about us | newsletter | contact | archive | members area
Bogdan Nitulescu, Tremend
Cryptocurrencies volatility is a big problem»

Aparthotels face competition test

Romania’s few aparthotels are holding steady through the financial turbulence, but a wave of new projects is to set to challenge the strength of the market, finds Corina Ilie

June 2009 - From the Print Edition

While hotel occupancy has collapsed and sales of residential apartments are in free-fall, Romania’s market for aparthotels remains bouyant.
High-class short-term apartment rental is still in demand and the occupancy rates at the high-end are still close to saturation.
Part of this is due to the lack of supply. Only about 600 apartments are available on the Bucharest aparthotel market, although there are at least a further 400 under construction over the next five years.
Aparthotels may not have a maid who cleans the room every day or 24-hour room service for free, but they do offer privacy, security and larger spaces at lower rates than hotels.
They are a strong alternative for business travellers looking to cut costs during the current financial crisis. They can give businesspeople the independence of cooking their own meals, housing their families or even holding evening soirees in a central location at a cheaper price than a hotel. In Bucharest, a regular hotel room is 25 to 30 sqm, while the size of an aparthotel can range between 40 sqm for a one room apartment and 120 sqm for three rooms.
“An apartment can accommodate more people or an entire family,” says Bianca Ionita, sales manager at Stil Suites aparthotel. “The price is fixed, customers do not have to pay more for living with more people. This is why this is a cost efficient solution.”
Some of the more exclusive aparthotels, such as the 292-apartment Centre Ville behind the Radisson SAS Hotel on Calea Victoriei, offer cleaning and meals at an extra cost. “We even have cooks who can prepare for customers in the kitchen their favourite dish,” says Yaron Askenazi, general manager of Centre Ville Elite Apartments.
In 2003, this aparthotel was the only one of its kind on the market, but soon had to change its positioning to offer a higher class of customer. “After a while I realised that CEOs were sending their staff to our aparthotels,” says Ashkenazi, “while they were checking into five-star hotels, because they were looking for luxury. So I decided to turn 62 of the rooms into Elite rooms for top management and movie stars.” Ashkenazi plans to turn 60 of his Centre Ville apartments into accommodation with more facilities, such as access to a swimming pool and free Internet access.
Other aparthotels in Bucharest’s centre are Casa Locato on Blvd Ion Mihalache, Stil Suites Residence in Piata Unirii, Piata Victoriei and Dorobanti, Bucharest Comfort Suites on Blvd Nicolae Balcescu and Phoenicia Aparthotel near Piata Presei.
But Mircea Draghici, project manager at real estate consultants CBRE Eurisko, argues that the only aparthotel which approaches international standards is Centre Ville.
There are between 500 to 600 apartments in Bucharest located inside buildings which are calling themselves aparthotels, but many of them do not offer the appropriate services of what a client would be used to in the west.
In Bucharest, the competition is still low because large international chains, such as the Hilton, Marriott or Intercontinental Hotels Group, have not expanded their aparthotel product to Romania yet.
“When these brands come to Romania the existing aparthotels will lose some of their customers,” argues Draghici. “The foreign customers will migrate towards the brand.”
This sector is now witnessing a series of new developments. Spanish group Hercesa will invest around ten million Euro in the renovation of the 19th century Hotel Cismigiu, near Cismigiu Park, which will be turned into an aparthotel with 67 apartments.
“We will keep the style of the facades, but the interiors will be modern,” says Alejandro Solano Gallego, general director of Hercesa Romania. “The project will be completed by 2011 and we plan to affiliate the aparthotel to an international operator.”
Meanwhile Austrian chain Starlight Suiten Hotel is managing a 78 apartment project in the under-development Metropolis Center project on Strada Iancu de Hunedoara, near Piata Victoriei. The Dambovita Center project, built by Israeli developer Plaza Centers near Eroilor metro station, will also include an aparthotel with 150 apartments, using the same concept as Centre Ville.
Romanian real estate company Castrum Construct will develop a complex including an aparthotel and an office on Strada Sevastopol in Bucharest. This aparthotel will have 107 units.
In the long-term this will see aparthotel numbers on the market increase by at least 67 per cent. Some aparthotel owners do not fear the competition as it may accustom more people to the concept. “When we opened seven years ago people did not understand the difference between the aparthotel system and other accommodation structures,” says Ionita. “It took us two years to explain the advantages and attract customers.”

Flexible friend

Aparthotels have the freedom of offering accommodation for the long-term or one night only, with the room rate dropping as the length of stay increases.
For example, one night in a Centre Ville apartment can cost between 180 and 200 Euro, while residents pay around 2,000 Euro for a monthly stay. The maximum accommodation term is three years. An apartment in the four-star Comfort Suites aparthotel, in the central area on Blvd Nicolae Balcescu, costs only 70 Euro, compared to the 200 Euro rack rate for the four-star Pullman Bucharest hotel.
Lower prices and the fewer apartments are the main reasons why aparthotels manage to have higher occupancy rates than hotels.
However the financial crisis has reduced the number of customers for all accommodations. “Fewer businesspeople are coming into the city,” Ashkenazi says. “Last year we had a 95 per cent occupancy rate in May, this year the occupancy rate dropped to 92 per cent.”
This is not such a steep drop for the market. Unlike many hotels, which have slashed their prices and increased their offers this year, Ashkenazi does not favour a price cut yet. CBRE Eurisko’s Mircea Draghici also thinks cutting the rack rates can lead to price-dumping
“The hoteliers thought that, if they cut the prices they will attract customers, but the demand had already fallen and to influence something that is falling anyway does not bring any advantage,” he says. “After dropping the prices, it is very difficult to increase them again.”

Cash back

Aparthotels are less affected by the customer decline than hotels, because they rent apartments for the long-term and do not have to fight for new customers every day. For an investor, the revenues are more stable and constant. This also adds to investor credibility if they want to ask for bank loans. The operational and staff costs are lower than hotels, because there is no restaurant and customers do not ask for daily cleaning services.
Investments in an aparthotel can be recovered faster than investments in a hotel with a higher number of rooms, restaurants and other facilities, argue some experts. A return on an investment can come in 50 per cent less time for an aparthotel than a hotel, according to Ashkenazi.
Meanwhile a hotel in Romania takes about 20 years to generate a positive return, says Eurisko’s Draghici. One of the benefits for an investor in an aparthotel, according is that they need to be placed in good, central locations, but not the top locations, which are cheaper than hotels. There is also no need for a kitchen with expensive and complex equipment, because only breakfast is catered for.
However Bianca Ionita of Stil Suites disagrees. She argues that the return on an investment in an aparthotel can only be recovered after 15 to 18 years, up to five years longer than a hotel, because the room rates are lower.
Another drawback is the lack of domestic demand for aparthotels. While expats who come to Romania with long term work contracts are more open to renting in an aparthotel, Romanians are less enthusiastic. “Romanians are more conservative than foreigners,” says Bianca Ionita. “If they move with their jobs from another city to Bucharest they prefer to buy an apartment than rent it.”
Flipping flats
Because transactions on the residential market have stagnated since Autumn 2008, most developers have started to rent the constructed apartments. Some are now considering flipping the projects into aparthotels. But experts are sceptical about this makeover.
“Businessmen do not want to live in a residential neighbourhood,” says Ashkenazi. “They want to live in a central area and have services as close as possible to luxury.” Also an aparthotel project needs supplementary costs for facilities and employees, which means higher investments than the developer had initially planned. “Hiring different kinds of employees and adjusting the residential concept to an aparthotel may be too difficult for developers,” says Hercesa’s Alejandro Solano. “Renting the apartments on the long term would be easier and more profitable.”
Additional reporting: Alexandra Pehlivan and Ana Maria Nitoi

Range of choice

■ Comfort Suites
16 Blvd Nicolae Balcescu
With three types of apartments, single room and one and two bedroom, the 27 Comfort Suites have Internet access, cable TV and air conditioning. Some also have bathrooms with a jacuzzi. Breakfast can be served in the lobby.

■ Stil Suites
22 Strada Maltopol (Unirii), 10 Strada Chile (Dorobanti) and 40-42 Strada Cuza Voda (Victoriei)
Aparthotel Unirii includes 14 one and two-room apartments with fully equipped kitchens, TV, wireless Internet and bath tubs with hydro-massage and chromotherapy. All meals can be served in the room. Cleaning services and transfer to the airport are also available at extra costs. The rack rate is 45 Euro per night. Aparthotel Victoriei has nine one- and two-room apartments and provides the same services as Piata Unirii at the same tariffs. Aparthotel Dorobanti in a two floor building with six one-room apartments and offers the same services at 49 Euro per night.

■ Centre Ville Elite Apartments
63-81 Calea Victoriei
Comprising 292 apartments, of which 230 are Centre Ville apartments and 62 are Elite apartments, there are four types of apartments, according to the view, size and facilities, including the Presidential apartments with office and jacuzzi. The aparthotel provides hotel and supermarket services, which means the staff can buy the groceries for residents, as well as a personal safe and satellite TV. Extra services which require supplementary costs are direct access to a fitness club, pick up to and from the airport and a beauty parlour.

■ Casa Locato Aparthotel
Blvd Ion Mihalache
Casa Locato has 21 two-room apartments with areas of 70 sqm, TV, air-conditioning and free Internet. Laundry, transfer to the airport and safe at the reception are on offer. The rack rates are 85 Euro per night for a single room and 100 Euro per night for a double room.

■ Phoenicia Aparthotel
11B Strada Turturelelor near Piata Alba-Iulia
Phoenicia Aparthotel consists of 55 two, three and four-star apartments with fully equipped kitchens and a restaurant. The apartments can be rented for prices ranging between 69 and 99 Euro per night.

There are 0 comments:

Validation Code

0 Comments  |  6137 Views
Daily Info
Smart city is not a fad, it's a necessity

In June 2018, the ranking of the most "smart" cities in the world was published. In other words, the most advanced cities in terms of human capital, social cohesion, the econo...

Ondrej Safar, CEZ Group: "Romania can become a hub for international smart solutions providers"

"We are already in the digital age, so the upward trend of implementing smart solutions is inevitable in all areas," he tells The Diplomat-Bucharest. "Especially in terms of u...

Telekom Romania, a strong supporter of Smart City development in Romania

Just like many other countries in the world Romania is now facing an unprecedented growth of the urban population, which can be both beneficial and detrimental for the society...

In the industrial era, the fight was for finite material resources. Not anymore

Now organizations fight and develop themselves for and around their talent. In a nutshell, getting ahead in today's business world is all about attracting and inspiring an e...

Richard Sareczky, Mol Limo: "We look at expansion locations across CEE including Romania"

Consumer mobility behaviour is changing, leading to up to one out of ten cars sold in 2030 potentially being a shared vehicle and the subsequent rise of a market for fit-for-p...




More on