Europe -  Bucharest, Romania

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Bucharest, Romania’s capital and the seat of its government, is undoubtedly the country’s main communications and industrial centre, with many multinational companies now represented in the city. The area around Piata Victoriei is establishing itself as the city’s business district. Key sectors within the city are oil (represented by companies such as Shell, Agip and Texaco), cars (Renault and Nissan), IT (Microsoft and IBM) and banking and finance (Raiffeisen, Société Générale, ING Bank, Citibank, and others).

Romania is now among the fastest-growing economies in the EU, driven by increased consumption through recent tax reliefs and VAT cuts. Wages are rising due to a shortage of qualified personnel. Successful businesses have helped to increase spending in Bucharest and drive the accommodation sector. While the corporate segment remains dominant, leisure tourism is rising, supported by Danube River cruises. Significant potential exists in the market, as occupancies are high (over 70%) and rates are still well below those of hotels in the neighbouring cities of Prague and Budapest, owing partly to the smaller luxury market in Bucharest. The future looks bright, but the country lacks professionals promoting the city and a modern MICE venue to attract large conferences. Underdeveloped infrastructure and the shortage of qualified hotel staff are likely to be some of the challenges for this market to overcome.

Both domestic and international arrivals to Bucharest were affected by the global economic downturn in 2009, and registered decreases. This had a major effect on the hotel industry, with a strong decrease in occupancy and average rate leading to a RevPAR decline of close to 30% in 2009; this negative trend continued and reached an all-time low close to €40 in 2013. Strong recovery started from 2014, with an average RevPAR growth of more than 9% per annum from 2014-16. However, the strong growth momentum slowed down in 2017 and 2018, leaving RevPAR some 30% lower than at its peak in 2007.

In the past, high barriers to entry have prevented new hotels from being developed in Bucharest. However, the privatisation process in Romania has allowed the hotel industry to develop at an accelerated pace. Therefore, hotel supply in Bucharest has increased in the past few years and the room stock is expected to increase by a further 5% by 2020.

In terms of transactions, the hotel market in Bucharest has recorded low levels of transactions since the economic crisis in 2008. In 2018, one hotel transaction took place in Bucharest: the 95-room Hotel Mercure Bucharest Unirii at €11.3 million (€120,000 per key). Overall, the market recorded a value increase of 2.4% in euro (4.5% in local currency) compared to 2017 levels.

The widespread impact of the coronavirus (COVID-19) has had an unprecedented impact on hotels and hotel values worldwide. Consequently, the latest HVI analysis may no longer reflect the most current measure of lodging industry strength or the hospitality investment market.

In each of our offices across the globe, we are working tirelessly to analyze the impact of recent events and provide timely insights to help you navigate these uncharted waters. Because it is unclear how long the pandemic will last or how long related restrictions will be in place, we are updating our analyses on a weekly basis using the most current data.

Additionally, examination of value trends in prior cycles can provide useful information. Historical patterns, together with an understanding of the market’s current expectations for the eventual recovery of the industry and its performance, can provide insights on the likely trajectory of decline and recovery for hotel values.

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For more information, please contact:

Sophie Perret, MRICS, MBA
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Magali Castells
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