Major international hotel chains such as Four Season, Hyatt, Kempinski Le Meridian and Movenpick have all shown an interest in the domestic market, but have failed to find any properties that match their required standards, according to representatives in the hotel industry.
The failure to find adequate locations is proving a major hindrance for hotel owners that want to enter the domestic market due to the high potential for development, given that the number of hotels in Bucharest is twice as low compared to Budapest, and three times lower than in Prague, according to the hotel companies that participated in Hotel Investment Forum.
"Given the market's growth, international brands are not hampered from entering the Romanian market in anyway, however there are very few properties available that meet their standards," said Tinu Sebesanu, CEO with Trend Hospitality, the strategic development partner of US hotel chain Wyndham, which owns Howard Johnson and Ramada brands domestically.
While the shortage of viable properties is blocking the entrance of major chains, developers could not be more interested in investing on a market that boasts margins that can reach 50%.
Marius Gomola, managing director with Horwath for Hungary & Russia, a hotel consultancy, says profit margins of around 50% in the hotel industry will remain unchanged in Central and Eastern Europe, unlike in Western Europe where they revolve around 30%.
"Bucharest and other capital cities such as Zagreb, Sofia, Kiev and Belgrade are emerging markets for the hotel industry," Gomola said. He added international chains are interested in the domestic market, but their entrance depends on domestic developers.
Out of the hotel chains with a strong presence in Central and Eastern Europe, only Hilton, Rezidor (which entered with Radisson SAS on Calea Victoriei), Accor (operating Ibis brand), InterContinental, Wyndham, Best Western and Golden Tulip have entered Romania. There are also the Romanian Continental hotel, which operates the three-star Ibis, four-star Continental and a two-star brand.
Jonathan Soper, general manager of Intercontinental Bucuresti, says the development of an independent hotel is much riskier because it would not benefit from the global booking system and it is harder for it to gain credibility on the market.
At the same time, Kurt Strohmager, a general manager of JW Marriott Bucharest Grand hotel, considers that to stay independent a hotel should have a capacity of below 150 rooms.
The Romanian hotel market includes around 1,100 hotels with 8,000 rooms, according to Mihai Rajnita, chief executive of the Federation of the Romanian Hotel Industry. However, the weight of hotels affiliated to international hotels remains low.
Hotel market
Major international hotel chains are interested in the domestic market, but have trouble finding properties that match their standards
The potential of the domestic hotel market is very high given that the number of hotels in Bucharest is twice as low compared to Budapest and three times lower than in Prague
Includes around 1,100 hotels with 8,000 rooms, but the number of hotels affiliated to international hotel chains remains low
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