The start of the year coincided in the hospitality industry with a flood of hotels put up for sale by their owners in Bucharest, the seaside, the mountains or other cities, in the context where room demand fell by 26.4% in the first quarter, but accommodation prices also went down.
At the same time, as a result of the lack of cash to finish constructions or finance further projects, over 20 hotels, put at 80m euros by their owners, were put up for sale.
"There are a lot of hotels for sale on the Romanian seaside, on Prahova Valley -over 10 hotels, in Bucharest and major cities such as Sibiu, Brasov, Timisoara at this moment," stated Mircea Draghici, project manager with the hotel unit of CB Richard Ellis/Eurisko (CBRE) real estate consultancy.
In the past four years, sustained economic growth and the favourable economic conditions have bolstered lending for hotel investments and have implicitly led to the emergence of new rooms on the market through the development of new hotels.
"The economic crisis raised borrowing costs, though. Also, it eroded demand and implicitly the occupancy rate of hotels in major cities and, last but not least, generated tougher competition amid the permanently falling accommodation rates," Draghici said.
Because of these imbalances, already operated hotel investments are registering cash flow and profitability problems. "Practically, on a cash drained market, a surplus supply of accommodation spaces has emerged because of the lack of a solvent demand," Mircea Draghici explained. Hence the flood of hotels put up for sale on the market.
For instance, businessman Josef Goschy, a major hotel owner in Romania, with 3,500 rooms in 25 hotels through Unita Holding, put up for sale six properties, that is 18.6% of the accommodation capacity. The total sum he could get from these properties amounts to 25m euros.
Another example is the four-star NH hotel of Piata Unirii in Bucharest, put up for sale for 16m euros early this year.
Stil hotel held by businessman Alin Burcea, was also put up for sale at the start of the year, for 3.8m euros, amid the lack of cash to finance other projects, though no contract has been signed so far.
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