Demand on the rise

According to Trends Radar, demand on the Polish hotel market has been on a steady upward trajectory in recent years. For example, in 2022 the number of nights rose by 23% year-on-year while 2023 is expected to finish with a year-on-year increase of 5%.

"These positive trends have been mostly driven by the increase in domestic demand while a recovery in the number of international nights is expected in 2024. Next year, the number of nights sold in Polish hotels is expected to surpass the 2019 level by 7%", says Maciej Prończuk, Hotel Market Expert, Cushman & Wakefield.

A further recovery in the Polish hotel market will also largely depend on an increase in business trips. While Oxford Economics expect business demand in Poland to bounce back to pre-pandemic levels in 2027, there are signs this might be notably earlier.

"Warsaw hotels have already reported an increase in corporate demand. At the end of Q3 2023, the number of room nights and revenue reached 81% and 98% of 2019’s levels respectively. Meanwhile, conference demand increased by nearly 20% compared with the same time last year. Although it remained 25% below the 2019 level, revenue was only 5% below 2019’s figure", adds Maciej Prończuk.

Airport hotels in Poland are also likely to capture more guests. The number of air passengers at Polish airports has returned to pre-pandemic levels and in the first half of 2023 it surpassed H1 2019’s number by 4%. This positive trend is expected to continue in the coming months.

Key performance indicators are also improving

According to Trends Radar, YTD October 2023 RevPAR in Poland experienced an increase of over 19% year-on-year and was above the YTD October 2019 level by 23%.

"While further growth is expected in 2024, it is likely to be at a slower pace. Occupancy levels are already close to pre-pandemic figures and ADR growth will be constrained, among other things, by inflation. After the rapid recovery period, the hotel market in Poland is stabilizing with more moderate performance growth", adds Maciej Prończuk.

Although hoteliers are faced with numerous challenges associated, among other things, with inflation, rising payroll expenses and utility costs, hotels remain profitable. For instance, based on HotStats data, total expenses in Warsaw hotels in YTD September 2023 increased by 25%-30%1. However, thanks to strong revenue growth, the Gross Operating Profit per occupied room in these hotels rose by 7%-17% compared to the same time in 2019. 

However, despite the improving performance of Polish hotels, the development pipeline remains constrained. According to Statistics Poland, the cumulative average annual growth rate of the number of hotel rooms was 3% during 2015-2023. A further average increase in hotel supply in Poland is expected in the coming years. Despite the significant development activity in the CEE region, approximately 17% of projects underway are facing delays, with another 11% being on hold, says Cushman & Wakefield in its report Hotel Operator Beat H1 2023. This is primarily due to high development costs and challenges with debt financing, according to 65% and 35% of surveyed operators respectively. The most common delay for projects in the pipeline is 6-12 months, according to 40% of the respondents. 

The growing focus on retrofitting and ESG

Due to the growing expectations of hotel guests, increased operational costs and the need to meet ESG requirements, more and more hotel investors are deciding to upgrade their existing installations, systems and procedures, and undertaking investments in new technologies.

"It is worth emphasising that according to ‘Hotel Investment Scene in CEE: Getting Real about ESG in Hotel Real Estate, a report from Cushman & Wakefield and CMS, Warsaw is ranked among the top 10 European markets in terms of the share of eco-certified hotels with nearly 10% of its hotels having a recognized green certificate. While the level of certification is lower than that in the office sector, Poland leads the way among CEE-6 countries in terms of the number of BREEAM and LEED-certified hotels. However, although some progress has been made, hoteliers still have a long path ahead to reduce their carbon footprint", adds Maciej Prończuk.

ESG aspects represent a challenge but also an opportunity, as sustainability policies can have a positive impact on revenues and notably reduce operational costs.

"ESG is also becoming an important criterion in lenders’ and operators’ decision-making processes. According to Cushman & Wakefield’s ‘Hotel Operator Beat H1 2023’ report, 42% of surveyed operators are likely to offer higher rent and 30% to offer more key money for hotels with the highest sustainability and ESG credentials", concludes Maciej Prończuk.