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The hotel owners felt the financial crisis effects even from the last three months of 2008 when business tourism dropped so that they have to consider cutting accommodation tariffs and improving services. More, competition heightened, less guests having to choose from multiple offers, specialists explained. Last year, the accommodation capacity of Bucharest increased with 3,479 new rooms putting pressure on tariffs applied by hotel owners this year.
In 2009, there will be a battle on tariffs. "I estimate that acquiring market share of the concurrence will drive the general phenomenon on hotel market in Bucharest”, stated Sorin Ionescu, Manager of Fivestar Hospitality Consultancy Company.
He also explained that since October and November 2008, most of the companies have imposed restrictions on travel budget of their employees and therefore, having implications on the occupancy rate and tariffs.
The market faced much more last minute cancellations at the end of last year. Considering the tourism in Bucharest is 85% based on business travel, the revenue per available room (REVPAR) has significantly dropped. In these conditions, many hoteliers have reacted by reducing terrific. Thus, in the first 11 months of the year the European average for the revenue for available room was 108 EUR decreasing from 111.6 EUR in the similar period of 2007, according to a study performed by Tri Hospitality Consulting in the major European capitals. Although Bucharest was not included in this study, Delloitte, the Consultancy Company estimates this indicator at EUR 73 for Bucharest, decreasing by over 10% compared to the same period last year.
However, the market players foresee tariffs stabilization in 2009 concomitantly with a decreasing of the occupancy rate. The tourism specialists warn the tariffs reduction is not the best solution, at least for the beginning. “I would rather advise the hoteliers not to start with tariffs reduction. Awarding some significant discounts will not have the expected effect; an improvement of services such us including some supplementary services in the offer would be more efficiently” says Sorin Ionescu. “In 2009, the negative impact on revenues persuades hoteliers to be aware of the necessity to significantly adjust the expenses” specifies Sorin Ionescu.
Reducing activities in order to decrease expenses will lead to personnel cut but the level of dismissals will not be significant. “We will not have an increase of employees’ number in the existent hotels but rather a higher professionalism in order to improve the quality of services” states Sorin Ionescu.
According to Sorin Ionescu, the uncertain situation met in tourism and in the most economic activities in this period will extent on the hotel market even in 2010. It depends also what kind of the incentives the new Government will provide. “Unfortunately, the recovery of tourism will heavily depend on the infrastructure projects and agriculture “, says Ionescu.
Hotel and restaurants sector performed a share of GDP of approximately EUR 3 bn., increasing only with 4% comparing to the previous year, according to the estimates of Fivestar Hospitality based on National Institute of Statistics and National Commission for Prognosis data. “If in 2007 the increase of the sector was by 15%, in 2008 the increase rate could not exceed 4% as a result of decline in the last quarter and the effects of financial crisis. But the final data for the 4th quarter are not available” says Ionescu. The Hotel and Restaurant sector would thus have a 2.2% contribution to GDP in 2008.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
