Contributing Thought Leader

Sanja Cizmar

Senior Partner

HD Consulting

GHN HOTEL MARKET WATCH

GlobalHotelNetwork.com: Where do you see the best opportunities for hotel investment or development? 

Sanja Cizmar: Croatia South East Europe continues to be an interesting target for hotel investments, due to its above-average growth rates of tourism demand compared to European averages, which positions SEE as a prospective market for investment. As a region fragmented in several markets with differentiated resources, development models and regulation, the investment opportunities differ across the region. As the most developed hotel market in the region, Croatia is positioned as a key target for hotel investments. The market is still dominated by local investors, mostly large hospitality companies with portfolio in several destinations along Adriatic coast. Croatian hotel industry is highly consolidated, where 15 largest hotel companies generate more than 50% of total business. Major focus of their investments are brownfields and privatization transactions of outdated hotel portfolios in former state ownership. In general, over the past decade, significant increase of hotel quality level in Croatia has been seen due to many investments in repositioning and improvement of product quality of existing properties. Greenfield investments are less present, due to the prolonged returns caused by mainly seasonal business model. International investors show interest to enter the Croatian market, targeting capital city Zagreb and larger cities along Adriatic coast, with year-round business combining leisure and MICE segments. Although international hotel brands have low penetration index of below 20%, there is constant interest of global hotel brands to enter the Croatian market, searching for adequate hotel products. As a consequence of the instability of the eastern Mediterranean markets during last couple of years and general strategy to shifting their operations to stable markets, large European tour operators (like TUI) increased their presence in Croatia in the upscale segment, mostly through branding and partnership with large local hospitality companies who invested in existing properties repositioning. Hotel investment outlook puts capital city Zagreb in the focus of hotel investors interest, since there is a potential for 10-20 thousand new rooms in mid-term, fueled by high growth rates of tourism volumes and stronger positioning of Zagreb on international travel market. Also, several hotel portfolios located in attractive destinations along Adriatic coast and presently owned by local investors will be on sale. Investment potential is also present in niche products such as health tourism, where the Government is developing regulation for investments, and international operators show high interest for Croatia due to its resources. Future investment activity is encouraged by availability of financing and low interest rates. However, the investment potential will depend on the future measures of Croatian Government directed to ensure more attractive business environment that would increase the competitiveness level of future hospitality operations in the country. As a small country and an open economy, Montenegro has low barriers to entry, low taxes rates and pro-active Government attitude to ensuring favorable conditions for investments. Therefore, the country continues to attract major international investors investing mostly in high-profile large mixed-use developments. Government is committed to develop infrastructure as a necessary prerequisite for further hotel & resort development, which is backed up with several EU and other international institutions financial mechanisms. Further tenders for some major locations on Adriatic coast and in the inland are expected, where mountain ski resorts are planned or under development. This will lead to new hospitality developments in upscale and luxury segments invested by high-profile international investors, probably focused to mixed-use product due to high returns. Albania is at the very beginning of its hotel development process. The country is in a fast modernization process, where tourism can significantly contribute in creating a new and appealing image of an attractive and open country. Government is determined to develop tourism strategically and create a clear path to investment and growth. Understanding strong potential of the market, a strong interest of international and regional investors is already shown in main cities as well as for green-field hotel & resort investment along the Adriatic coast, parallel with entrance of several international hotel brands on the market. In the last decade, the number of international arrivals in Albania showed strong and consistent above-average growth compared to the region. Although still highly seasonal market, there is a trend of strengthening shoulder season. That shows that besides sense as a main driver, also other motives of arrivals are strengthening, based on exploring Albania’s rich cultural heritage, and untouched natural beauty. Donor institutions are already heavily supporting Albania, focused to infrastructure development and capacity building programs which are all prerequisites for further hotel and resorts development. Although a small market, Slovenia strategically develop its tourism industry focusing the sustainability and diversified tourism products which guarantee year-round operation. Capital city Ljubljana and Slovenian Adriatic coast are the main targets for international and regional hotel investors due to the attractive products and stabilized operation. Hotel market in Ljubljana has been experiencing the entrance of several international hotel brands due to the stable potential of this market. Hotel investment opportunities in Serbia are mostly real estate driven, with capital city Belgrade as the main investment target. It has been experiencing high hotel and real-estate development over the past years, resulting with balancing the supply and demand. This resulted with putting hotel KPIs and returns on the regional average, although market is still being strong and with high future potential, having in mind business and leisure market segments.