Factors of Ukrainian Hotel Business Development
By Nikolay Mayger, CEO, Mayger Consulting Company
Mr. Nikolay Mayger
Ukrainian hospitality business is at the stage of its development and with every year becomes one of the most dynamically developing and profitable fields of the country’s economy. Undoubtedly, it became possible on the basis of total political, economic, social, demographic, geographical, ecological, etc., factors. String of pronounced facts indicates about it.
• One of the most significant factors of situation changes at the domestic hospitality market is the economic one: structural changes in the economy, external economic activity, macroeconomic indicators, financial results of enterprises and organizations, price and tariff indices which have an essential influence on positive dynamics of Ukrainian hotel business.
It should be mentioned that macroeconomic indicators in Ukraine during the last years were stable; according to the data of British agency Fitch Ratings the economic growth rate made up 7.5 % annually.
In January-April 2008, the real GDP was 106.2% as compared with the relevant period of the last year.
During 2007, exports of foreign trade in goods to EU countries made up $13.9 billion and increased in comparison with 2006 for 15.1%; correspondingly import – $ 22.2 billion and 37.2%.
The profitability of 4-5* Kiev hotels exceeds 40% that is not the least of the factors of Ukrainian hospitality development. The average fillability is 60-85%.
It is significant to note that the volume of direct investments from EU countries by 01.01.2008 made up $22.9 billion which make up 77.8% of the total investment to Ukraine (01.01.2007 – $16.3 billion, 75.2%).
There is a bank lending boom (the increase for 76% since January to June).
On the 16th of May, 2008 Ukraine became the 152nd member of World Trade Organization.
• Geographical and geopolitical location promotes development of tourism and hospitality of Ukraine:
Special attention should be paid to unique natural and climatic recourses, historical and cultural inheritance.
Beneficial climate of the Black sea and Sea of Azov, the Crimea, the Carpathian Mountains is widely used practically at all resorts as the main medical and health-recreation factor.
Among health-improving resources the considerable reserves of therapeutic muds and numerous deposits of mineral water should also be noted.
• Definite influence upon hotel business development has political factor and legal framework:
Improving of investment climate of Ukraine depends to a large extent on creation of the efficient system of institutional activity support of foreign investors, the priority of which is successive politics of executive pressure softening on investors.
The economy of Ukraine reacted easily to the political instability of the last years - two elections to Verkhovna Rada for 18 months, three government changes since the beginning of 2005.
We can not fail to note about the development of cooperation between Ukraine and World Tourism Organization (WTO) that is a priority area of public policies in the development of international tourism and an important prerequisite for the integration of Ukraine into the world travel space.
Also an important fact is the opening of borders, visa free entry to Ukraine for representatives from EU countries, the Swiss Confederation, the Principality of Liechtenstein, Japan, Bulgaria and Romania.
By the decree of the President of Ukraine № 136/2007 "About activities connected with the tourism and resorts development in Ukraine” the 2008 was declared as the Year of Tourism and Resorts in Ukraine.
The President of Ukraine decreed to develop and approve "The strategy of stable development of tourism and resorts in Ukraine". It will help to create favorable conditions for catalyzing the tourist’s and resorts’ investments, to implement mechanisms for stimulation of construction of new and renovation of operating tourism and resort infrastructure, to practice different activities for the positive boosting of positive travel image at the international tourism market by creating a network of Tourist IC in Ukraine and tourist agencies abroad.
At the same time among the important events of the last year it is important to note the return of budgetary financing of expenses for the development of tourism and resorts. 20 million UAH was given for these purposes.
Preparation of the country to receive the guests of European Football Championship in 2012 greatly influenced on the dynamics of the hospitality development. A law “About organizing and conducting the final part of European Football Championship 2012 in Ukraine” was passed. It is important to note that investors will receive the benefits for infrastructure construction.
On December 26, 2007 the Law of Ukraine № 877-V "On the main regulations of state control in the sphere of economic activity" joined into force which aimed to introduce proper order in the implementation of state control.
The new version of Rules of obligatory services certification for temporary accommodation which are provided by parties of tourist's activities in the joint and individual means of accommodation (27.12.2007 for № 1418/14685) was approved. This will significantly improve the quality and control over services.
Thus the adoption of several important legal acts will promote the development of the market and allow solving quantities of disputable issues currently existing in this field.
• The demographic and socio-economic factors as well as incomes, health protection, social welfare, education has its particular influence:
Hotel business development depends to a large extent on the fact that during the 2007, 23 million foreign citizens visited Ukraine, what is almost 4 million more in comparison with the previous year.
At the same time the priority type of tourist's activities in Ukraine remains internal tourism. During the 9 months the growth rate was 74% while for the same period in 2006 - 47%.
Significant influence has the increase of domestic and foreign business tourism and the growth of business activity inside the country.
• Factors that have become catalysts for the dynamic development of the hotel market in Ukraine:
Mainly the conducting of the UEFA championship Cup - Final in 2012 jointly with the Republic of Poland catalyzed the interest of investors.
Determining influence is also experienced by the organization of youth football (soccer) UEFA championship in 2009 in Donetsk.
Conducting annual meeting of EBRD in 2008 in Kiev.
It is well known that hotel industry is entirely oriented to the consumer and directly depends on the quality of provided services. External factors of low efficiency of hotel enterprises greatly influence he formation of the hotel market. The problem of low-quality service is rather typical for Ukrainian hotel market due to the influence of old Soviet school.
Thus the dynamics of Ukrainian hospitality development can be estimated as positive. Ukraine has a great potential and opportunities for further development of hotel industry and tourism, efficient use of natural and recreational, historical and cultural, tourist & excursion resources, complete satisfaction of the health-improving & sports, cognitive, spiritual needs of domestic and foreign tourists and favourable conditions for investment activization. In 2007, investments in hotel development sphere constituted 12 billion UAH which is 0.7% higher comparing to the previous year. During January-March 2008 the volume of provided services made up 573 million UAH and for the same period of the last year - 392 million UAH.
Over the past years international public hotel operating companies actively show interest and make negotiations about possible projects. In many ways appearance of international brands and hotel management companies in the Ukrainian hospitality market is a natural development indicator of hotel sector of Ukraine.
Currently three public hotel operating companies Global Hyatt Corporation (in July 2007, 5-stars hotel Hayatt Regency “ Saint Sofia Kiev” started operating under Hyatt brand), Rezidor Hotel Group (2005 – four-star Radisson SAS Hotel Kyiv), Rixos Hotel (2005 – five-star Rixos Hotel Prikarpatye) are doing business in Ukraine now and one national managing company “Premier International” which represents “Premier Hotels”. Hilton Hotels Corporation, InterContinental Hotels & Resorts, Marriott International, Kempinski Hotels&Resorts and Accor Group wanted to enter Ukrainian hotel market. In 2007 , InterContinental Hotels & Resorts, Hilton Hotels Corporation, Starwood Hotels & Resorts , Marriott International, Accor Group , InterContinental Hotels & Resorts, Magic Life, , Kempinski Hotels&Resorts, Continent Hotels & Resort, Choice Hotel International, Wyndham Worldwide have announced their close interest in Ukraine.
Nikolay Mayger is the Founder and the President of Mayger Consulting Company, a Ukraine-based company 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. and informational-analytical company "Ukrainian agency of financial development". Mayger Consulting is merited to reward “The Leader of Ukrainian business” which purpose is presenting the leaders of national economy in different fields. Nikolay Mayger is a member of the Ukrainian Union of industrialists and businessmen, the Ukrainian Business Assistance Network and the Federation of employers of Ukraine. Mr. Mayger entered the book “Economists of Ukraine. The leaders of national economy”. The book contains articles about outstanding Ukrainian businessmen and specialists. The detailed information about activities of Mr. Nikolay Mayger you can find at the official web-site of the consortium “Who is Who in Ukraine” http://who-is-who.com.ua/bookmaket/economisty2006/8/134.html. Mr. Mayger can be contacted at or nikolay@maygerconsulting.com
