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Kiev hotel market analysis

Jones Lang LaSalle’ Hotels & Hospitality Group announces the H1 2013 Kiev hotel market results.

“The Kiev hotel market, for a number of reasons, is proving to be highly competitive and as expected is showing a decline in performance in 2013 compared with 2012. For the first 6 months, the ‘branded market’ is down in RevPAR by almost 32% compared to the same time period last year – an alarming situation. This is coming through a drop in occupancy for the year of 10% and a drop in average rate of over 20%,” - reports David Jenkins, Head of Jones Lang LaSalle’ Hotels & Hospitality Group, Russia & CIS.

Results in brief:
• Occupancy dropped to 48.3% in H1 2013;
• Average rate dropped from USD280 in H1 2012 down to USD212 this year to date;
• In June 2012, during UEFA football championship, saw a city ADR of USD446 with June 2013 at USD207;
• With the opening of hotels such as Ibis, Holiday Inn and Ramada Encore, there should be a hope for European weekend break business segment to grow.
Kiev Hotel Market in details
This year the city occupancy is sitting at 48.3% compared with 53.5% last year. The boom in hotel openings in the past few years has led to an intense competition in the city for any corporate and limited leisure business that comes in. Aligned with the well documented financial and political challenges in Ukraine, the downward trend looks set to continue with several new hotels still expected to open in the city over the next few years, including a Park Inn, Hilton and a Renaissance.

The 10% drop in occupancy is not as bad as potentially it could have been, given the new hotel supply in the market. “We see the significant drop in average rate – from USD280 in H1 2012 down to USD212 this year to date,” - David Jenkins says. – “On the one hand, the city has been well recognized as being ‘expensive’ for hotels, especially when there were so few brands on the market. With the opening of hotels such as Ibis, Holiday Inn and Ramada Encore, the city is now able to offer slightly more affordable options.”

At the top end of the market the opening of the Fairmont in 2012 created a stronger price competition amongst the higher end hotels – including Hyatt and Intercontinental. There were simply too many available rooms for the limited high-end business coming to the city. Inevitably prices are dropping across the board.

It is though important to note that in June 2012, Kiev hosted the UEFA football championship. If we compare the results just for June 2012 v 2013 we can see that the major impact the football had was on average rate. June 2012 saw a city ADR of USD446 with June 2013 at USD207. Occupancy was flat year to year.

So if we remove the June figures as an ‘event influenced’ change, the drop in ADR for the year comes in at a 14% drop – still significant.

David Jenkins comments: “Despite a visa free regime for most travelers, Kiev has been unable to tap into the lucrative European weekend break business, though again given the drops coming in prices and the availability of more hotels at better rates – there should be hope for this segment to grow and help boost occupancy in a city that should really be on the list of top European cities to visit. The opening of new airport terminals last year and more direct international flights should also be helping.”

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