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H1 2016 Kiev Hotel Market Update: Growth of Operating Performance in UAH and Gradual Stabilization of USD Indices

KIEV, 01 August, 2016 – JLL presents the H1 2016 results of the quality hotels market in Kiev.

Kiev hotel market gradually recovers and starts to increase both occupancy and rates in UAH. In H1 2016, the average market occupancy in Kiev hotels increased by 16% (5.3 p. p.) compared to the same period in 2015 - to 37%. “When compared to the very poor 2014 operating performance, occupancy growth this year is even more impressive – 11 p.p.” – Tatiana Veller, Head of JLL Hotels & Hospitality Group, Russia & CIS, says. – “At the same time, the current year’s result is still inferior to the levels of more stable periods: for example, in January-June 2013 about half of all quality hotel rooms (48%) were occupied in Kiev.”

“There is every reason to believe that in case of continuation of current dynamics, Kiev market will fully rebound to the usual occupancy levels within two to three years,” – Tatiana Veller continues. – “The main drivers will be the business activity returning to the region and restoring the image of Kiev as a tourist destination among international travelers. But, political stability is primarily needed for both.”

ADR in UAH grew in the H1 2016 by 17% and reached UAH 3.85 thousand; as a result, RevPAR increased by 36%, or about UAH 400. In dollar terms, the fall of ADR continues to slow down: if in H1 2015 it dropped more than 20% compared to the same period in 2014, in the current year it decreased just 2.6% - to USD 151.

“For the past three years the dynamics of the average rate in local currency in Kiev hotels closely followed the exchange rate of hryvnia against the dollar. This means that quality hotels in the market are withstanding the urge to lower prices in order to compete with local players for the occupancy. International hoteliers are well aware of how difficult it is difficult to restore rates after price wars, even in a strong market,” – Tatiana Veller comments.

USD RevPAR levels also began to actively recover: in the H1 2016 the average revenue per room increased by 14% in comparison with January-June 2015, reaching USD 56.

The market needs the dollar rates to rebound in order for developers (which mainly took out financing in hard currency) to feel some confidence in market prospects and start unfreezing and completing their projects. Currently, there are no new internationally branded hotel openings announced for 2016 in the city.

“Talking about the country at large, it is worth noting that the recent history of the hotel and tourism market of Ukraine – is a story of belief in the future and persistent development, despite the lack of confidence in what tomorrow brings.” – Tatiana Veller concludes. – “Domestic tourism continues to grow under the influence of hryvnia devaluation against the hard currencies, and the main domestic tourism destinations have now emerged. For example, Odessa is the summer seaside vacation spot, Bukovel is a place for winter sports, Lviv is a favored city break location for cultural and historical tourism, which is also actively developing now as a MICE destination.”