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Real Estate Market Review 2011 | Latvia Hotel Market Hotel Market Distribution of Latvian Hotels by Number of Stars 1-star 2-star 3-star 61% 7% 2% 7% 23% 4-star 5-star Distribution of Latvian Hotels by Number of Stars 1-star 2-star 3-star 67 8 2 8 25 4-star 5-star OVERVIEW The Latvian hospitality market has reached it’s bottom during 2009 and first signs of market recovery were evident in 2010. The number of incoming visitors and visitor nights spent in Latvian accommodation establishments has increased in 2010 by 18 per cent relative to the previous year, the occupancy rate has improved and the outlook for the lodging industry is bright. One of the major events that took place in 2010 was the partnership agreement signed between the Rezidor Hotel Group and Norwegian real estate developer Linstow for the management of 10 Reval hotels in the Baltics and in Russia. The joint venture agreement includes three hotels in Riga, two hotels in Tallinn, two hotels in Vilnius, and three hotels in the cities of Kaunas, Klaipeda and St. Petersburg. The new hotels in Riga are operated under Radisson BLU brand. This positive trend will potentially benefit all market players in terms of greater stability. Several distressed hotels were repossessed by banks or banks’ SPV companies during 2010. These properties will be either sold to new investors or new hotel brands will be attracted to operate them under management agreement. Just one hotel (256 rooms) was opened in Riga in 2010, thus the supply has changed insignificantly. Hotel development is expected to be rather limited over the next two years. SUPPLY As of January 2011, Latvia has 110 officially rated and certified hotels with a total of 6,712 rooms. Riga hotels account for over 70 per cent of Latvia’s total room supply. 3-star hotels dominate Latvia’s hotel market in respect to both number of hotels and total room supply, comprising 60.9 per cent and 46.6 per cent respectively. In Riga, 4-star hotels provide the market with the largest number of rooms (46 per cent) while more than half of all hotels in Riga are 3-star (55 per cent). During 2010 just one Tallink Hotel Riga with 256 rooms located near Riga Central Train Station was put into commission, which is similar to the increase in 2009 when several smaller boutique type hotels were opened in Riga’s Old Town. No new hotels are planning to be opened in Riga in 2011, however 3-star hotel Karavella will be renovated and refurbished during the year. The 30-storey Z Towers project, where one of the towers will be Sheraton Hotel, is under construction and expected to be commissioned in January 2014. Marriott Hotel project with 200 rooms is at the planning stage and can theoretically be commissioned in three or four years time. Visitors (000s) Visitor Dynamics in accommodation Establishments Source: Central Statistical Bureau of Latvia, Colliers International 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2005 Riga 2006 Latvia 2007 2008 2009 2010 Number of Rated Hotels and Rooms in Latvia and Riga as at January 2011 Source: Central Statistical Bureau of Latvia, Colliers International Stars Latvia Riga Number of Hotels Number of Rooms Number of Hotels Number of Rooms 5-star 8 735 7 693 4-star 25 2,549 16 2,192 3-star 67 3,130 33 1,709 2-star 8 253 2 117 1-star 2 45 2 45 Total certified 110 6,712 60 4,756 Non certified 111 2,701 31 1,201 Total 221 9,413 91 5,957 Completed Projects in Riga in 2010 City Stars Project Name Address Number of Rooms Operator Riga 4-star Tallink Hotel Riga Elizabetes 24 256 TLG Hotell CONTACTS: DENISS KAIRANS - d.kairans@colliers.lv l MARIJA KAPELKA - m.kapelka@colliers.lv Colliers International | p. 18
Real Estate Market Review 2011 | Latvia Hotel Market Guests (000s) Distribution of Foreign and Local Guests in Riga Accommodation Establishments Source: Central Statistical Bureau of Latvia 900 800 700 600 500 400 300 200 100 0 2005 Foreign Distribution of Foreign Visitors by Country in Latvian Accommodation Establishments Source: Central Statistical Bureau of Latvia 27% 3% 5% 7% Russia Germany Finland Lithuania Estonia 2006 7% 2007 Local 7% 2008 14% 10% 2009 11% 9% Sweden Norway United Kingdom Italy Other Countries 2010 DEMAND In 2010 the Latvian tourist market has seen an 18 per cent increase in visitors staying in accommodation establishments compared to 2009, a total of 1.312 million (2009: 1.114 m). This is a clear sign of market recovery and stabilization. The worst period of economic recession is over and the outlook for Latvian hospitality industry is bright. In Riga 780,000 visitors stayed in accommodation establishments in 2010 (2009: 689,000), which is a 13 per cent increase. As the economies of Western European countries recover from recession, travel has increased and Riga is benefiting from this trend. Foreign guests make up the majority of hotel visitor numbers, comprising 66.9 per cent of visitors to Latvia and 86.8 per cent in Riga. Local tourists dominate numbers in the lowend accommodation segment while foreign visitors prefer to stay in 3–5 star hotels. The number of tourists from nearby Russia has increased significantly in 2010 (by 65 per cent), reaching 14 per cent of the total (8.9 per cent in 2009), becoming a major tourist country. This is due to very unpleasant weather conditions in Moscow caused by forest fires in the summer and overall warmer political climate with the neighbouring country. Among other countries that are traditionally popular for visiting Latvia are Germany (11 per cent), Lithuania (10 per cent), and Finland (9 per cent). PRICES Despite an increased number of tourists and the positive dynamics of Latvian lodging industry, the prices for hotel rooms did not increase significantly during 2010, but remained stable. Hotels continued to compete on prices to attract guests, thus the downward pressure on prices did not diminish. During 2010 the average weighted room price per standard double room in Riga’s 5-star hotels was around EUR 150 per night, twice the average price in a 3-star hotel. OCCUPANCY The hotel occupancy rate reached the bottom in 2009 after showing historically low levels and grew during 2010. The average rate in 2010 was 32.8 per cent in Latvia overall and 40.6 per cent in Riga. However, well-established, professionallyoperated hotels in the upper class segment outperform the market average and show consistently higher occupancy rates. Colliers International estimates that in 2011 the occupancy rate will continue its positive trend and will continue to grow along with to overall improvement in “Old Europe” economies as well the undertakings of local organizations, such as LIAA in promoting Latvia abroad. Dynamics of Average Room Occupancy Rate in Accommodation Establishments Source : Central Statistical Bureau of Latvia, Colliers International 70 Price Range for Standard Double Hotel Rooms in Riga Stars Minimum Room Rate, Maximum Room Rate, Average Room Rate, EUR EUR EUR 5-star 100 250 140 - 150 4-star 50 100 70 - 75 3-star 25 70 50 - 60 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Riga Latvia CONTACTS: DENISS KAIRANS - d.kairans@colliers.lv l MARIJA KAPELKA - m.kapelka@colliers.lv Colliers International | p. 19
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