Hotel, Tourism and Leisure. Special Market Reports Issue 4 - POLAND

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1 Hotel, Tourism and Leisure Special Market Reports Issue 4 - POLAND June 2014

2 Special Market Reports Issue 24 - Poland ECONOMIC SITUATION AND DEVELOPMENT The supply office space in major Polish cities in Q (sq.m) Poland plays one of the leading roles in Central and Eastern Europe region in terms of economy and development. During the economic slowdown in the worldwide economy in 2009 through 2010, Poland was the only country in the region and among 27 European Union countries that recorded gross-domestic-product growth. GDP rose in 2013 by 1.6% year over year, and the forecasts for 2014 and 2015, according to the International Monetary Fund, predict economic growth at the level of 3.2% and 3.4%, respectively. GDP Growth in Poland in Source: General Statistic Office The above are the cities with a significant boost in the economic market of the country. Warsaw has 4 million square meters of office space supply, according to Colliers International. There is 1 million square meters of modern office space under construction in Poland. The new supply planned for completion in this year is estimated at approximately 600,000 square meters. This phenomenon is driven mainly by the enormous role of business process outsourcing centers. The BPO sector is the fastest growing sector in the country. Poland accounts now for 3.4% of all jobs in the outsourcing sector in the world, according to Jones Lang LaSalle. Due to the Polish Information and Foreign Investment Agency, one-third of all investments operated by the agency are connected with BPO sector. Source: General Statistic Office The stable economic situation in Poland encourages many foreign investors to develop in the country. Since political transformation in 1989, Poland has achieved foreign direct investment total value of more than 160 billion ($218 billion), according to the Polish Information and Foreign Investment Agency. As a result, there is an active office supply market, led by Warsaw as well as other major polish cities such as Cracow, Poznan, Wroclaw and Gdansk. The office market in Poland is dominated by Warsaw, which holds a 59% market share of the total modern office stock, according to DTZ Poland. The Polish economy in recent years has revived large investments in infrastructure: construction of national and local roads; expansion of airports, including Gdansk, Poznan, Wroclaw, Rzeszow and Katowice; modernization of railway stations and railway lines; expansion of the energy sector; and the construction of four stadiums for UEFA Euro 2012.

3 Special Market Reports Issue 24 -Poland Major investments have been made in road development. According to The Chancellery of the Prime Minister, in 2007 through 2013 almost 2,500 kilometers of motorways were constructed and further 775 national roads were built or rebuilt. In total, this gives Poland more than 3,000 kilometers of new roads and highways. The value of the structural funds in Poland in the years 2007 through 2013 amounted to 67.3 billion ($91.6 billion). In 2014 through 2020, Poland will invest 82.5 billion ($112.3 billion) from the E.U. cohesion policy, which means a stable and further development of the infrastructure of the country. A TOURISM BOOM IN POLAND Tourism is one of the fastest rebounding sectors after recession and currently is a booming industry in Poland. After many events of the worldwide recognition such as: Chopin`s Year in 2010, Polish Presidency in UE in 2011, organization of UEFA EURO 2012 and organization of United Nations Climate Change Congress in 2013 Poland is becoming a very attractively perceived place on the map of Europe. Thanks to all infrastructure investments it may become one of the leading tourism destinations in the future. German tourists play a dominant role in the Polish tourism market. According to the Ministry of Sport and Tourism, they contribute to 33.5% of all tourist arrivals to the country. Another important group for Poland are neighbors outside the Schengen area. They contribute to 28% of all tourist arrivals. Poland has also a strong domestic tourism market because there is a solid leisure base in holiday resorts, as well as the business areas developed in the city. The number of domestic tourists increased by 11% in 2013 compared to the previous year. The strong organization of UEFA Euro 2012 contributed to a global recognition of Poland as a country of great development prospects, huge infrastructure investments and a perfect tourism destination with many attractions. In August and September 2014, Poland will host in seven different cities the FIVB Volleyball Men's World Championship. Since last year there has been a significant rise in the role of tourism in building the national GDP. The cumulative growth in the share of tourism in GDP in Poland and the World There has been a sustainable increase in the number of people coming to Poland. The statistics of Ministry of Sport and Tourism in Poland say about 15,8 mln tourists travelling to Poland in 2013 which means a 6,8% increase in comparison to Warsaw Chopin Airport exceeded in 2013 the historical number of 10 million passengers handled per annum. Estimated number of tourist arrivals (in millions) Source: Eurostat Data gathered by STR Global, shows that Warsaw and Cracow were on the leading position in terms of occupancy rate in The leading position of Warsaw remained in the first quarter of 2014, when the average occupancy rate in the city amounted to 63%. Source: Ministry of Sport and Tourism

4 Special Market Reports Issue 24 - Poland Number of overnight stays in Poland The ratio of hotel rooms at chain and independent facilities according to province (%) Source: Central statistics office There are 2,390 hotels in Poland, according to Horwath HTL. Within the last decade, the number of hotels has increased by approximately 88%. It shows how important this area of investment is in Poland and how strong it continues to develop. According to Eurostat data, Poland has experienced the greatest increase in number of new rooms among eight other CEE countries. The increase in number of rooms in CEE coutnries in Source: Horwath HTL Hotel base The share of chain hotel rooms in Poland by category Source: Horwath HTL Source: Eurostat International Hotel chains in Poland HOTEL DEVELOPMENT Domestic and foreign hotel chains operate across Poland. In 2014, 24 Polish hotel chains operate across Poland, jointly offering 132 hotels with more than 14,000 rooms, according to Horwath HTL. Fourteen global hotel chains with 149 hotels and 24,000 hotel rooms are also present. Chain hotels, in every category, have on average more hotel rooms than independent facilities. Source: Horwath HTL

5 4 Poland The most dynamic group of global hotel chains forms mainly Accor, Hilton Worldwide Holdings and Best Western International. Accor is a franchise partner of ORBIS, which is a Polish hotel group, and amounts to 62 hotels all over the country. The chain develops in Poland mostly economic brands, such as: Ibis, Ibis Styles, Novotel and Mercure. There are several new projects in the pipeline. Hilton, after many years of operating one property in Warsaw, is entering other city markets. The chain operates nine properties, mainly Hampton by Hilton, Hilton Garden Inn and DoubleTree by Hilton. Best Western operates 22 properties, with projects in the pipeline. TRANSACTION MARKET After a few years slowdown of the hotel transaction market in the CEE region, there is a move toward hotel purchase and acquisitions. Among the most popular transactions in the Polish market was a sale of the Intercontinental Hotel Warsaw for 100 million ($136 million); Radisson Blu Hotel Sobieski in Warsaw for more than 50 million ($68 million); Bristol, a Luxury Collection Hotel in Warsaw (unknown sale price); and the Sheraton Hotel in Cracow for 38 million ($52 million). Bristol Hotel is the first property that belongs to the luxury segment of global hotel chains. The second hotel that will operate under the luxurious hotel brand will be The Raffles Hotel & Resort located in the heart of historical part of Warsaw, planned to be opened in 2015/2016. We expect that in the next few years hotel transactions will continue. The newly built Hampton by Hilton Hotel in Warsaw city center (one of the biggest hotels of this brand in the world, to be opened in June 2014) is already planned to be sold. WRITTEN BY: JANUSZ MITULSKI Partner Horwath HTL Poland jmitulski@horwathhtl.com Janusz is the Partner of the Warsaw Office of Horwath HTL and Vice President of Chamber of Commerce of Polish Hotel Industry. Prior to his career in consultancy he worked with one of the main polish hotel chains, as a General Manager of their hotels and Director of Sales and Marketing in the central office of the chain. At Horwath HTL he carries out projects in the field of planning and development of hotel investments, search and selection of international hotel brands and hotel operators. He also participates in creating marketing strategies, development and repositioning strategies for operating hotels, advises on hotel transactions. He is a regular speaker at the leading hotel investment conferences in Poland and CEE region. In addition to consulting Janusz is widely involved in the activities for the development of the hotel industry in Poland. He is an author of Hotelguidebook - the first polish guide for hotel investors and coorganizer of Hoteliers Academy in Poland. He speaks fluent English. MARTA ABRATOWSKA-JANIEC Junior Market Analyst Horwath HTL Poland mabratowskajaniec@horwathhtl.com Marta is a Market Analyst at Horwath HTL Warsaw Office, specializing in hotel feasibility studies, market analysis and operational audits of the hotels. She joined Horwath HTL in September 2012 after completing her studies in Tourism at Warsaw University of Life Sciences. She also acquired knowledge while studying at universities in Germany, in Munich and Trier. After the studies she worked in various companies from hotel and leisure industry. At Horwath HTL she is responsible for cooperation with different hotel investors and preparation of consultancy assignments. She speaks fluent English and German. ORWAT TL POLAND Wola Center, Przyokopowa 33, Warsaw, Poland T

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