Due to rising operating costs, the profitability of hotels is deteriorating, but the industry is slowly returning to pre-Covid levels, says Ireneusz Węgłowski, president of the Economic Chamber of Hotel Management in Poland (IGHP). In his opinion, the prices of hotel services will grow at a similar rate to those for the general economy.
“The hotel industry after the COVID-19 pandemic and after the start of Russia’s aggression in Ukraine is slowly returning to the demand of three years ago. Its structure has changed, as there has been a decrease in the number of foreign guests, apart from Ukrainians,” Węgłowski said.
“We are observing a deterioration in the profitability of hotels due to a relatively high increase in operating costs, caused, among other things, by increases in energy and gas prices, wages or food. One can venture to say that on the revenue side the industry is at the top of the upward curve, but looking at profitability we are rubbing the bottom,” he added.
According to him, despite the improvement on the revenue side, high costs are still hampering hoteliers’ ability to achieve satisfactory levels of profitability.
He estimated that in 2023 and 2024, the value of the market in Poland will grow, which will be the result of both higher prices and an increased number of hotel guests.
“The increase in the value of the market will be the result of increasing occupancy rates, although for now, nationwide, they are around 50%. The second factor driving market value growth will be the increasing average price of services provided in hotels,” Węgłowski pointed out.
“It is worth noting that the key factor in the industry’s price dynamics is the pricing policy of hotels during low demand – the prices of accommodation during the high season do not necessarily cause the average price to increase throughout the year,” Węgłowski added.
Asked about the projected scale of increases in the following quarters, Węgłowski estimated that it would be similar to the CPI for the overall economy.
“The upward movement in the price of hotel services has been driven for some time by the rising prices of external supplies and services that are essential to the business. As long as inflation is driving up costs in hotels, the prices of hotel accommodation and services in hotel restaurants will follow suit,” Węgłowski explained.
At the same time, he added that higher increases are helped by periods of high tourist season or high demand on days when large sporting or stage events are organised.
“In order to properly assess the price phenomena occurring on the hotel services market, analyses should be conducted after the end of the year, when average values are known, and not those quoted only during the peak or low season,” said the President of the Polish Hotel Management Chamber.
Asked about the current financial situation of companies in the hotel industry, the president of the chamber assessed that the hotel market has not yet returned to the levels of 2018 and 2019, i.e. “the best years of the previous decade”.
“The situation in the industry is not yet stable and there are no clear prospects for development in the short and medium term. There are too many uncertainties resulting from changes in the global and especially Eastern European geopolitical situation. Concerns about the continuing war are translating into decisions in both individual, group and business tourism,” Węgłowski said.
“The uneasy situation in the industry is also evidenced by the difficulty in obtaining financing for hotel investments,” Węgłowski added.
The IGHP president further said that the industry’s losses from the COVID-19 pandemic would not be made up in 2023, as hotel profitability would have to increase intensively in 2022 and 2023, which did not happen.
“On the contrary, the much higher supply prices that caused a sharp increase in hotel operating costs and insufficient demand after the pandemic and due to the war in Ukraine further inhibited the possibility of increased profitability,” Węgłowski explained.
Source: IGHP and ISBnews
Photo: IGHP
