International Hotel Expansion - Kyiv

International hotel operators are planning to expand their presence in Ukraine, while some new players are considering the UEFA football championship Euro-2012 as a stimulus for their plans. In spite of the recent expansion of luxury hotels in other parts of the country such as the Donbass Palace in Donetsk, most of those with expansion plans are concentrating their efforts on Kyiv.

At the beginning of 2007 the UK’s InterContinental Hotels Group announced plans for the InterContinental Kiev, now due to open in 2008. The InterContinental chain, put together by the old Pan American World Airways to support its route system in the early days of international air travel, was later was sold off during Pan Am’s difficulties that led to its bankruptcy. The new owners have turned InterContinental into the world’s largest hotel group by number of rooms. IHG owns, manages, leases or franchises, through various subsidiaries, over 3,650 hotels and 540,000 guest rooms in nearly 100 countries and territories around the world. IHG recently announced that it would bring one of its most famous brand names to Kyiv, with the opening of its planned Holiday Inn Kiev in 2009.

“Clearly, Ukraine has a growing tourism and hotel market and is an area under consideration. UEFA’s decision for Poland and the Ukraine to jointly host the 2012 European Championship - the first time either has hosted a major football championship - is further evidence of the country’s increasing tourism appeal and potential,” Michael Cooper, IHG’s vice president of Strategic Development - Russia & Ukraine, told UOO.

Cooper added that IHG’s development plans are focused on Kyiv in accordance with IHG’s current capital city development policy. “Our focus will be on the three, four and five star market, with our Holiday Inn, Crowne Plaza and InterContinental hotel brands,” Cooper said.

Recently opened 5-star Hyatt Regency Saint Sophia Kyiv will not be the only Kyiv hotel operated by the American operator Global Hyatt Corporation. According to the deputy president of the Industrial Group Oleksandr Pylypenko, owner of Ukraine’s first Hyatt hotel, his company is planning to build at least one more hotel that will be associated with the Hyatt chain. The planned addition will operate under the brand Park Hyatt.

“However, if we can’t agree all questions about a land site this year, then it doesn’t make sense for us to build this hotel,” he added. Pylypenko explained that with the number of hotels planned for opening in the next several years the Ukrainian market would loose its attraction for international chains.

“Operators seek ways to fill their hotels then [after Euro-2012]. They will hardly come to the market if they are not sure of [adequate occupancy],” he said.

The Rezidor Hotel Group, with head office in Brussels, was the first international chain coming to the Ukrainian market in 2005 with its 4-star Radisson SAS Hotel in the center of Kyiv. The Group will also manage the Radisson Airport Hotel Kiev on the Kyiv-Boryspil highway, with completion expected by the end of 2009.

“We have several projects we are working on. We are definitely focusing on other destinations such as the Crimea, Odesa and Lviv,” Radisson SAS Hotel general manager Conrad Meier told UOO.

However, Meier said that Euro-2012 doesn’t influence the plans of his company in Ukraine. Both Pylypenko and Meier emphasized that the championship is a short-time event. It gives many opportunities for the country as a whole but cannot affect hotel business long-term fundamentals.

“It [Euro-2012] is, of course, a push but the major need of Ukraine is in improvement of infrastructure; it’s an urgent need,” Meier added.

Despite underdeveloped infrastructure, the interest to the Ukrainian hotel market is growing rapidly in the world. Meier said that he knows of at least 15 chains that are studying the Kyiv market. The question of land and property and the number of licenses necessary serve as obstacles for their rapid coming to Ukraine.

The Radisson SAS general manager considers that this interest is mostly the result of the field underdevelopment in Ukraine.

“There is an undersupply of hotel rooms from budget to upscale and luxury here. New hotels are in demand in the city but that should be controlled…otherwise, hotels will grow like mushrooms and at the end there will be nobody to stay there,” he concluded.

Ukrainian investors have recently become activate in their interest in the hotel business and stimulated the coming of new international operators to the country. While the Industrial Group, managing company of the Donetsk-based giant Industrial Union of Donbass, continue cooperation with Hyatt Corporation, a big Ukrainian developer, XXI Century Investments signed an agreement with French group Accor which operates hotels in 90 countries under such brands as Sofitel, Novotel, Mercure, Suitehotel and some others. The first hotel of this chain in Ukraine will be a 5-star Sofitel in the center of Kyiv.

Andriy Myrhorodskiy, a member of the XXI Century Investments directors’ board, said that his company is going to build 18 hotels by 2010. The company plans include hotels ranging from 3 to 5 star ratings in Lviv, Dnipropetrovsk, Donetsk, Kharkiv and Odessa.

“We have very serious ambitions by Euro-2012. Today we are already working with city administrations,” he added.

According to the State Tourism and Resorts Service, more than EU 1 billion will be necessary for building new and repairing old hotels by Euro 2012. The money is necessary for providing Ukrainian guests with 5,365 rooms in 4- and 5-star hotels and 5,200 rooms of 3- and 2-star hotels. These numbers were presented as optimal in the second half of 2006 during Ukraine’s participation along with Poland in the tender for hosting the UEFA football championships. These requirements mean that 32 new upscale hotels should appear in Ukraine, with half of them planned for Kyiv.

The press service of the Tourism and Resort Service said that these calculations are being updated now.

Market insiders say that plans for further hotel construction need serious development, especially about luxury hotels. “They [officials] should be very careful about the number of 5-star facilities that get built because there is limit to the need for such hotels,” Meier said.

Link to source: ukraine-observer.com