Mr. Nikolay MaygerThere is paradoxical market situation currently in Ukraine. Demand for hotel services is much higher than the market can offer by all the indexes and forecasts. The hotel realty market in the Ukraine shows extremely low supply rate along with a deficit of good quality rooms together with high booking rates.
Many factors influence the hotel industry today. The main one is lack of experience in organization of developing hotel projects. This business is not attractive to Ukrainian investors because it is capital-intensive (payback period can be up to 15 years long depending on the project, hotel quality and market situation). Running a business in the hotel industry also requires considerable knowledge, experience and many Ukrainian developers don’t have such. Another factor that influences the hotel industry in Ukraine is the low number of rooms in the middle-level price segment.
Still the hotel industry in the Ukraine is a very dynamic one showing high growth rates in spite of all these factors. Tourists flow increases by 19-25% annually. About 19 million foreign tourists have visited the Ukraine in 2006 which is 7% higher compared to 2005. In the first six months of 2007 the tourist flow increased by 27% and reached 9.5 million visitors point according to the Ukrainian Governmental Tourism and Resorts Committee. That is 2 million higher compared to the previous year.
Growth dynamic of the hotel industry can be seen in table below*:
Several years in a row the Ukrainian hotel industry market was in anticipation of international franchise professionals entry. It was expected because franchise is the fastest method of organization and developing any hotel project. As the result there are many international companies with well known brands already in the market or about to enter it. This includes Radisson, Inter-Continental, Hyatt International, Hilton, Sheraton Hotels & Resorts, Marriot International, Accor Group, Hilton, Magic Life, Rixos, Kempinski Hotel & Resorts, Continent Hotels & Resort, Park Inn, Orbism Rival Hotels, Comfort Green Hotels Holiday In, etc..
International hotel networks’ entry to Ukrainian hotel industry market became real because there are quite many perspectives such as:
Organization of youth football (soccer) UEFA championship in 2009 in Donetsk.
Conducting annual meeting of EBRD in 2008 in Kiev.
Conducting UEFA championship finals together with Poland in 2012. Hosting cities are Kiyiv, Donetsk, Dnipropetrovsk, Lviv, Odesa, Kharkiv (opt. Ivano-Frankivsk).
"No visa entry regime" for citizens of EU, USA, Switzerland, Japan, etc.
Official law "Regarding organization and conducting of finals of European football (soccer) Championship in 2012 in Ukraine".
At the present moment there is one national hotel network "Premier Hotels" that consists of seven 4 & 5 star level hotels in different cities of the Ukraine. And there is one managing company "Premier International" which represents "Premier Hotels".
In July 2007 Austrian investment fund "Sparkassen Immobilien" which belongs to German financial group "Erste Bank Group" declared plans to build two 5-star hotels in Kiyiv. Some 4-star hotels will be built in Kiyiv, Lviv, Kharkiv, Dnipropetrovsk, Donetsk and managed by Marriot.
New 5-star hotel Hyatt Regency Kiev with capacity of 234 rooms was opened in September 2007. Executives of Hyatt International announced its plans to open one more hotel using its brand.
Rezidor company (brands Radisson SAS, Regent, Country Inn, Park Inn and Missoni) became significantly more active in the Ukrainian market. It manages 4-star hotel Radisson SAS in Kiev. Rezidor has also made an agreement to manage 5-star hotel Radisson SAS Airport Hotel Kiev (Borispil International Airport) and agreements with developer companies "Dubl W" and "Nedvigimost Stolitsi" (NEST) on management of hotel Radisson Paradiso Big Yalta which is situated in Mishore (South region of Crimea). Besides Rezidor declared intentions to build a hotel network Park Inn in cities with populations of more than 500,000. Yuliya Sayenko (chief architect of Dnipropetrovsk) says that company Rezidor plans to build two 3-4 star hotels in the city. Rezidor Hotel Group consists of 302 hotels with overall capacity more than 62,000 rooms in 47 countries.
In the near future new hotel Hilton should be opened on the Taras Shevchenko boulevard in Kiev.
Accor Group (the biggest European hotel network which consist of 3800 hotels in more than 100 countries, it owns 26 trademarks: Sofitel, Mercure, Ibis, Etap, Formule 1, etc. ) plans to enter the Ukrainian market. It made an agreement with investment-developer company "XXI Vek" on management and share holding in building 13 hotels. This international hotel management company will manage four 5-star hotels in Kiev with overall capacity more than 1000 rooms and nine more 3-star hotels in the cities where EURO-2012 will be conducted.
Inter Continental plans to enter the Ukrainian market in the near future.
Turkish hotel network Rixos actively develops its business in Ukrainian hotel industry with its debut hotel Rixos Hotels Prikarpatye.
International hotel network Kempinski Hotels&Resorts is in the negotiation process regarding building several 5-stars hotels in Kiev, Kharkiv, Yalta and Odessa.
German hotel management company Magic Life which manages "all-included" hotels in 6 countries (Tunis, Egypt, Greece, Turkey, Bulgaria, Austria) is also in the process of entering Ukrainian market.
Sheraton Hotels & Resorts , Continent Hotels & Resort, Rival Hotels, Comfort Green Hotels, Holiday Inn, etc. are also looking into the Ukrainian hotel industry.
"Demand generates Supply" is market-rule. It was stated in the 7th International investment forum that increase in tourist’s appeal of Ukraine and as the result increase of demand for hotel services defines situation in Ukrainian hotel industry as one of the most promising in Eastern Europe. International franchise companies certainly will set up new standards of running hotel business but in turn they are expecting comfortable conditions for foreign investors such as perfection of legislation, infrastructure development, and increase in the quality of available tourist services. But the key is in finding reliable partnerships, because some international brands that easily enter many other international markets face failure in the first attempt. The main reason for such failures is misunderstanding rules of organizing business in the Ukraine, lack of reliable Ukrainian partnerships or dealing with companies that do not realize how business in Ukraine should be organized and developed.
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
