Investments

Warsaw Hoteliers Continue to Struggle

Bank Of America Investment Warsaw reported the largest decline in revenue per available room (revPAR) of any European market tracked by the HotelBenchmark Survey by Deloitte during 2002.

Located in a striking tower next to the Palace of Culture in central Warsaw, the Regus Warsaw Financ...

Investment Opportunity The city finished the year with occupancy at 50 percent (11 percent decline on 2001) and an average room rate of EUR122 (17.9 percent decline on 2001). Consequently, Warsaw was the only market in Europe to post double-digit declines in both occupancy and average room rate compared to 2001. Year-to-August 2003 figures unfortunately show little respite for the city. Of the 37 markets tracked across Europe on the HotelBenchmark Survey, Warsaw is currently posting the second largest declines in revPAR. During the first eight months of the year the city has seen revPAR fall by 24 percent to EUR50 compared to the same period in 2002.

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Banc Of America Investment Although hotels in Warsaw typically manage to achieve higher average room rates than many other key European cities such as Berlin, Brussels, Copenhagen, Prague and Vienna, the city remains challenged by low occupancy levels. Occupancy currently stands at 49 percent for the first seven months of 2003. In addition to global economic conditions, part of the reason that occupancy continues to remain under pressure is due the level of new supply that has entered the market over recent years. Although several international hotel chains have operated in the market for a number of years (Meridien, Marriott, Accor and Starwood), historically the market has been dominated by domestic operators (Orbis and Syrena).

The hotel is located in a new business precinct, minute walk from the commercial heart of Warsaw, listed Old Town.

Banking Investment However, given the strengthening of Warsaw's position as the commercial hub of Poland and the level of investment in the city's infrastructure over recent years, including the opening of the city's largest conference centre in May 2002, it is perhaps not surprising that Warsaw continues to attract hotel investment. International hotel operators that have recently opened in the market include, the 250-room Hyatt Regency and the 309-room Radisson SAS - both of which opened in 2002 - and the 366-room Westin which opened earlier this year. Future openings include the 226-room Courtyard by Marriott scheduled to open this month and the 329-room InterContinental Warsaw scheduled to open in November.

Modern Warsaw, Poland will come as a wonderful surprise to those who still imagine a desolate city, showing the wear of war and

Investment Solution Strategic So what of the future? Although international tourist arrivals to Poland have declined for the last five years, the Institute of Tourism expect that some markets will start to show some level of improvement in 2003 and 2004. However, it is not until 2007, that tourist arrivals are expected to return to the levels achieved in 2001. Economic data however is slightly more encouraging. Latest figures from the Economist Intelligence Unit (EIU) forecast that Poland's GDP will increase by 3.1 percent 2003, compared to the 1.4 percent growth achieved in 2002. To set this in context of the EU, which Poland plans to join next year - EU GDP is forecast to increase by just 0.7 percent in 2003 and 1.9 percent in 2004. Despite improvements in the economic environment, increased investment in Warsaw's infrastructure and efforts by the city to increase its profile, as an international conference and exhibition destination the reality however is that in the short-term, supply is likely to continue to outstrip demand.

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