The hotel branch - a promising market for investor
The aim of the previous publication was to underline the perspectives of luxury hotels on Ukrainian market. Hence, it didn’t give an accurate account of all accommodation services. This article tries to analyze perspectives of capital investments to other classes of Ukrainian hotels.
Increasing of the number of tourists would always result in increasing the demand for hotel services. Rise of activity in the segment of business tourism exposed a critical shortage of economy class as well as 3-star and 4-star hotels in our country. However, the highest demand is for single standard (economy) rooms. According to the National Tourist Administration of Ukraine currently there are two hotel beds per 1,000 inhabitants which means that attractive and vacant niches on the market of hotel services are still available. (For comparison, this index in Moscow is 9, in Paris – 38, in Europe 14-18 hotel beds). So far the shortage of hotel rooms contributes to keeping accommodation prices at high levels. The prices offered by the hotels today are slightly exaggerated. Prices in the hotels of Ukraine vary from $10-20 a day in hotel-type hostels to $500 and higher in high-star hotels. That gives an explanation to the question why does the average investment recovery period for a hotel in the West comprise 8-10 years, but in Ukraine this index can be 5-7 years.
Shortage of hotel capacities in Ukraine is obvious. Due to the absence of local hotel operators every dollar invested into the hotel sector in Ukraine will bring quasi rent in the nearest future, project recovery periods being much shorter than the average ones worldwide. Investors’ interests today are due to be concentrated on major projects with good future prospects for the sector development. Construction of mini hotels, separate complexes with well-developed infrastructure (entertainment centers, etc.) as well as hostel-type hotels is currently the most promising investment attraction. Proceeding from the current dynamics of youth tourism development one can undoubtedly forecast arising of more hostel-type hotels. According to our calculations the average cost recovery period for establishing a hostel-type hotel is 3-4 years. It doesn’t seem to be very long for hostels of improved conveniences with expected yearly income of $1mln. According to our experts, the investment volume for constructing a new hostel building might be $1.5-3mln depending on the quality of the rooms.
In general, the Ukrainian hotel business can be estimated as a complicated but promising market for investors. Building hotels of different classes in such regions of the country as the Crimea, the Black Sea coast and the Carpathian Mountains will be particular profitable field for foreign businessmen to invest.