Contents
Contents
The tourism scene in Romania continued its growth or recovery in 2023, depending on which angle you are looking from or which segment of the market you are analyzing. Leisure tourism is back in black and has been for a while as the number of domestic tourists arriving in local hotels stood at nearly 7 million in 2023, quite close to record highs and also above the average in the pre-pandemic years. As a general comment, for the most part, this strong rebound of the leisure tourism is gradually making it more appealing to more institutional investors. Foreign tourists arriving in Romania are, however, still some 25% below pre-pandemic levels.
Tourism arrivals in hotels in Romania
Source: Eurostat, Colliers
Otherwise, it’s not just local tourism that has flourished, given that the passenger air traffic surpassed the 2019 highs in the summer of 2023, setting new records both in Bucharest and various other cities. It is important to note that over 90% of passengers in airports do so for international travel, so this also feeds into the story of a strong appetite for tourism from Romanian households, which have had their income increase substantially in real terms prior to the pandemic.
It is exactly this resilience that the industry has had in the last few years that is attracting a growing number of investors in different projects, as the inflationary backdrop post-COVID was not enough to stop the recovery. While also keeping in mind that some investors have gotten a bit dismayed by news regarding other commercial real estate sectors (in particular offices) and sought diversification, we have seen a growing number of projects up on the market due in 2025-2026 in particular.
Airport traffice recovery amid rise in some regional cities versus pre-pandemic period, Bucharest flat versus 2019 at ~14.5 million passengers in 2023
Source: Airports Association of Romania
Furthermore, we are also seeing a growing (and quite diverse) number of brands that want to enter the market, from luxury to budget, with many offering a greater degree of flexibility and some incentives in order to convince developers to start projects. It is important to note here that once a building gets the backing of an international brand, obtaining bank financing becomes easier. Lastly, also helping the market expanding is the fact that are seeing more and more professional operators on the market (from France, the Baltics as well as local ones), which lease the building from owners and manage the hotel; these have been a missing link between developers and brands and should help certain investors as it means one less risk to worry about if they so desire.
Looking a bit in-depth at financial and occupancy indicators for the upper end of the market (4-and 5-star) hotels in Bucharest, we note that ADRs have been rising quite a bit – 15-20% for the whole year after rising an additional 57% in 2022 (in RON terms). For these 4- and 5-star hotels, ADR stood at around 126 EUR/night in central areas and 82 EUR/night in northern Bucharest. Occupancy has increased by some 10% during summer months in competitive Bucharest hotels, but remains a bit below pre-pandemic levels. We need to revisit what we said earlier about fewer foreigners arriving in Romania, with most of these being business tourism; while this category is recovering, it is still not completely up to par with what we saw prior to 2020. Furthermore, there are some questions about whether or not this recovery can be maintained as the war in Israel has the potential to create some issues for some: based on anecdotal evidence, a significant part of arrivals in ultra-central hotels in Bucharest were from Israel.
In terms of upcoming projects of branded hotels, while 2023 only saw a major addition in Ibis Styles Airport in Norther Bucharest (84 rooms), the future looks much brighter. At the start of 2023, there were talks about only 7 projects underway, but by the end of 2023, that number surpassed 20 based on public announcements and rumours, with most of these in the Capital. Accor, Marriott and Radisson are some of the most active brands in search of new projects, the Louvre Hotel Group also seeking hotels for their Campanile chain. Currently, 26 internationally affiliated hotels exist in Bucharest, which have around 5,000 rooms, almost half of the total in the Capital in competitive hotels. Outside Bucharest, Cluj-Napoca, Brasov, Oradea, Arad are some of the most active markets.
Looking specifically at the almost 2,000 rooms that can be delivered between 2024 and 2026, we can mention some projects. On the upper end, One United is bringing a luxury brand for their hotel on the Clemanceau street – Ennismore (100 rooms); while another luxury brand from Ascott, The Crest Collection, is bringing a 170 rooms project near Bucharest’s Palace of the Parliament. A new collaboration with Accor on Novotel Living will bring a 150 rooms aparthotel, ready in 2025, while in the proximate future, Corinthia Grand Hotel Boulevard will be finished with its 30 rooms. Also, in relevant market news, 2023 saw the rebranding of the former Hilton Athenee Palace to Intercontinental.
Overall, the market seems poised for growth in both quantitative and qualitative aspects, as new projects will lead to a larger stock of rooms, while existing projects should deliver growth, albeit at different paces. Challenges remain in place; even without taking into account the economic uncertainties, local hotels face growing obstacle from a lack of labour force (as much as 10% - and growing – of employees in central hotels in Bucharest are from abroad, mostly from South Asia) to significant shifts in operational costs (like they faced throughout 2022 amid higher energy prices). Overall, though, the longer term future seems bright, hence the robust inflow of new projects.