Maksim Gromadtsov for Kommersant
Maksim Gromadtsov, Esta Holding, Director of Investments
— How could international hotel operators become interested in Ukraine’s regions?
— Actually, they were interested in Ukraine’s regions before the crisis and are interested now. Even more than that, they consider virtually any proposals because an operator, unlike developer, does not invest its own money in a project. For sure, there are certain operators that believe it is crucial to enter the Kiev market first and expand to the regions later. However, they are not numerous.
— So, why are only four chain hotels operating in the regions?
— No major hotels have been built in the regions for the last five years. The international operators have their own limitations: a hotel must have at least 100 rooms; otherwise its operation makes no economic sense. Besides, many developers think they can manage their hotels effectively on their own. But the most important thing is that the economic result of hotel operation in the regions is lower than in the capital. The international booking system ensures higher occupancy rate in Kiev. Thus, about 80-90% of hotel guests in Kiev, especially in four-star or five-star hotels, are foreigners. They either have membership cards or corporate contracts with hotel chains, or they simply trust a particular brand. In the regions, Ukrainian citizens on their business trips make up the largest share of hotel guests, and they are not particularly interested in brands.
— What recent market developments could you point out?
— Nothing changed for the five-star hotels. But the market has matured substantially in the three-star segment. Whereas previously investors and developers preferred to do everything on their own, now there is a transition to the Western model where developers, investors and operators have different clearly defined functions. Apart from that, many projects that were frozen during the crisis were resumed in the run-up to EURO 2012.
— Did EURO 2012 really make such an impact?
— Yes, everyone tried to catch the leaving train. But the companies that had projects in progress, at various stages of construction, were on the winning side. The state provided assistance to these developers introducing the mechanism of loan interest reimbursement.
— Did the operators’ requirements to the projects change?
— The market was altogether different five years ago, and that is why many people got their fingers burned. Whereas previously the operators were ready to sign agreements at the stage where a developer had nothing more but a land plot, now they are interested in the projects that are currently in progress or close to completion. Developers, too, became more particular in choosing their partners. Five years ago, it took 1-1.5 months to sign an agreement for the period of 20-30 years, although the process normally requires up to six months. Apart from that, the developers took a more realistic approach to choosing the hotel category. Everyone wanted more stars before the crisis: the developers opted for five stars even where it was reasonable to make it four. Today, everyone listens to the operator’s opinion.
— What factors affect the further market growth rate?
— The market is currently recovering. However, its development depends on the bank financing. Few companies are willing to invest their money, especially with the soaring cost of financing. Even if a developer is currently receiving investments and carrying on with the construction, these projects are unlikely to make any profit. The companies hope that the situation will change in 2-3 years and that the cost of loans will go down.
Interviewer: Veronika Gavrilyuk
Source: Kommersant No. 208