Tourist Accommodation – Bucharest Romania

The tourist accommodation industry fared worst than expected in 2008 after a particularly difficult operating environment in the second half of the year. The outlook for 2009 appears even darker mainly because of the European and national economy slow down resulting in reduced visitor arrivals. Furthermore, additional room supply and competition between the different types of accommodation offered will keep room rate drops in check.

Industry weathers difficult operating environment

We thought operating conditions were tough in 2008 but 2009 proves to be another challenging year for the tourist accommodation industry with the international financial crisis, the impact of the recent Russia-Ukraine gas disputes and the Middle East conflict overseas visitor arrivals plummeting.

International visitor arrivals dropped by 8.9% in the six months from June

Yet, room occupancy rates for hotels held well with the average rate for the first half of 2008 at 62.3%, down 6.8% points from the same period in 2007 and that for motels & guesthouses was down 1.9% point. Serviced apartments fared slightly better with an average occupancy rate of 64.4%, down 1.4% points.

The second half of 2008 became less active in the hotels, motels & guesthouses and serviced apartments market with the average room occupancy rate and average takings per room night occupied down 4.3% points and 8.6% on the year second half respectively. This caused a weaker performance for the tourist accommodation market for 2008 as a whole.

Overall, the tourist accommodation market fared worst than initially expected largely because of the domestic and European travel market as residents opted to holiday at home. Short-term resident arrival fell by 2% in 2008 per the National market, extending the weak trend at least until 2009. Domestic and foreign visitor nights in hotels, motels and guesthouses and serviced apartments in Bucharest dropped by 2.8% in 2008.

In terms of room supply, the serviced apartment market in Bucharest saw a sharp increase in supply reflecting its increasing popularity.

The hotel segment will not recover from the poor showing in 2008. The average room rate dropped by around 8% in Bucharest, caused in part by the increase in the number of hotel rooms as refurbishments was being finished. Conventions and big events did not absorb supply as usual, causing the drop in rates.

Bitter prospects ahead

The outlook for the tourism accommodation sector appears darker with the number of foreign visitor arrivals expected to drop after two years of economical decline in the EU and US. This scepticism is underpinned by a global economic slow down and the international financial crisis.

According to the Bucharest Serviced Apartments Company (BSAC) international visitor arrivals are projected to drop by 9.9%, bringing the total number of visitors in Bucharest to 1.2 mn in 2009.

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