NAI Ukraine: Kyiv hotel real estate market has a great growth potential
In 2016, Kyiv hotel real estate market showed a positive trend, which promises the market’s rapid recovery, already confirmed by the results of the first months of 2017. In addition, the international events that take place in Kyiv in spring 2017 (Eurovision Song Contest, World Hockey Championship 2017) should significantly accelerate the market recovery.
2016 showed the minimum number of new hotel properties commissioned in Kyiv— there were only three small 3-star hotels with a total hotel room stock of 206 rooms opened in the capital. On the whole, the current hotel room stock of the capital is 10 thousand rooms, and in the outlook, another 2 thousand rooms are expected to open. The new hotels’ commissioning will be insignificant in the current year, as the majority of new properties is expected to open in 2018-2019.
"Although Kyiv hotel real estate is not an attractive investment just yet, reduced commissioning, growing tourist flows and a number of international events, held in the capital this spring, will allow the market to reach higher indexes," said the founder and CEO of NAI Ukraine Vitaliy Boyko.
By the end of 2016 the hotel occupancy in the capital reached 40%, and the room rate in UAH increased by 12%, therefore the hotels profitability increased by 23%. The prices of Kyiv hotels have established at the European level (earlier they were significantly higher). There is an excess of 4-5 stars hotels and a shortage of 3-star hotels. "Considering that the normal occupancy rate for a successful tourism market is 70%, today's 40% index will still stop potential investors," said founder and CEO of NAI Ukraine Vitaliy Boyko.
International tourism arrivals increased in 2016, compared to 2015, by 7% — up to 13.3 million. A major challenge for Kyiv is the lack of recreational and entertainment facilities. The capital has a great untapped potential: for example, Dnipro — one of the largest rivers in Europe — is completely undeveloped for tourism. Instead of a recreational areas for tourists, there are only cramped beaches and virtually no hotels and entertainment facilities. Therefore, historical and cultural sites so far remain the sole and ultimate attractions for tourists.
Due to the decline in tourist numbers, in the last 3 years hospitality and tourism business had significant problems with occupancy and profitability. “Nevertheless, the market is recovering — the expansion of the offer and international events work for the benefit. Moreover, one of the main drawbacks in the tourist palette of Kyiv — lack of entertainment facilities — is compensated by shopping centers, in particular by the shopping-tainment concept, implemented in the shopping center Lavina Mall", — added Vitaliy Boyko.