This man has seen better times: Martin Schaffer, hotel expert at the Austrian tourism consulting agency Kohl & Partner, is looking back on a turbulent year of 2009. Schaffer: “The tourism industry of many Eastern European countries, especially Ukraine, Bulgaria and Dalmatia, has hit rock bottom these days. In Bulgaria, for example, the business with British all-inclusive tourists, which was still running splendidly the previous year, has now almost come to a complete standstill. Due to the collapse of the British pound, the Brits can’t even afford the comparably cheap destination on the Black Sea coast at the moment.” To blame for the poor situation is the slump in business travel, which has partly been drastic. Schaffer: “Especially in cities like Bucharest and Sofia, the hotels almost exclusively live off business travellers.” And in many Eastern European countries, this group has shrunk dramatically in 2009. Schaffer: “Hoteliers are at the bottom of the tourism feeding chain. The slump in passenger numbers from airlines in Eastern and South-Eastern Europe directly affect the number of overnight stays in hotels.”

Austria: Suffering at a High Level

In Austria, the tourism industry has gotten away with a black eye. All in all, according to Schaffer, a decline of “only” two percent was recorded in 2009. Vienna and Salzburg, however, have been hit harder with declines of up to 20 percent. But Schaffer has a simple explanation for this: “In 2007, the Mozart Year caused an extraordinary increase in business, and in 2008, the European soccer championship filled hotel beds above average. After those record years, Vienna and Salzburg are back to the Austrian average.” At first glance, this might sound bitter, but they are suffering at a high level; after all, Vienna and Salzburg are still among Central Europe’s most important destinations. Schaffer: “These days, however, hoteliers cannot yield the same rates per room and per night than they could in 2007 and 2008. Many have to make compromises in their room rates to ensure occupancy.” Schaffer anticipates that it will be five or six years before the rates from 2008 can be yielded again in the market.

Hotel Developers rely on 4-Star Segment

Despite the clouded perspectives, Austria’s hotel developers remain on track. Almost no one is putting commenced hotel projects on hold or cancelling announced projects. Franz Jurkowitsch, CEO of Warimpex, who currently operates 18 luxury and business hotels with over 4,300 rooms from Russia to Poland: “We will complete all construction we have started or projected within the last few years.” Warimpex is currently developing five hotel properties with approximately 1,230 rooms between Yekaterinburg in Russia and Lódz in Poland – projects that are scheduled to be completed by the second quarter of 2010 at the latest. Jurkowitsch: “New projects however have been put on hold, since we are waiting to see how the market develops.” Warimpex has also adapted their business strategy to the market requirements. Instead of the luxury segment, they are now aiming at hotel projects in lower categories. Together with Louvre Hotels, budget hotel chains of the brands “Campanile” and “Premiere Classe” are being developed in Eastern Europe. Jurkowitsch: “The lesson from the crisis is clear: The luxury market is very volatile, while the 3 and 4 star segment shows better occupancy rates.” Verkehrsbüro Group, who (in cooperation with its hotel subsidiary, Austria Trend Hotels) opened their first hotel abroad in mid-November of 2009 in Bratislava, is taking a similar route. Their project, developed together with Sparkassen Immobilien AG as investor, is in a prime location in the Old Town, close to the Novy Most Bridge across the Danube, and is deliberately placed in the 4-star segment. Harald Nograsek, General Director of Verkehrsbüro Group: “For the first year, we expect an occupancy rate of at least 50 percent, with 45,000 guests.”

VI-Hotels are adding to their Hotel Portfolio in 2009

Also in post-crisis times, the 4-star segment is the obvious sector that Rudolf Tucek, Director of the board of Vienna International Hotels (VI-Hotels), relies on. Tucek: “Due to corporate governance reasons, for many companies, overnight stays in the luxury segment as part of business trips are not possible in times of crisis. In air travel, business travellers are switching from business to economy class, and for hotels, they are choosing 4-star establishments.” Tucek does not consider the low numbers from 2009 a reason to panic. He expects a strong upward trend for the coming months. Tucek: “Business has to continue; businessmen cannot hide behind their headquarter desks forever. Also, we are complaining a great deal. A decline in business of 10 percent ‘only’ sets the industry back to its status from three years ago. And back then, there was no talk of a crisis.” In any case, VI-Hotels have greatly expanded their portfolio in 2009. The 4-star Pannonia Tower Hotel project in Parndorf, Burgenland was opened in March; three months later, in cooperation with Rainer AG, the opening of 4-star Hotel Rainer in Vienna followed. Just before Christmas, the first guests were welcomed at the 5-star luxury resort of Royal Spa Kitzbühel, a VI-Hotels project close to the skiing metropolis of Kitzbühel. The highlight of the hotel with 144 rooms and suites is its 3,600 square metre large Mountain Health Spa, featuring a panorama sauna, Tyrolean bath and a Hildegard von Bingen steam room. Tucek: “In a location like Kitzbühel, there is only demand for the top segment in the hotel industry. But in order to stand out there, guests need to be offered something very special. Therefore, in this case, we focused on a range of exclusive spa services.”

Spa and Services as Strategy for Survival

Thanks to their consistently followed 4-star strategy, Falkensteiner Michaeler Tourism Group (FMTG), the operator of 21 family, wellness and city hotels in South Tyrol, Austria, the Czech Republic, Slovakia and Croatia, have not cancelled any of their ten commenced or planned projects that are set to enhance the company’s portfolio by 2011. Ivo Pezzei, COO of FMTG’s project development company, Michaeler & Partner: “With the exception of the establishments in Katschberg in Carinthia and Punta Skala in Croatia, which were developed as ‘serviced apartments’, we are deliberately not active in the luxury segment but primarily consider ourselves operators of 4-star hotels and vacation clubs.” And as such, they certainly remain on course for expansion. In early May of 2009, a new hotel & spa with 128 rooms and a 2,300 square metre large spa area opened in Bad Waltersdorf. By 2013, a 4-star and a 4-star-superior hotel with a total of 330 beds are scheduled to be completed in Vienna, according to Pezzei. Despite the economic crisis, Eastern and South-Eastern Europe remain a major market for FMTG. Pezzei: “In June of last year, we completed the first construction phase of our 30 hectare large resort in Punta Skala near Zadar, which includes a 4-star family hotel and 187 holiday apartments. In spring of 2010, we want to open the 5-star hotel ‘Iadera’ which features a seaside restaurant. We are also currently planning a 4-star hotel in Punat on the popular holiday island of Krk.”

Dancing Towers in Hamburg

Austrian ARCOTEL Group is not letting the crisis sway their plans for expansion either. By 2011, the group, which already operates five hotels in Austria, one in Croatia and four in Germany, wants to complete their fifth German hotel in Hamburg. ARCOTEL Onyx at the Reeperbahn 1 address will be part of the exciting architectural project “Dancing Towers” in the famous St. Pauli district. ARCOTEL Manager Manfred Mayer: Together with Strabag Real Estate, the group is investing 45 million EUR in this project, continuing a partnership that has already proven to be successful with Berlin’s ARCOTEL John F Berlin. In the domestic Austrian market, ARCOTEL by the way was pleased to receive the “AA” top score for its hotels in the investment ranking by Treugast Solutions Group. For Manfred Mayer, this is a sign “that we were able to maintain our position in the market against our competitors, even in times of crisis.”

Restoration instead of New Construction

For many hotel operators, Austria is currently an important factor due to its stability. This is also true for the List Group. The parkade specialist is operating five hotel projects in Austria as a second leg; among them are top hotels in Pörtschach and Seefeld and a serviced apartment building on Singerstraße in Vienna. All these projects optimally complement List Group’s portfolio. However, List Group is only looking to invest in existing top-class projects in selected locations – a trend that expert Martin Schaffer can confirm: “While new building projects often face difficulties with banks these days in regard to financing, financial institutions are much faster to agree to provide funds for restorations and upgrades of existing properties.” Therefore, many local hotel operators are also relying on revitalizing their existing facilities. Austria Trend Hotels, for example, will begin full restoration of the traditional Parkhotel Schönbrunn in 2010. By fall of 2011, the hotel, which was built in 1907 as the emperor’s guest house, will be remodelled completely. At that time, guests will be able to choose from 18 suites and 230 rooms. By then, according to Schaffer, the tourism industry should have overcome the crisis for good. Schaffer: “As of 2010, I am cautiously optimistic.” [ CN ]