of plans. As a consequence, the plan may provide for general provisions for the designation of the land for both services or for residential development, which may result in a number of possible interpretations as well as requests for detailed specifications for the designation for a given type of development, for example, for a hotel. In cases where the designation has been restricted to allowing the development of a hotel, how should apart-hotels and condo-hotels be treated? On the one hand, the function of a hotel is involved; however, on the other hand, one may wonder whether an apart/condo-hotel could be built with ordinary residential units and at the same time not fall foul of the applicable provisions.

Investor, keep an eye on those suspensions

One should also bear in mind that the administrative process for issuing development conditions can be suspended for a period of less than 12 months. After that date, the authorities are obligated to resume the process and issue the decision, with the exception of cases where within two months of the suspension the authorities have adopted a resolution on drawing up a local zoning plan, or where such a plan has been adopted during the period of suspension. So it is always worthwhile monitoring the progress of the plan, particularly with regard to the fact that any decision on development conditions in certain situations may expire.

But is it worthwhile, during an economic crisis, investing in hotel services in Poland at all? Yes! Investors are falling over one another with ideas for the development of tourist facilities, which includes plans for a significant number of hotels; while experienced hotel market players are searching for locations for more diverse projects, i.e. conference centres, boarding houses in attractive locations and tourist accommodation in the less popular locations where the Euro 2012 participants will be left to train in peace. It seems that the era of popular ‘private rooms’ is fast drawing to an end. ν

Agata Jurek-Zbrojska is a legal advisor and a manager of the real estate department of Garrigues’ Warsaw office

Adriana Andrzejewska is an apprentice attorney and a lawyer in the real estate department of Garrigues’ Warsaw office