BusinessMagazin

Tag: rooms

  • New Hotels Can Wait

    Most projects were stopped, some due to lack of funding, others due to lack of courage, and there is no talk of any new projects. Only some of the investments planned a long time ago remain. Radu Enache, owner of the Continental hotel chain, is afraid. Not so much because of the difficult period, which has pushed him to take almost desperate steps, such as giving the receptionist a green light to negotiate accommodation fees. He is much more afraid of the unstable exchange rate and of the Government’s decisions, of tax increases and of the non-existent strategy of the newly-re-established Ministry of Tourism.

    ”How can I go ahead with building the hotel in Timisoara, where I have funding ready and am prolonging talks with the constructor so as to buy more time, while they are preparing a 4.8 RON/euro rate,” Radu Enache asks. Although he is scared of the economic environment, the businessman has decided to start the constructions he had planned for this year, although problems do exist. ”For the time being we have our funding secured and we are seeking to streamline more expensive funding taken out a while ago; because of this, in fact, we are not 100% covered in terms of financial resources, and we have a 12% budget deficit against last year.”

    The owner of Continental hotels says he will try to solve this problem via a capital increase, which will take place within the next few months. Also in view of securing more financial resources for investments, the businessman has decided to sell the Hello hotel in Bucharest opened last year and put at 18 million euros, via a sales & lease back contract. This year Radu Enache says he will in fact start two projects, in Timisoara and in Bucharest. The two projects are based on the same concept – they have an integrated hotel structure (several types of hotels in one architectural complex), a concept for which Radu Enache sealed a deal with Czech investment fund PPF last year alongside the sale of a 30% stake in the Continental Hotels business (the deal was concluded in the summer of 2008 and put at 30 million euros). The first project that Enache says he will start is the one in Timisoara – which includes a Continental Forum hotel (with 120 rooms), an Ibis hotel (174 rooms) and a conference centre which will be able to host events accommodating 1.500 people.

  • It might be cheaper next door

    At the end of last year, Dragos Raducan, general secretary of the Federation of Romanian Tourism Business Owners (FPTR), told BUSINESS Magazin that the pressure on the prices charged by hotel operators would be heavier this year, so that unless they froze rates at at least 2008’s level, they would lose money. Reactions on the market at the time did not seem to back Raducan’s opinion, but January results made hotel operators change their minds.

    Take-up started to go down by 10-15% in the second half of last year and 2009 estimates point to a constant decline, as a result of a shrinking demand for accommodation and the rising number of hotels. Considering the projects already announced, but regarded with scepticism (because development of many of them has been halted), 12 to 15 hotels will open this year, most of which outside Bucharest. Competition and slow market have upset last year’s trend when the most expensive hotels on the market fared best. Now, hotel owners have started to fight a battle of special offers and lower prices, though lowered by quite small percentages.

    The 10-20% cuts started from the small hotels unaffiliated to international chains, which are the most exposed when it comes to the decline in business travel, because they are not part of international booking chains (the number of rooms affiliated to international chains is quite low, about 3% in Romania, anyway). ”They risk not being able to cover the expenses and then starting to make people redundant. There are big hotels in Prahova Valley that fired 30% of their employees,” Dragos Raducan says. On the other hand, contracts were signed at the same rates in RON last year for the seaside, and in mountain and spa areas rates in RON were kept or raised by 5-8% on average (in some rare occurrences, they were either kept unchanged or rose by 12%).