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HOTEL SUPPLY and UEFA Championship

Ukraine is co-hosting the UEFA Championship, commonly referred to as the Euro 2012, with Poland from the 8th June to 1st July 2012. The UEFA Executive Committee decided that Kiev, Donetsk, Lviv and Kharkiv will all hosts UEFA EURO 2012 matches and that Kiev will accommodate the tournament final.

At that time, the UEFA Executive Committee specifically noted, however, that there still was a huge amount of work that had to be undertaken by all host cities and the government of Ukraine to guarantee the full and proper implementation of the tournament requirements for UEFA EURO 2012 matches. To this effect, UEFA will continue to closely monitor the state of infrastructure and operational preparations in the two host countries.

The Poland-Ukraine European Football Championship 2012 has already managed to attract approximately 400 investment projects to Ukraine, mostly involved in infrastructure developments in Kiev and other major cities including transport, sports, entertainment, medical, utilities and hotels. According to Kiev’s city administration some of these projects include the construction of the new football stadium Olympiis’kyi (project value €210 million), the renovation of the Dynamo stadium, as well as the Dynamo, Vidradne and Nyvky training centres, the reconstruction of the new terminal of Boryspil and Zhyliany Airports, reconstruction of several squares, namely Moskovs’ka, Leninhrads’ka, Poshtova and the construction of the new state-of-the-art Podils’kyi bridge over the Dnipro river with a capacity of up to 60,000 cars per hour (investment value €682.1 million).

The following chart shows the breakdown of the planned investments into Kiev’s infrastructure between 2009 and 2012 as planned by the City Administration:

Likely Development of Quality Hotel Supply in Kiev

It is obvious that there is a great deal of interest in hotel development in Kiev at present. This is mainly attributed to the fact that the city will host the 2012 UEFA European Football Championship and a large proportion of Kiev hotels do not meet international standards, however, the continuously increasing pre-crisis visitation of the city and the lack of quality supply in certain tiers of the market (luxury/upscale and mid- to up-market, i.e. 4-star sectors) also fuelled interest towards hotel investments.

Although, there are several plans, talks and rumours about new hotel projects citywide the global economic crisis affected seriously developers and the lack of financial vehicles stopped or postponed many projects. In addition, demand for hotels decreased significantly in 2009 compared to previous years also resulting in reconsideration of development strategies. This consequently led to a situation where many projects would not be delivered until 2012 or not materialising at all and those which are likely to be realised also scaled down their level of investment.

It is also known that the government promised financial support for hotel investors in form of tax incentives, which provides 10 years corporate profits tax exemption for developers of 3-, 4- and 5-star hotels.

In addition it is also seen that at many sites of previously ‘announced’ projects there was no evidence of any development activity. Nevertheless, the city still offers good opportunities for hotel developers and despite the aforementioned constraints a series of hotel projects could be realised in the mid- and long-term, however, it is extremely difficult to quantify the real number of new hotels entering the market, furthermore the actual time when this may occur.

• The newly built Ibis hotel, the first internationally branded three-star hotel in Kiev with 212 rooms and underground parking has been recently delivered to the market at 25 Shevchenko Boulevard;

• The building of the Fairmont Grand Hotel Kyiv at the corner of the Naberezhno-Khreshchatytska and Borichiv descent is nearing completion. The hotel is owned by the owner of the Hotel Riviera and InterContinental hotels and is planned to open in Q1 2012. The hotel will comprise approximately 258 rooms and a typical 5-star configuration of facilities;

• InterContinental Hotels Group have signed a management contract for a 200-room Holiday Inn hotel as part of a mixed-use development comprising office, retail, hotel and residential components. The project is in a relatively advanced phase at 79 Gorkovo Street only 5-minute walk from the Olympic Stadium. Based on the latest information it is assumed that the hotel could commence operation in Q2 2012;

• The proposed 250-room Hilton hotel is currently under construction along Tarasa Shevchenka Boulevard. Following a longer postponement of the construction the project was sold to local private investors, who re-launched the constructions in 2010. It is expected that the hotel could commence operation in June 2012, by the beginning of the Football Championship;

• Starwood Hotels and Resorts are evaluating multiple sites for its brands. It is more likely that the company will enter the market with the Sheraton brand first. Starwood Hotels & Resorts Worldwide has recently signed an agreement with Construction Investment Company TM Inc. to open the 190-key Sheraton Kiev Olympiysky Hotel in Q2 2012 near the central entrance of the Olympiysky National Sports Complex at 55, Chervonoarmeiska Street. This property will be the first hotel of the chain in Kyiv, while the first hotel in Ukraine under the Four Points by Sheraton brand was opened in September in Zaporizhia. The ongoing Victory Towers mixed-use project, which is developed at 2 Borschahivs’ka Street by K.A.N. Development was announced to bring additional 312 hotel rooms and some conference spaces to the market under the Sheraton brand. Based on the current stage of construction the targeted opening date of the complex in 2012/2013 is viewed as rather ambitious and the hotel project has been frozen. There is another site for a proposed 319-key hotel development, operated also under the Sheraton brand and located at 21 Naberezhno-Khreschatyts’ka Str. However, construction works on the plot have been suspended;

• Rezidor Group also plans to extend its portfolio with a new Radisson BLU at Borispyl Airport. The property will include 344 guestrooms, an 1,500-square metre wellness centre, conference facilities on approximately 1,500 square metres, fitness centre, indoor and outdoor swimming pools, two restaurants and one bar. The opening of this property is assumed in Q1 2013;

• There is a large-scale mixed-use development at 4 Sholudenka Street in the western part of the city developed by KDD Group. The mixed-use complex Sky Towers is under construction and it will comprise an approximately 470-room upscale/up-market hotel which is going to be operated by a reputable hotel company, namely Swissotel Hotels&Resorts. The hotel will comprise various food and beverage facilities, a fitness and spa centre and extensive conference facilities on approximately 3,500 square metres accompanied with other ancillary facilities and will be positioned as a five-star hotel. The largest (convention) hall is going to be developed on approximately 1,800 square metres with a seated capacity for up to around 1,500 people. The hotel is anticipated to commence operation in 2013;

• The city is a major target market for Accor Group. The French operator is intending to enter the market with multiple brands such as Ibis, Novotel and M Gallery. The pipeline also includes the development of a 286-key Sofitel that will be developed on Kruglo Universytetska Street and could commence operation the earliest in H2 2013.

In addition to the above mentioned projects there is a series of other planned/rumoured upscale and mid-market hotel projects in Kiev.

• There is a site for a proposed 400-key hotel located in Krasnoarmeyskaya Street. The construction of the project has not been started yet on the gated and empty site, and there is no activity admitted on the land plot. However, Rezidor Hotel Group was considering the operation of the proposed hotel. Previously there were rumours about the advent of the luxurious Regent brand in this location. More recently, this property has been associated with the Radisson brand, which would be a more suitable positioning based on location and capacities. If this project were completed, following the proposed opening of the Radisson at Boryspil Airport, this would be the third property managed by the Rezidor Group in the city. There are also rumours about a 200-250-key Park Inn hotel in central Kiev, however, this was not reconfirmed yet by the operator;

• Plans also exist for the construction of another international hotel operated under Crowne Plaza brand by IHG. However, the project is still in planning phase as the required funds are currently not available. The proposed hotel is supposed to comprise 225 four-star category hotel rooms and related conference facilities, and going to be developed on an extensive land plot at Fizkultury Street. The site is currently empty and there is a lack of activity, therefore the proposed hotel would commence operation the earliest in 2014-2015;

• There is an attractive property with excellent location situated downtown Kyiv at 24/29 Prorizna Street. Following its reconstruction, the ex-hotel Leipzig, an old historical building, which used to be a hotel before, has been standing vacant for about 10 years. Based on information received from city administration, the building was sold few years ago. A new owner Istil Group is now trying to attract an international operator to the property and open a high quality internationally branded hotel. Rumours have associated this property with the Renaissance brand of Marriott, however, this has not been confirmed. As the building already exists, it will take about 16-20 months to open a hotel after signing a contract with the selected operator. Based on preliminary plans the hotel will offer 178 rooms, a SPA-centre and parking facilities. Extensive MICE facilities have not been included in the project;

• The proposed 400-key Novotel project in the Moskovskaya Street, which is currently in planning phase, would also significantly increase the current room count of the international upper mid-market sector in Kiev;

• According to information sourced from Astron-Ukraine/Ukrainian Hotels, the company is planning to develop several hotels across Ukraine managed by Sophos Hotels and operated under the Ramada and Ramada Plaza brands. According to available information the first, 272-key Ramada hotel in Kiev is under construction. 

Based on the above analysis of the likely development of quality hotel supply in Kiev, it can be concluded that the above detailed future supply, together with the existing lower mid-market properties under refurbishment such as the Hotel President and the proposed refurbished facilities in Hotel Rus, will be considerably stronger in the mid to long-term resulting in a more competitive market indicating the advent of approximately 2,500-3,000 new international quality hotel rooms until 2015. It is evidenced that the quality hotel market as a whole is yet to commence further development. Similarly to other hotel markets in the CEE, the variety of hotel products will lead to a more sophisticated and polarised market, where each hotel will have its own, well-defined set of competitor hotels and will build their core demand sectors by finding their respective niches and channels. Until such time however, a significant overlap is expected and the hotels in various tiers are expected to compete with one another.

It is also believed that the dynamism of the market will greatly depend upon the quantum of new upscale and up-market hotel supply with the addition of mid-market properties and the respective timing of entry into the market of those projects that reach fruition.

/ Source: Kiev City Administration

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