Factors of Hotel Business Development in Ukraine
By Nikolay Mayger, CEO, Mayger Consulting Company
Nikolay Mayger
The development of one or another field depends on a number of factors. The hotel industry isn’t an exception. Enumerating factors that have influence on the development of hotel industry, it is necessary to differentiate the factors, resulting from the place of hotel sector in economy system and specific conditions of the functioning of this industry in every concrete country. The main group of factors is an economic one (general condition of economics, financial stability, maturity of hotel sector, investment attraction, mean income per head, unemployment level, a rate of exchange of domestic currency, taxation level, interest on bank credit, existence of strong competition on apartment and flat market etc.).
The national measures of Ukrainian economy create a picture of stable economic development. According to official statistics the growth of GDP for the period from January to April, 2007 in comparison with the same period of past year is 7,9%. Grows steadily the part of service sector in GDP, it is 38%. The positive dynamics of enumerated indexes tells on the sphere of hotel services. In 2006 the volume of realization of services, afforded by hotels and other places for short-period residence in the Ukraine, was 2 milliard 47 mil grv. (in market prices), that is 35% higher than in 2005.
Together with this the important role in the development of industry regarding the internal consumer play social and social-economic factors: distribution of population according to the level of income, level of education, culture, ethnical needs of people, way of living, age structure, ratio of urban and town population (town population is more mobile), crime rate, development of tourism, increasing need of rest because of stress load and other. The special place between these factors occupies the increase of business tourism as the result of business activity both national and foreign industrialists.
The increasing of number of business negotiations and their organizational level as the result of rise of investment attraction of Ukraine, stimulate the development of hotel complexes of first class, which include in itself the infrastructure, which provides a negotiation process. It must be mentioned, that expenses of businessmen are 3 times more than ones of tourists. And as marketing researches show, in contrast to other ways of traveling, business tourism provides the capacity of hotel organizations during all the year, what is especially important in the off-season period. At the times of any economical recession and crisis the sphere of business tourism suffers less then others, and sometimes even increases its volume. On average a service of corporative business tourists gives to hotels 40-50% of income and greatly cooperate in increasing of their competitive capacity. Such indexes are typical to business-hotels with developed infrastructure of corresponding services.
A special influence also has a demographic factor. In this aspect especially are important tendencies of changing the number of population, birth rate, mortality coefficient, phenomenon of migration. The number of population, its consistence and structure influence on formation of consumer segment of hotels, as well as their preferences. Nowadays in the Ukraine exists the negative tendency of changing the number of population and high migration activity.
The important feature of hotel services, that distinguishes it from industrial ones, where machines are used, is the high participation of people in the process of production. The involvement of human factor influences on heterogeneity, changeability of quality and concerning with this a lack of standardization, what creates one of the most important problems in development of hotel services. To solve this problem in hotel sphere are brought service standards – a complex of obligatory rules, which are called to guarantee an established quality level of all operations.
The main problem in Ukraine nowadays is the absence of qualified staff. Although more than hundred universities give the education in the “Hotel business” sphere, level of knowledge doesn’t correspond to reality. A perfect solution is a practical training, it is desirable to realize it in one place but on different services, so that a student will be able to choose a department in which he will work, and the hotel provides itself with qualified staff, known with hotel structure and able to work from first days of their career.
Determining influence on hotel sector development has legal sphere. Through adoption of legislative enactments, which regulate actions of individuals, dealing with hotel business, regulatory legal base is created: tax legislation, labor laws, rules of fire safety, licensing, hygiene-and-sanitary conditions etc. Problems, which are connected with questions of issue of land can be pointed out into separate group. Heterogeneous situation in this plane has been shaped in the Ukraine. In Kiev can be observed the deficiency of building sites and also difficulties in the process of their documentary legalization. In another regions land can be bought cheaper, many questions are solved easier.
The most interesting big cities in the plane of development are – Odessa, Harkov, Doneck, Dnepropetrovsk, Crimea, as one of the Ukrainian resort center.
Some influence on structure of tourist stream, and so on market of hotel services, has political situation in country. The Ukrainian political sphere in 2007 is characterized by unpredictable events, that tells on external contacts with another countries. For example, in holiday season of 2007 in Crimea are expected the decrease of tourists from Russia and increasing of European ones. It is connected with the fear of Russian tourists that the frontier between the Ukraine and Russian can be closed and foreign passports will be needed.
Besides of general factors a number of specific ones also has a great influence on economy of hotel sphere. In Ukraine a future organization of footbal European championship in 2012 stimulates greatly the development of hotel sector. To satisfy the requirements of UEFA 16 five-star hotels have to be built in the Ukraine. Following the conditions of football federation only in the capital are to be 5-10 five-star hotels (now exist 2) and to 30 four-star hotels (now 8).
The cities involved in the carrying of the championship will be – Kiev, Dnepropetrovsk, Doneck and Lvov. Also Odessa and Harkov are observed. According to Uriy Galushki nowadays the hotel in Kiev can accommodate 15.5 thousand people and speaking about the regions their existing hotel level and potential number of rooms can’t satisfy requirements. Foe example, Doneck can offer only 19 hotels, Lvov – 38, Dnepropetrovs – 40. The more missing category in all cities is three and four star hotels to 150-200 habitants with developed conference service and cost under 100 $ per day.
So, during the next years is expected an activity of investment in Ukrainian hotel sector. During last 2 months the appearance in Ukrainian market of foreign operators with international names (Accor Group, InterContinental Hotels Group) was announced. Also foreign operators, which have occupied certain positions in the sphere of hotel services in Ukraine, become more intense in the real estate sphere in searching the places with the purpose of reconstruction them for new hotel complexes.
Nikolay Mayger is the founder and the president of Mayger Consulting Company, a Ukraine-based firm established in 2000 by highly skilled team of business and finance experts. The company is a member of the International investment forum "Ukraine-Germany", as well as the founder of the audit company "Ukrugaudit" Ltd. He serves as a member of the Ukrainian Union of industrialists and businessmen, and represents the Ukrainian Business Assistance Network and the Federation of employers of Ukraine. Mayger Consulting Company is an affiliate of the Fin Group. Mr Mayer serves as the Chief of the supervisory board of Commercial Bank, and is President of the Regional Agency of the Ukrainian National Committee of International Chamber of Commerce. He can be contacted at +380-482-343-333 or commerce@maygerconsulting.com
