Kyiv’s hotel market is far from saturated, according to figures by real estate experts that show prices and occupancy levels are expected to remain high in the near term
Kyiv’s hotel market is far from saturated, according to figures by real estate experts showing that prices and occupancy levels are expected to remain high in the near term.
Yet new hotel projects are gradually surfacing on the horizon, as investors backing them are hopeful of slipping into a highly promising hotel market.
One of the newest projects unveiled, a luxurious hotel slated for Kyiv’s city center, is being backed by Turkey’s Kayi Group.
Turkish firm Kayi Group said it plans to invest $60 million in the project, yet they aren’t yet sure exactly where the hotel will be located.
“We are in the inquiry phase at the moment and are expecting successful cooperation with local authorities,” said Talha Gorgulu, the chairman of Kayi Group.
The Turkish company intends to build a high-class 250-300 room hotel which will operate under the Riva brand, a leading Turkish resort hotel chain. It is envisioned that the new Ukrainian hotel will be designed by Turkish architects who have already worked with Kayi Group on other Riva hotel projects. In addition to the eight hotels operated by the Riva chain, the Kayi Group also owns the charter airline SKY Airlines, travel agencies, tour operators and the DSM music production company.
Kayi Group and other investment groups and developers backing hotel projects for Kyiv are hoping to sneak into what remains an underdeveloped, yet promising Ukrainian hotel market.
“No doubt, Kyiv is in great need of quality hotels, both in the leisure and business segments,” said Yuri Nartov, head of the Investment Services Department at the Kyiv offices of Colliers International.
According to government statistics, 90-98 hotels currently operate in Kyiv, offering about 8,000 rooms. This equals 4 rooms per 1,000 city residents, far below the ratio of 6-7 in Moscow, and even less than the 10-12 ratio seen in Europe.
Top-class hotels are in the shortest supply, but more are on the horizon.
The construction of the Saint Sophia Hyatt Regency hotel, repeatedly stalled for the past seven years due to financial issues, will most likely be completed this year, according to officials at a Ukrainian business group backing the project.
More than $49 million has been pumped into the project by Donbas Industrial Union, a large Ukrainian industrial group whose main business is in steel production and trade. Donbas Industrial Union acquired an interest in the hotel project in 2004. The International Finance Cooperation, the private-sector arm of the World Bank, provided a $29.5 million loan in August 2005 to complete the construction of the centrally located hotel, which will be operated by Hyatt International under the Hyatt brand name. Full scale efforts to finish the job, however, have not yet begun.
Among other likely projects in the pipeline between 2006 and 2008 with an international presence are the 223-room Rixos Hotel Kiev, envisioned to be located across from Kyiv’s historic Golden Gates, as well as plans for a Hilton on the banks of the Dnipro River and a Holiday Inn at a yet to be disclosed location.
Two international operators successfully entered the market last year.
The Radisson SAS opened its four-star $57.3 million hotel with 255 rooms in the city’s diplomatic district. Outside of Kyiv, Turkish hotel operator Rixos, which also has plans to open a hotel in Kyiv, opened the five-star Rixos Prykarpattya hotel complex with 434 rooms in Truskavets, in Lviv region.
Analysts pointed to the creation of the first national hotel network, Premier Hotels, in autumn 2003, as a positive trend for the hotel market.
The network currently includes the Premier Palace in Kyiv, and another five hotels throughout the country including the Oreanda in Yalta and Dniester in Lviv.
Room for growth
Kyiv’s hotel market is far from saturated. Leading international operators, such as Accor, Marriot, Hilton, Kempinski and InterContinental, have considered entering the market in recent years, yet their plans remain on paper alone.
According to Colliers International, false starts and bureaucratic barriers connected to the availability of quality land plots have kept new projects at bay. It remains difficult to find a centrally located land plot of the necessary size.
The lack of competition has kept prices high, compared to those in the West.
The advertised price for a standard room in the Radisson SAS, for example, is $350 per night. A comparable room in Kyiv’s only five-star hotel, Premier Palace, stands at about $420 per night.
“With a very limited supply of high-quality hotels as well as the uncertainty of new projects, the market may enjoy growing long-term demand,” Nartov said.
“Therefore, despite [the arrival of] new competition, the room rates at such quality levels are expected to remain high,” he added. In 2004 and 2005, the occupancy rate of Kyiv’s four- and five-star hotels was at about 70 percent, according to figures provided by Colliers, which ads that the hotels are completely booked during peak seasons and while major events are held in the capital.
