Preparing to host new brands

New international hotel names may enter the Bucharest hospitality market, but the number of rooms is not set to rise, argues Ramada Parc & Plaza manager Daniel Ben Yehuda Profile by Corina Ilie

December 2010 - From the Print Edition

International hotel brand chains are set to expand further in Romania in the next year - but this may not result in a larger number of rooms on the market, according to general manager of four-star hotels Ramada Parc & Ramada Plaza, Daniel Ben Yehuda.
Despite the crisis, international hotel chains have not shied away from Romania and its capital.
US giants Hilton and JW Marriott have signalled they will open new hotels in the four-star category in the next two years. Other private investors, such as Marvel Grup, will open a five star hotel on Bucharest’s Calea Victoriei in 2012.
Ramada Parc & Ramada Plaza’s franchisers - the Wyndham chain - will also expand with a three-star Days Inn hotel in Sibiu and another in Bucharest next year, while a new four star Ramada hotel is opening in Ploiesti.
However Ben Yehuda thinks the supply of rooms in the city may go down, as many small hotels will close. International chains may also focus more on rebranding existing hotels than new builds.
There are also indications that Bucharest’s largest hotel - the 1,500-room Rin Grand Hotel - will be shutting a substantial number of its rooms to convert into offices [the hotel owners were not available for comment].
“I do not think the international hotels chains are really expanding, they are taking advantage of a very strong international crisis in which some independent hoteliers cannot make a profit and prefer to sell their hotels to international brands,” he says. “Also I do not see Romanian owners building hotels in Romania right now, because it is cheaper to buy a hotel than to build one. I am sure that in the future we will see a lot of international hotel chains coming to Bucharest. This is a capital where all the big hotel brands want to be present. Starwood, the owner of Le Meridien and Sheraton, also wants to come to Bucharest, because this is one of the capitals where it has no representation.”
If the expansion of four and five star hotels seems logical in the near future, the general manager thinks Bucharest does not need two and three star hotels for the moment. “Two years ago there was a strong need for two and three star rooms in Bucharest,” he says, “but right now a two-star hotel and a five-star sometimes have the same rates.”

Prices down, numbers up

Room prices in Bucharest remain low and it will take a few more years before they can return to the 2007 levels, according to Ben Yehuda.
Although the hotels are seeing an increase in volume compared to the last two years, they can hardly cover their operational costs.
“We see demand on the hospitality market, but we cannot increase the rates right now because occupancy will fall again,” says the manager. “The Bucharest hospitality market is recovering, but is not very mature - and when a demand decline is expected, many hoteliers panic and reduce rates automatically. If one big hotel cuts the rates, all the hotels are affected. The five star hotels initiated this domino effect of price cuts, which impacted negatively on all the other hotels.”
In the last decade Romania enjoyed high average rates for its top hotels - with a price to quality ratio which could rival Paris and London, but without offering customers a view onto Big Ben or the Eiffel Tower.
This was due to a high demand for a scarce number of rooms in the city. Speculators, investors and business travellers who spent three days a week in Bucharest were happy to pay these rates, as Bucharest was a booming market.
However in 2008, following an unsustainable period of growth, Romania was hit by both the global financial crisis and a domestic bust. At the same time many new hotels in the four and five star bracket opened, flooding the market with thousands of new rooms. Suddenly supply rose as demand fell.
“Before the crisis, hotels had high occupancy and hardly put any effort into attracting customers,” says Ben Yehuda. “The cost management was also poor, there were many useless expenses and the manpower was too high. The crisis has taught the hotel managers to have much wiser management strategies.”
Many hotels cut the rates by half and are now complaining about low profit margins. The perspective is dark for the four and five-star hotels, which have to maintain quality standards. “If the five-star hotel in Bucharest were selling rooms at 150 Euro per room, now their rates have declined to 80 or 90 Euro per room,” says Ben Yehuda. “Their expenses are the same and the revenues are lower, which means they are making much less money.”
The occupancy of Ramada Plaza and Ramada Parc went up this year compared to 2009. The increase became more obvious this autumn when both hotels were booked out for certain weeks. “This only happens in the high seasons,” says Ben Yehuda. “Usually our occupancy ranges between 60 and 80 per cent during the week and between 30 and 35 per cent during the weekends.”
Boosting occupancy rates in the city is hard at the weekends. Ben Yehuda says that even if his guests spend the week in Bucharest, most customers leave to the Romanian mountains at the weekend. In the capital, the guests enjoy walking in the park, shopping and going to the opera. There is also the historic centre, which has recently experienced a dramatic makeover.
“Foreigners think the life night is very good here,” says Ben Yehuda. “They like going to restaurants, clubs and casinos. However many complain about being cheated by taxi drivers.”
One attraction which could keep Ramada Plaza customers in the hotel is a three million Euro spa complex, which will be ready in 2011 and will include a 25 sqm heated swimming pool.
Other investments which Ramada Plaza will make next year include the building of two to four new conference rooms, adding to its existing three. A connection between the two hotels which stand side by side - Ramada Parc and Ramada Plaza - will also be ready in 2011. ■

Who is Daniel Ben Yehuda?

As a child, British and Israeli citizen Daniel Ben Yehuda was accustomed to a life of constant travel - he was born in Africa and grew up in countries such as Tanzania, Iran and Cyprus.
After studying hotel management, he worked through the roles of a restaurant manager, banqueting manager, F&B manager and resident hotel manager.
“The best thing about the hospitality industry, compared with other businesses, is that promotion is automatically triggered by capabilities,” he says. “It is a system similar to the army.”
After managing hotels in French Polynesia and Israel, Ben Yehuda came to Romania six years ago as general manager of the former Best Western Parc Hotel, which was later affiliated to the four star Ramada brand and became Ramada Parc. Married with two children, the general manager has no plans to leave Romania in the near future. “I consider myself Romanian now,” he says. “My wife is half Romanian, I have a son who was born here and he speaks Romanian perfectly. I also get offended when anyone says something bad about Romania.”