Romanian Tourism: Interview with Friedrich Niemann, General Manager with Athenee Palace Hilton NineOClock 2007-02-23
How did Hilton’s business evolve last year in financial terms?
In general, 2006 was the best year ever this hotel had. As in 2005, last year was a strong year in terms of demand. We had the highest revenues and the highest profits. In revenues we grew roughly 8 per cent and in profit more or less the same, respectively 7.8 8 per cent. We had a different business mix than the year before so a little less occupancy, respectively approximately 72 per cent but, since we pushed up the rates, the average room rate was higher. The foods and beverages operations were very successful and we also registered all time highs in terms of business in the restaurants.
To what extent did the EU accession perspective drive tourists’ interest to 5 stars hotels?
Bucharest is not a tourist destination; it is mainly a business one. So, when we speak about tourism in Romania, Bucharest barely exists. A lot of business people come to Bucharest because of investments and privatizations. The accession to the European Union certainly will have and already did have a positive impact on business. And this impact does not necessarily translate into business growth because we are already at a high level. Our hotel and this goes for the other hotels with whom we are competing is fully booked Monday to Thursday in general, but we have availability during the weekend. We have 272 rooms and during the week, once they are full, they are full. So, we can only work on the rate and this was outstanding for last year and will be also for this year. This year we also have more business people, now that Romania is an EU member. Certainly, investors are keener to invest here because they are more confident in terms of legislation and jurisdiction. This certainly has an effect on us and it is tangible already, but it can not really grow our business much any more.
Is Bucharest hotel market mature? How much room is there on the 5 stars market for the new comers?
It depends how one would define mature. A full hotel is a good hotel, let us say. Bucharest is a growing market and I am sure the market could digest 1-3 more five stars hotels. Certainly now, if another ten hotels come on the market this would not be beneficial. And this has been seen in other destinations of Eastern Europe. Warsaw for example, 5-6 years ago had too many hotels and the market was nearly collapsing because the demand did not grow. Here, we expect the demand still to grow but not in double-digits terms. It is definitely a solid market. We are doing business, we are successful, we are happy, our customers are happy so I would consider it being a mature market.
The four-five stars market revolves around approximately 3,000 rooms now. Its growth beyond maturity absolutely depends on how the country is developing. For instance, we have the opportunity to hold conventions or large meetings at the People’s Palace but it is not a professional convention centre. If at one point Bucharest had a convention centre where it could host events for 2,000-3,000 people, with exhibition space around it, than yes, we definitely would need 1,000-2,000 more hotel rooms. Then Bucharest would become a competitive destination for Prague or Budapest for hosting this kind of events. But these days Bucharest is not a convention city so there won’t be any events, consequently we do not need more hotels.
And the same goes when you look at tourism. I have been living in Bucharest for one year and a half now and I think it is an extremely interesting city which has a lot to offer for people who live here and also for visitors. But, unfortunately, Bucharest and Romania have a bad image in Western Europe or in the rest of the world. And it is the job of the government, of authorities and it is also our job to promote both, but we have restricted funds and abilities so we have to synergize.
The EU accession certainly has a positive effect, there is more media attention on Romania, there is a Romanian Commissioner in Brussels and whenever you now see a map of the EU, Romania is a part of it and it is psychologically getting closer to people. Moreover, with the open sky now, traditional airlines can operate more flights, low-cost carriers are already coming in, but we still need to market Bucharest and Romania as an attractive destination.
How will Hilton adapt to the expected increasing competition?
This depends on what strategy the other hotels will have. In general, Hilton positions itself as a top 5 star hotel in the respective market and we do not intend to change that. We may have to make adjustments in terms of business mix or products which we are selling or offering depending on how the competition scenario will change. But definitely we see our niche in the top end of the market being not a small hotel with 272 rooms but not as big as other players on the market. We offer the customers the possibility to be in a more private, a cozier atmosphere. The hotel has more individuality as against the other big hotels. First we have the best location in town and secondly the hotel has the tradition and hospitality of 93 years now. People are coming here certainly, because of the quality of the brand but also of the location, services and facilities the hotel is offering.
Does the Hilton chain intend to enter the Romanian 3-4 stars hotels market?
Hilton Hotels Corporation is operating 13 different brands in the 3 to 5 stars segments. It is the company strategy to grow on the 3, 4 and 5 stars market with other brands all over the world, in Europe and also in Eastern Europe. Romania is on the development map but so far we have no particular projects either in Bucharest or in other destinations of the country although we definitely see a growth market for the company and its portfolio.
At one point something will definitely happen but I would be very surprised if this entry on the 3-4 stars hotel market would take place in 2007. So, this is more a medium to long-term approach.
Currently we are not targeting any particular city in Romania. But, generally due to the diverse structure of the country other major cities aside Bucharest are also taken into consideration for business expansion.
Hilton is the most recognized hotel brand in the world so we must be careful not to mix it up or dilute the quality of the brand.
What are Hilton’s business growth perspectives in 2007?
We plan to maintain the occupancy around 72 or 74 per cent. We definitely plan to grow the average rate and the profitability. Our vision for this year is to grow profits by another seven per cent, roughly. Indications as we have seen so far are proving 2007 will be a good year.
Prior to coming to Romania you worked in Sofia. Could you draw a short comparison between the Bulgarian Capital’s hotel market and Bucharest?
These are two different cities. Sofia is much smaller, much more oriental in atmosphere and style while Bucharest is much more European and dynamic. Life in Sofia is more peaceful while Bucharest is more aggressive. When in Sofia, I was thinking the country’s tourism was developing in a slow pace but after coming to Romania I have to admit that Bulgarians really know what to do in this field.
Romania did not manage tourism at all until now. If you go to the mountains, to Transylvania, to the northern part of the country or to the Danube Delta, there is an atmosphere you do not have anywhere else in Europe. But it is not promoted.
Are there any consultations with the Romanian authorities on the background of tourism promotion?
We had a joint lunch on February 15, all the five stars hotels managers in Bucharest with the head of the National Tourism Authority to discus what can be done, how we can support and what is the authority expecting from us and the hotel. We decided to meet again and to work on getting journalists into Romania and into Bucharest to make it known that these are nice places to visit.
We are very happy how the business is developing in Bucharest but we would urge the responsible authorities to really join forces to promote the city as an attractive destination.