Rafał Rosiejak on the situation and future of the transaction market (COURTESY TRANSLATION)

28th September 2020 – Courtesy Translation of the article from www.horecanet.pl/ (ORIGINAL: https://www.horecanet.pl/rafal-rosiejak-o-sytuacji-i-przyszlosci-na-rynku-transakcji/)

„The Polish hotel market is characterized by a relatively small number of transactions. Every year only a few dozen or so properties change owners. In 2019, 15 properties were sold, with two transactions involving a small portfolio, which means that there were only 10 transactions (data – L/E/I Transactions). In these properties are approx. about 2,800 rooms, which is 2% of the total number of 137,000 rooms available in almost 3,000 Polish hotels.

The recent years have brought a significant increase in hotel investments in Poland. The impulse for the development of the accommodation base was provided by the Euro 2012 European Football Championship. Thanks to the dynamic economic development, many hotels were established in the main cities – Warsaw, Kraków, Gdańsk and Wrocław. A significant increase in new facilities is recorded in resorts in the mountains and at the seaside – Zakopane, Szklarska Poręba, Kołobrzeg are the most important investment destinations. Poland’s attractiveness in terms of investments has been noticed and appreciated by the world’s biggest hotel brands. Hilton, Marriott, IHG, Radisson, Louvre, Accor are building their position in our country intensively, but with caution. Thanks to the growing internal demand (i.e. guests from Poland) the financial results of the hotels were getting better every year.

The above situation caused the hotel market to become a maturing market. This means that the owners are willing to sell their facilities like any other investment property. There are also offers to sell forward purchase, i.e. an investment that is being prepared or in progress but not yet completed.

 The most important aspects of proper preparation of a property for sale, which L/E/I Transactions experts point out, are:

 – Location of the investment;

– The size of the hotel (the number of rooms should be at least 100 units);

– Feasibility study for new facilities;

– Financial results of an operating hotel (P&L);

– Necessary amount of expenditure for renovation or modernization of the hotel (CAPEX);

– Property/business management (desired model – lease/lease);

– Multifunctionality of the facility (mix used – combination of functions of a hotel, office building, retail and catering part);

– Acquired international brand;

– Sale price (hotel investors expect a reasonable price, resulting primarily from the EBIDTA profitability ratio);

– Readiness to cooperate with an experienced transaction advisor, guaranteeing effective management of the sales process.

Outlook for 2020 and 2021

The current situation in connection with the COVID-19 global pandemic has a very strong impact on the tourism industry. Many hotel companies around the world are experiencing serious financial difficulties. According to the data of the Chamber of Commerce of the Polish Hotel Industry, the decrease in occupancy and income in many cities is several dozen percent. The European tourist powers – Spain, Italy and Greece – are experiencing huge drops in revenue. Many hotels remain closed, and their owners are putting their assets up for sale …“