(AG Real Estate) Tourism and hotel development in Serbia

Serbia features a market economy with a GDP of about USD 50 billion in 2008. Between 2005 and 2008, Serbia’s GDP grew at a significant higher rate than the average GDP of the European Union member states. Serbia therefore represented one of the fastest growing economies in Europe. However, the country was also hit by the worldwide economic crisis. GDP dropped by approximately 9 % in 2009, which can mainly be ascribed to the global economic downturn.

Serbia benefits from a stable tourism demand which has been particularly strong in Belgrade and Novi Sad, which are the administrative centres of the country, followed by mountain resorts (e.g. Kopaonik, Zlatibor, etc) and spa destinations (e.g. Vrnjačka Banja, Gornja Trepča, etc). Among the most important countries of origin (with regard to overnight stays) of Serbia are Montenegro, Bosnia and Herzegovina, Germany, Slovenia, Italy and Croatia.

The following chart provides an overview of tourism supply and demand in Serbia and in Belgrade:

Currently, there are only two internationally branded hotels in Serbia, both located in Belgrade. The five-star Hyatt Regency is situated in the centre of New Belgrade and offers 302 rooms and suites. The Holiday Inn, which opened in 2007, offers 140 rooms. Besides the above-mentioned hotels, there are two properties in Belgrade which are part of the hotel co-operation Best Western.

The majority of hotels in Serbia (and in Belgrade) are rather outdated, small-scaled and privately-owned. The largest share of the hotel market in Belgrade is currently represented by the three-star segment, followed by four-star properties (according to the national classification system), which together make up approximately 60 % of the total market.

Traditionally, demand from the (international) leisure travel segment in Serbia has been rather weak. The country is not perceived as a (leisure) tourist destination. The rather poor condition of the traffic infrastructure (motorways, airports, etc) can be identified as a further reason for the limited number of international tourists. On the other hand, demand deriving from business guests has been growing in the administrative centres, such as Belgrade and Novi Sad.

Serbia has a considerable tourism potential, which could be tapped fully in the future in order to compete with other destinations such as the Czech Republic, Hungary or Romania. For this reason, attractive tourist products will have to be developed and commercialised on an international level. Potential can be seen in developing niche products such as rural tourism, nature tourism as well as tourism related to river cruising. Already existing offerings, such as health and spa facilities should be further enhanced. With regard to the development of city tourism, Belgrade and secondary cities such as Novi Sad and Niš, will be partly dependent on the pace of the completion of infrastructure projects (motorways, etc). According to information provided by Belgrade Nikola Tesla Airport, low-cost carriers such as Germanwings and FlyNiki started to offer regular flight services, which play an important role when it comes to the development of city breaks.

Real Estate Market

Serbia’s real estate market started to develop relatively late compared to other CEE countries. The market is highly dependent on foreign investments as local development lags behind. Like all other countries in the region, Serbia and its real estate market were hit by the global economic crisis, but first signs of a recovery can be identified.

With regard to the hotel real estate market in Serbia, potential can be seen in renovating existing properties but also in developing new projects. In the cities, hotel developments should first and foremost be targeted to the business traveller segment, i.e. by providing an acceptable rooms product and additional services such as meeting facilities or business centres. Furthermore, Belgrade currently lacks boutique-style hotels which could be identified as a niche in the market. Also, the congress and conference sector in Belgrade (and, to a lesser degree, in Novi Sad) could be further enhanced. Currently, Belgrade provides various venues for fairs and conferences (e.g. Belgrade Fair, Expo XXI, Sava Centar) which are partly in need of renovation. Novi Sad added a new congress centre to its already existing (and outdated) fairgrounds in 2006, as demand for (international) conferences has increased in the last few years. This can be mainly explained by the fact that the number of international companies which opened regional headquarters or branch offices in Serbia has been constantly growing in the last few years.

In the upcoming years, supply is expected to slightly grow (especially in Belgrade) due to new hotel projects which are planned or under construction. Despite these new projects, the country will need to further improve its current supply of accommodation facilities.

At the moment, the following hotel projects in Belgrade and Novi Sad can be identified:

Several international brands – such as InterContinental and Kempinski – are expected to enter the Serbian market over the coming years. This should enhance the attractiveness of Serbia as a tourism destination and should also boost new developments or refurbishments of already existing properties. The development of branded hotels in secondary cities is expected to take longer than in Belgrade. First attempts can already be identified (for example the planned Holiday Inn in Novi Sad). The development of budget hotels in Belgrade as well as in secondary cities represents a main potential in the near future. A Holiday Inn Express for instance, is already planned in the city of Belgrade.

For the next five years, PKF hotelexperts expects the following main trends:

§ focus on budget and mid-segment hotels;

§ increasing interest in secondary cities;

§ smaller scale of development (mostly 100 to 150 rooms);

§ single-use developments (no more gigantic mixed-use developments);

§ increased international interest on Serbia’s hotel market in expectation of
EU membership;

author :

Michael Widmann, Managing Director

PKF hotelexperts GmbH

Michael.Widmann@pkfhotels.com

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