Polish hotels recover as leisure and business demand rises

Poland’s hotel market is seeing a steady increase in demand and key performance indicators, trends which are expected to continue into 2024 as the number of international guest nights in Polish hotels recovers.

In the long-term, there will be greater focus on retrofitting hotels and implementing modern technology and ESG solutions according to Cushman & Wakefield’s Trends Radar – Riding the Wave of Change in Real Estate report.

Demand for Polish hotels has been steadily increasing in recent years and in 2022 the number of nights rose by 23% year-on-year. A year-on- year increase of 5% is expected in 2023.

Increased domestic demand accounts for much of the increase but a recovery in the number of international nights is expected in 2024 – Cushman & Wakefield hotel expert Maciej Prończuk said the number of nights sold is expected to surpass 2019 levels by 7%.

An increase in business trips will lead further add to growth. Although Oxford Economics expects business demand in Poland to return to pre-pandemic levels in 2027, C&W said there are signs this might be notably earlier.

There is already increased corporate demand for Warsaw hotels and at the end of Q3 2023, the number of room nights and revenue reached 81% and 98% of 2019’s levels respectively. Conference demand increased by nearly 20% compared with the same time last year. Although this demand was 25% below 2019’s level, revenue was only 5% down on that year according to Prończuk.

Poland’s airport hotels are also likely to receive more guests in 2024 as air passenger numbers have returned to pre-pandemic levels and in H1 2023 was 4% ahead of the H1 2019 figure.

By October 2023, RevPAR in Poland had increased more than 19% year-on-year and was above the YTD October 2019 level by 23%. However, while additional growth is expected in 2024 it is likely to occur more slowly as occupancy levels are close to pre-pandemic figures and ADR growth will be constrained by inflation.

Hotels remain profitable despite challenges such as inflation, rising payroll and utility costs but the development pipeline remains constrained. The cumulative average annual rate of growth of the number of hotel rooms was 3% during 2015- 2023 and, despite significant development activity, about 17% of projects underway are delayed and 11% are on hold primarily due to high development costs and challenges with debt financing.