Based on the latest Trends Radar report “Real Estate on the wave of change” prepared by the international consulting agency Cushman & Wakefield, the hotel market in Poland is recording consistent increase in demand and key indicators related to hotel performance. This positive situation is expected to continue into 2024, when a recovery in the number of overnight stays given to foreign guests is expected. In the long term, the market will focus more on modernising existing hotel facilities and implementing advanced technological solutions and those related to ESG.
Demand is Growing in the Market
As reported by Trends Radar, the hotel market in Poland is witnessing a consistent increase in demand. For example, in 2022, the sector recorded a 23% year-on-year increase in the number of overnight stays, and forecasts for the end of 2023 speak of an expected 5% increase compared to 2022.
These positive trends are primarily the result of strong domestic demand, while a recovery in the number of foreign overnight guests is expected in 2024. According to forecasts, the number of nights spent in Polish hotels next year is expected to exceed 7% of the level recorded in 2019, explains Maciej Prończuk, a Cushman & Wakefield hotel market expert.
Further recovery in the Polish hotel market will also largely depend on an increase in the number of business trips. While Oxford Economics is forecasting a return to pre-pandemic demand levels in the business segment in Poland by 2027, many indications suggest that this could happen much earlier.
Hotels in Warsaw are already recording an increase in demand generated by companies. At the end of the third quarter of this year, the number of overnight stays and revenues related to business demand were 81% and 98% respectively of the levels recorded in 2019. Meanwhile, conference demand in Warsaw hotels increased by almost 20% compared to the same period last year. Although this was 25% lower than in 2019, it is worth noting that it generated only 5% less revenue than in the same period in 2019, adds Maciej Prończuk.
Hotels located near Polish airports can also expect more guests. Data shows that the number of passengers at Polish airports has returned to pre-pandemic levels and even surpassed them – in the first half of 2023, it was 4% higher compared to the first half of 2019. Forecasts predict this positive trend will continue in the coming months.
Key Performance Indicators are also Rising
Trends Radar reports that the Revenue Per Available Room (RevPAR) indicator in Polish hotels for the period from January to October 2023 increased by more than 19% compared to the same period in 2022 and was 23% higher than the level recorded in the same period in 2019.
This trend may continue in 2024, but we must also bear in mind that the expected growth rate will slow down. Occupancy rates are already close to pre-pandemic levels, and the ability to raise Average Daily Rates (ADR) will be limited, which will be influenced by factors such as inflation. After a period of dynamic recovery, the hotel market in Poland is stabilising, which means a more moderate increase in results, says Maciej Prończuk.
Despite many challenges arising from factors such as inflation, rising wage and media costs, hotels remain profitable. For example, according to HotStats data, total costs from the beginning of this year to September in hotels in Warsaw increased by 25%-30%. At the same time, thanks to strong revenue growth, gross operating profit per occupied room in Warsaw hotels increased from 7% to even 17% compared to the same period in 2019.
However, despite the improving results of hotels in Poland, the market does not have many new hotel investments under construction. The Central Statistical Office reports that the accumulated average annual growth rate for the number of hotel rooms between 2015 and 2023 was 3%. A further average increase in the hotel base in Poland is forecast for the coming years. According to the Cushman & Wakefield “Hotel Operator Beat H1 2023” report, despite significant developer activity in the CEE region, about 17% of projects are delayed, and another 11% have been put on hold. This is primarily due to high construction costs and difficulties in obtaining debt financing, which is pointed out by 65% and 35% of surveyed operators, respectively. According to 40% of respondents, delays in hotel investment tend to last from 6 to 12 months.
The Future of the Market: Modernisation and ESG
The growing expectations of hotel guests, increasingly high operating costs, and the necessity to meet ESG criteria are leading more investors in the hotel market to opt for modernisation of existing facilities, systems, and procedures, along with investment in new technologies.
It is worth noting that Warsaw ranks in the top ten largest European markets in terms of the number of hotels with recognised ecological certificates, reaching nearly 10% in the capital. Moreover, despite a lower level of certification compared to the office property sector, Poland is the leader among the six CEE countries in terms of the number of hotels with BREEAM or LEED certificates. However, operators still have a lot to do to minimise the carbon footprint of hotels, adds Maciej Prończuk.
ESG-related aspects pose a challenge but also an opportunity, as the implementation of sustainable development policies can positively affect revenue levels and allow for reductions in operating costs.
ESG is also becoming a significant criterion in decision-making processes for operators and institutions providing debt financing. According to the Cushman & Wakefield “Hotel Operator Beat H1 2023” study, 42% of surveyed operators are willing to offer a higher rent, and 30% to offer owners a larger security deposit (key money) in the case of hotels meeting the highest standards in terms of sustainable development and ESG, concludes Maciej Prończuk.
