Tourism in Bucharest stood out through a much stronger evolution, reaching pre-pandemic levels
Romania’s hospitality industry followed global growth trends in 2022 in terms of hotel occupancy, with arrivals in hotels countrywide reaching 84% of the pre-pandemic level, Colliers’ 2022 annual report shows. If internațional tourism would have recorded a more accelerated recovery, in line with local trends, Romania would have easily surpassed 90% of the pre-pandemic arrivals levels, Colliers consultants estimate. Bucharest and other major cities in the country performed better compared to the national average, with major hotels in the Capital recording occupancy levels in the last 3 months of 2022 more or less comparable to 2019, particularly as both leisure and corporate business travel recovered significantly.
“Given the robustness of the economy, it’s not a surprise that leisure travel has recovered, but corporate business travel was the highlight of the year, particularly given how other aspects of the business landscape, like the way of working and presence in the office, are still impacted by the aftermath of the COVID-19 pandemic. A strong sign of recovery in local business travel, not considering foreign tourists arriving for leisure purposes in numbers still likely lower compared to pre-pandemic potential, was the dynamic recorded by hotels, especially towards the end of the year, boosted by a very active public events scene”, explains Raluca Buciuc, Director and Partner of Valuation and Advisory Services at Colliers.
Deep diving on Bucharest’s hospitality industry, 4 star hotels remained the most active segment in 2022, with an occupancy rate of 68% towards the end of the year compared to around 72% back in 2019 and an average daily cost of 80 euro/night compared to 87 euro/night just before the pandemic. Central locations in the Capital performed even better, with occupancy reaching 72% and the average daily cost surpassing 100 euro/night in the final months of 2022.
In terms of hotel construction and development plans, only a few major openings are expected in the next two years. Among them are the currently under construction Swiss Hotel in the Expozitiei area, with 225 rooms distributed over 23 floors, the 30-suite Grand Hotel du Bulevard operated by luxury chain Corinthia, and a 100-room hotel in the Victoriei area set to be completed, originally intended to be operated under the Indigo brand.
“One of the previously mentioned openings is related to a building project by local developer One United, mostly established in the office and residential sectors locally. The Israelian group Hagag also purchased another central building in Bucharest with intentions to turn it into a hotel. We expect that as the recovery of the tourism market is confirmed, such dynamics will continue, maybe with fresh entries of such non-traditional developers. Otherwise, despite the recovery of both domestic and international travel, the hospitality industry still faces many challenges looking forward. For instance, the rising costs of utilities, in particular for larger hotels that do not qualify for the SMEs state-backed support scheme. This means that they will likely have to increase prices. Furthermore, operators are also feeling the sharp increase in minimum wages, given that a big chunk of their employees are paid at that level. And last but not least, developers continue to face the issue of still elevated construction costs, though pressures have been dissipating and the drop of prices in commodity markets is encouraging”, adds Raluca Buciuc.
The medium-term outlook remains challenging. 2023 looks like a difficult year to forecast for any business as uncertainties regarding consumption remain in place, Colliers consultants appreciate. The full effect of the higher interest rates has yet to be felt and the aspect that many overlook is the fact that interest rates are not coming down any time soon. This means that a fresh drop in leisure travel cannot be excluded at this point.
However, Colliers consultants remain moderately optimistic, given that in 2021 many market participants rather expected hotels to recover and return to pre-pandemic levels within two years, but after restrictions were relaxed in the spring of 2022, it only took 6 months to reach this target. Meanwhile, this year will bring a further boost, as China looks set to be easing its COVID-19 lockdown approach.