EURO 2012 and Hotel Business of Ukraine

By Nickolay Mayger, Founder & President MAYGER LLC

. July 09, 2010

A man who has committed a mistake and doesn't correct it, is committing another mistake.
Confucius

Many events and actions of government and local partners towards foreign investors caused occurrence of distrust and subjective attitude of global business community to Ukraine. Now there is an opportunity to improve the situation. EURO 2012 is the chance to revive tourism industry, develop and modernize infrastructure, show high development level and readiness for international collaboration. Nowadays world community oversees the process of preparations to EURO 2012. If Ukraine fails to justify the trust of UEFA, obviously it will lose the opportunity to host events of such significance and acquire the stereotype of unreliability and distrust which will be difficult to change.

2012 UEFA European Football Championship will be held in Ukraine and Poland . As of today the host cities in Ukraine are Kiev, Lvov, Kharkov and Donetsk.

According to State Program of Accommodation in Kiev to EURO-2012 construction/renovation of the following number of hotels was planned:

5* - 20 hotels for 4 499 rooms
4* - 48 hotels for 8 301rooms
3* - 44 hotels for 6 693 rooms
2* - 6 hotels for 1260 rooms

In budget segment it was planned:

to construct/renovate 6 hostels for1 601 places
to create International youth centre for 15 000 places
total amount of places should make up 37 354.

However, currently, the construction of majority objects is frozen or does not meet the deadline due to the lack of financing. Some hotels in Kiev are at the start up and construction plans are not fulfilled, notwithstanding the fact that a triple shift construction of some hotels is permitted.

Kiev authorities assert that construction of only 7 hotels is planned to EURO 2012. Among them there will be hotels of three categories. They are five star Hilton, Fairmount Grand Hotel Kiev, Sofitel, office-hotel complex at the crossroads of Reznitskaya and Moscowskaya streets, four star flotel Coliseum and three star hotel Ibis. The name of the seventh hotel is still unknown. Economy and budget rooms demand should be covered by rooms in hostels, lightweight construction houses, residents' flats, flotels, passenger ships that will tie up on the Dnieper. Flotels and ships will afford rooms of various categories.

Following Sydney 2000 Summer Olympic Gamesthe City Council of Kiev aims to provide sufficient number of budget rooms in renovated hostels.The funds for renovation of all the Kiev's university hostels which will be used for fans' accommodation have already been allocated.The first deputy chairman of Kyiv State Administration Anatoliy Holubchenko informed about it during a press conference "Kiev and Euro 2012: UEFA requirements, plans of the authorities" which was held on the 27th of April. He added that for the period of EURO Championship all the students should leave Kiev for home. The Championship will take place in June when the students of all the Universities have examinations. The authorities should find the way out of such situation. Moreover, it will be extremely difficult to buy transport tickets during EURO 2012 due to the fact that all tickets will be sold out beforehand. The question rises how evicted students will be able to reach home. In consideration of the fact that students from all over Ukraine study in Kiev it is mystery. Following the Sydney with budget accommodation everybody should understand that the quality of Kiev hostels cannot be equal to the Sydney ones.

In 2008 for preparation of hotel infrastructure in Kharkiv the construction of 24 hotels was planned. Now Kharkiv can provide sufficient number of rooms in 3* hotels category, on the contrary the number of higher categories will not be sufficient: nine 4* and two 5* hotels respectively.

In Donetsk building of 16 hotels for EURO 2012 was planned, totally 2 836 (with existing ones) elite rooms. Currently only 2 hotels are under construction. In whole 5 hotels should be put into operation by the end of the year.

In Lvov construction of five 5*, seven 4* and five 3* hotels was planned to EURO 2012. This year only hotel chain Reikartz opened the hotel in Lvov.

The inflow of tourists is expected in Odessa as it is considered to be a supporting city. In 2008 building/renovation of 9 hotels was planned to EURO 2012. As of 2009 four hotels were built. In case of hotel rooms lack Odessa Seaport is capable to supply hotels accommodation with 5 ships.

State Program of Accommodation to EURO-2012 foresees more rooms then is required by UEFA. According to the UEFA requirements host cities should provide the following number of rooms: for 5* hotels the number of rooms should make up 5630, for 4* - 8895, for 3* - 1030.

Thus total amount of rooms should make up 15 655 rooms.

Indeed the situation is different. According to data of Administration for Organization and Holding of the Final Part of the European Football Championship 2012, Ukrainian hotels met the requirements for 80% (12 639 rooms).

Source: http://www.socmart.com.ua

Significant to note that these 80% includes secured hotels, which signed accommodation agreements with TUI Travel. Among them not all hotels are in operation. This situation alerts UEFA. UEFA experts expected to have definite amount of ready hotels.

Michael Platini was dissatisfied with preparations of Ukraine to EURO 2012 Championship after he had visited Ukraine on the 8th of April and after repeated visit on the 2-d of June he expressed an opinion that threat for Ukraine to lose two host cities remains till autumn. According to the rules set by UEFA Executive Committeein case of non-preparedness of one of the host cities Championship may take place in four Polish and two Ukrainian cities.

Football Championship is not the key factor that catalyzes the rise of interest of foreign investors to Ukraine. Hotel market is still free niche. Hotels profitability is much higher than in Europe. Correspondingly, due to the lack of competition hotels may afford to jack up prices unreasonably.

For example total price per Deluxe King room in Hyatt Regency Warsaw makes up 160.00 ÅUR to compare with the same daily rate in Hyatt Regency Kiev which makes up 435.00 ÅUR.

The same pricing policy is observed in Radisson Blu. Total Price per Standard Guest Room in Radisson Blu Warsaw is 146 ÅUR to compare with Radisson Blu Kiev it makes up 267 ÅUR.

New projects to EURO 2012 are doubtful due to the lack of time for their development. Two-three years are not enough for hotel project development, approval, construction and putting into operation. The majority of projects that received endorsement is in the infant stage or frozen due to the absence of financing. Implementation of such projects to EURO 2012 is doubtful. Consequently, State Program of Accommodation to EURO-2012 will not be implemented due to late attempts of regulation and influence on the implementation of approved projects made by government.

Hospitality market of Ukraine has an opportunity to improve the situation. It's possible if the owners of investment projects understand the specific of hotel business and the necessity of cooperation with professional companies.

Government regulation, infrastructure development and modernization as well as complex approach to hotel business development will result in rise of Ukraine tourist attractiveness. The higher level of preparedness for the European Football Championship 2012, the more chances has Ukraine to get an opportunity to host events of the world significance and increase GDP due to tourism and hotel business development.

MAYGER LLC (Ukraine) is a top-ranked development and consulting company. MAYGER is a leader in business development, engineering and management of investment projects, provision of consulting services in Ukraine. MAYGER was founded in 2000 by Dr. Mayger Nickolay. Creative & Reliable Solutions, quality and responsibility make MAYGER a reliable navigator for foreign companies in the world of Ukrainian business. In 2008 MAYGER was awarded the title The Leader of Ukrainian Business for its great contribution to the economy development of Ukraine.

More information on www.mayger.org

Mr. Mayger can be contacted at +380-482-343-333 or [email protected]

Business Contact:

Nickolay Mayger
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