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HOTEL MARKET VACANCIES
International hospitality brands sprouting in Euro 2012 hot house despite crisis
Judging by the number of new hotel projects and the appearance of new international operators for their management, the economic crisis has had little influence on the expansion of Ukraine's hotel sector. Despite some short-term downturn in the number of business travellers who are the main clients of Ukraine's luxury hotel sector, developers are increasing their hotel portfolios and preparing to exploit the opportunities presented by the Euro 2012 football championships.

New face on the market

The number of international operators coming to the market is constantly growing, pushed by the existing shortage of high quality hotel accommodations in Ukraine's largest cities, with the economic downturn seemingly having little negative impact so far. For example, in November Fairmont Hotels & Resorts, the largest luxury hotel company based in America, announced it would soon have a luxury hotel in Kyiv, the company's first in eastern Europe. Set to open in late 2010, the classically designed Fairmont Grand Hotel Kyiv will feature 257 rooms, including 35 suites at a location on the Dnipro River in the heart of the historic Podil district of Kyiv. "The Fairmont Grand Hotel Kyiv will be an exciting addition to our portfolio, reinforcing our commitment to managing world-class properties that build upon our brand's global strength and provide unique experiences for our guests to enjoy," Thomas W. Storey, the president of the Fairmont Hotels & Resorts, said of the new venture.

The owner and developer of the new hotel is Kyiv-based developer Yaroslaviv Val which is developing another hotel project in the centre of the Ukrainian capital, destined for another well-known international hotel operator. In February 2007 UK-based Inter-Continental Hotels Group (IHG) announced the signing of a contract with Yaroslaviv Val, controlled by Ukrainian tycoon Leonid Yurushev, to open a new five-star hotel. According to the operator, the 272-room Intercontinental Kyiv is scheduled to open in April 2009.

CONTINUING INVASION

Despite current market conditions, IHG is signing agreements with new investors and will expand its work in Ukraine with several more new hotels in coming years. The 210-room Holiday Inn Kyiv is due to open in the first quarter 2010, owned by the property developer Toronto-Kyiv. In line with an initial agreement inked in July 2008, the Crowne Plaza Kyiv is expected to open in April 2012. The hotel is being developed by owner ITT-Plaza, part of the ITT Investment Group, and will be run by IHG under a 15-year management contract. "While current market conditions are more challenging, our business model is resilient and, given the power of our brands, the size and resilience of our pipeline and our leading reservations systems, we are positioned well to continue to outperform the industry," IHG's chief executive officer Andrew Cosslett said.
In the beginning of 2011 Ukraine will get its first hotel operated by France's Accor Group. Accor signed a contract with major Ukrainian developer XXI Century Investments which had already announced correction of its business strategy and limitations of its investments, but remains committed to development of hotel projects for Euro 2012. As a result, in 2011 Kyiv will get a Sofitel luxury hotel with 277 rooms that will most likely be named the Sofitel Kyiv. In addition, XXI Century has confirmed it is continuing work on three more hotels in Kyiv and Kyiv region as well as one in Kharkiv, all of which are scheduled for completion in 2011.

INTERNATIONAL SERVICE STANDARDS IN CRIMEA

The Brussels-based Rezidor Hotel Group was the first international chain to enter the Ukrainian market, arriving in 2005 with its 4-star Radisson SAS Hotel in the centre of Kyiv. This spring the company added the Radisson SAS Resort Alushta, the first hotel operating under the Rezidor brand in Crimea. Rezidor will also manage a Radisson resort, the Bolshaya Yalta and the Radisson Airport Hotel Kyiv on the Kyiv-Boryspil highway, both scheduled for completion in 2010. Another leading international brand Hilton Hotels Corporation had previously announced plans to enter the market with management of the five-star Hilton Kyiv, though the timing of the project has not been confirmed recently by the operator.

Darren Blanchard of the Rezidor Hotel Group representative office in Russia sees the market avoiding the worst of the current economic downturn and is encouraged by the increasing investor interest in the sector. "Many of the obstacles restricting development just a few years ago, such as financing, now present less of a challenge in spite of the current credit crunch, since both local capital and international investors are increasingly interested in entering into the Ukrainian hotel industry. Hotels are like no other business and very diverse from other real estate developments. Unlike office, residential, warehouses and retail they cannot simply be left as shell and core and then leased out. They require a complete fit-out in furniture, furnishings, fixtures and equipment right down to the last teaspoon. This means they carry a far higher burden of investment and by consequence risk," Mr. Blanchard commented.

GOVERNMENTAL SUPPORT

Meanwhile, the Ukrainian Cabinet of Ministers is working out a programme to support hotel investors ahead of Euro 2012. Deputy Prime Minister Ivan Vasyunyk told journalists after an expanded meeting of the Euro 2012 co-ordinating bodies of Ukraine and Poland that the Ukrainian government is discussing several plans to attract investors to the country's hotel projects including compensation from the state budget of part of the commercial bank interest rate on loans to support hotel construction.

Yaroslav Ivanov, the head of the marketing department at the real estate consulting company Ukrainian Trade Guild, sees support for Euro 2012 as crucial to the sector in 2009. "In the near future the development of the sector may depend on state support for Euro 2012-related projects, with the possibility that international financial organisations will also offer funding."

Oksana Bondarchuk

Business Ukraine



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