Poland’s major hotel marketsReal Estate Market
Originally Published in March 2018
As a year-round destination, Poland has rapidly gained interest over the past years. Due to a growing economy, the development and improvement of infrastructure and rising tourism demand, the region attracts international investors as well as leading hotel chains. This strong performance is to a small feat due to an increase in the number of business travellers to Poland. Cities such as Krakow, Warsaw, Wroclaw, Tri-City and Katowice became more important from a global perspective as centres for Business Process Outsourcing companies (BPOs) – not only very basic call centres, but more advanced services. According to the latest ABSL report (Q1 2017) the economic uplift led to about 1,080 business centres employing more than 240,000 employees in Poland.
Poland’s hotel market has shown continuous growth with extensive investments in this sector. The number of accommodation facilities in Poland has picked up significantly in 2012 with the UEFA Euro 2012 being co-hosted by Poland and Ukraine during summer. Over the span of ten years, the number of hotels more than doubled and following 2012 the number of hotels grew to c. 2,550 in 2017, representing an increase of c. 9% (CAGR 2%). This overall positive development of the Polish hotel market is based on a steadily growing demand from national and international guests that visit the country.
Although the country’s tourism sector suffered from the financial crisis ten years ago, the industry was able to pick up quickly and the number of overnight stays in hotels and B&Bs increased on average by about 15% p.a. during the last five years to more than 47 million leading to an average length of stay of 2.6 nights in 2017. This swift recovery may also be attributed to the high amount of national travellers accounting for about 80% of all overnight stays.
Over the past five years, it has become evident that the 3-star segment, with a total of c. 1,200 hotels and a market share of about 50% in 2017, represents the majority of hotel market supply. It currently holds more than 113,000 bed places, representing up to 43% of the about 261,000 total accommodation bed places. 5-star hotels compose the minority of the entire hotel stock, with only 65 hotels nationwide. The upper midrange segments continue to grow, while 1-star establishments recorded ongoing declines with on average -3% p.a. in terms of facilities. 4- and 3-star hotels had an annual growth rate of c. 5% respectively.
In the last years Poland has seen a significant number of new hotel developments coming to market. Lots of hotels are already under construction in cities like Gdansk, while Warsaw is catching up to its European counterparts. As Poland’s capital, represents the largest hotel market in absolute figures however, the bed and tourism ratios per 1,000 inhabitants clearly demonstrate the magnitude of the Krakow hotel market: with more than twice as many inhabitants, Warsaw only records about 20% more overnights than Krakow.
The majority of publicly known hotel projects in the country’s main destinations include international budget and economy, lifestyle as well as high-end luxury brands due to an already high brand penetration in the midscale and upscale segments. Poland’s first Raffles hotel is scheduled for 2018, along with a Four Points by Sheraton and a Renaissance hotel, which are planned to make their market debut in the Polish capital. The national lifestyle brand PURO and Marriott’s economy brand MOXY will expand to Warsaw while Krakow will witness the opening of the first Meininger, a Germany based hostel/hotel brand.
Marriott’s Autograph Collection plans to expand to Krakow and the city will also be home to a third PURO hotel while Gdansk’s pipeline promises a MOXY for the leading Tri-City destination. In addition, a first Curio by Hilton, a Park Inn and a Hilton Garden Inn are to open in the city of Poznan and Louvre will launch its Chinese brand Metropolo in Poland, as well as opening a first Kyriad hotel.
There are many reasons why investors are convinced of the country’s potential. Factors include the improvement of hotel indicators, more international hotel chains, the enhancement of the country’s meetings and conference industry, improving road and rail infrastructure, as well as favourable property prices in comparison to key European markets such as London, Paris or Munich.
Comment by Lukas Hochedlinger MRICS, Managing Director Central & Northern Europe at Christie & Co