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Factors of Ukrainian hotel business development (published by National Hotel Executive)

Ukrainian hospitality business is at the stage of its development and by every year becomes one of the most dynamically developing and profitable fields of the country’s economy. Undoubtedly that it became possible on the basis of total political, economic, social, demographic, geographical, ecological, etc., factors. String of pronounced facts indicates it.

One of the most significant factors of situation changes at the domestic hospitality market is economic one: structural changes in the economy, external economic activity, macroeconomic indicators, financial results of enterprises and organizations, price and tariff indices which have an essential influence on positive dynamics of Ukrainian hotel business.

It should be mentioned that macroeconomic indicators in Ukraine during the last years were stable; according to the date of British agency Fitch Ratings the economic growth rate made up 7,5 % annually.

In January-April 2008, the real GDP was 106,2% as compared with the relevant period of the last year.

During 2007, exports of foreign trade in goods to EU countries made up 13916,8 mln.$ dollars and increased in comparison with 2006 for 15,1%; correspondingly import – 22217,9 mln. $ dollars and 37,2%.

The profitability of 4-5* Kiev hotels exceeds 40% that is not the least of the factors of Ukrainian hospitality development. The average fillability is 60-85%.

It is significant to note that the volume of direct investments from EU countries by 01.01.2008 made up 22,9 billion $ dollars which make up 77,8% of the total investment to Ukraine (01.01.2007 – 16,3 billion $ dollars, 75,2%).

There is a bank lending boom (the increase for 76% since January to June).

On the 16th of May, 2008 Ukraine became the 152nd member of World Trade Organization.

Geographical and geopolitical location promotes development of tourism and hospitality of Ukraine:

Special attention should be paid to unique natural and climatic recourses, historical and cultural inheritance.

Beneficial climate of the Black sea and Sea of Azov, the Crimea, Carpathian Mountains is widely used practically at all resorts as the main medical and health-improving factor.

Among health-improving resources the considerable reserves of therapeutic muds and numerous deposits of mineral water should also be noted.

Definite influence upon hotel business development has political factor and legal framework:

Improving of investment climate of Ukraine depends to a large extent on creation the efficient system of institutional activity support of foreign investors, the priority of which is successive politics of pressure lowering on investors.

The economy of Ukraine reacted easily to the political instability of the last years - two elections to Verkhovna Rada for 18 months, three government changes since the beginning of 2005.

Development of cooperation between Ukraine and World Tourism Organization (WTO) should be mentioned, that is a priority area of public policies in the development of international tourism and an important precondition for the integration of Ukraine into the world travel space.

Also an important fact is the opening of borders, visa free entry to Ukraine for representatives from EU countries, the Swiss Confederation, the Principality of Liechtenstein, Japan, Bulgaria and Romania.

By the decree of the President of Ukraine № 136/2007 "About activities connected with the tourism and resorts development in Ukraine” the 2008 was declared as the Year of Tourism and Resorts in Ukraine.

The President of Ukraine decreed to develop and approve "The strategy of stable development of tourism and resorts in Ukraine". It will help to create favorable conditions for catalyzing the tourist’s and resorts’ investments, to implement mechanisms for stimulation of new constructions and renovation of operating tourist’s and resort’s objects, to realize different activities for the positive rising of travel image at the international tourist's market by making a chain of Tourist IC in Ukraine and tourist agency abroad.

At the same time among the important events of the last year it is important to note the return of budgetary financing of expenses for the development of tourism and resorts. 20 million UAH was given for these purposes.

Preparation of the country to receive the guests of European Football Championship in 2012 greatly influenced on the dynamics of the hospitality development. A law “Providing of preparation and conducting in Poland and Ukraine of final tournament of Europe championship UEFA 2010/12” was passed. It is important to note that investors will receive the benefits for infrastructure construction.

On December 26, 2007 the Law of Ukraine № 877-V "On the main regulations of state control in the sphere of economic activity" joined into force which aimed to introduce proper order in the implementation of state control.

The new version of Rules of obligatory services certification for temporary accommodation which are provided by parties of tourist's activities in the joint and individual means of accommodation (27.12.2007 for № 1418/14685) was approved. This will significantly improve the quality and control over services.

Thus the adoption of several important legal acts will promote the development of the market and allow to solve quantities of disputable issues currently existing in this field.

The demographic and socio-economic factors as well as incomes, health protection, social welfare, education has its particular influence:

Hotel business development depends to a large extent on the fact that during the 2007, 23122157 million of foreign citizens visited Ukraine that is almost 4 million more in comparison with the previous year.

Structure of tourists’ flow by purpose

 

 

2006

2007

Business trip

1 011230

908 964

Organised tourism

1 210156

1 444962

Private visit

16 552159

20 563044

Education

45 262

49 481

Placing in a job

4 623

7 814

Immigration

15 778

24 032

Cultural event, sport event, religion, other

96 567

123 860

  * Based on data from the Administration of State Frontier Service of Ukraine Source: © SSC of Ukraine

At the same time the priority type of tourist's activities in Ukraine remains internal tourism. During the 9-month growth rate was 74% while for the same period in 2006 - 47%.

Significant influence has the increase of domestic and foreign business tourism and the growth of business activity inside the country.

Factors that have become catalysts for the dynamic development of the hotel market in Ukraine:

Mainly the conducting of the UEFA championship Cup - Final in 2012 jointly with the Republic of Poland catalyzed the interest of investors.

Determining influence had the organization of youth football (soccer) UEFA championship in 2009 in Donetsk.

Conducting annual meeting of EBRD in 2008 in Kiev.

It is well known that hotel industry is entirely consumer oriented and directly depends on the quality of provided services. External factors of low efficiency of hotel enterprises greatly influence on the formation of the hotel market. The problem of low-quality service is rather typical for Ukrainian hotel market due to the influence of old Soviet school.

Thus the dynamics of Ukrainian hospitality development can be estimated as positive. Ukraine has a great potential and opportunities for further development of hotel industry and tourism, efficient use of natural and recreational, historical and cultural, tourist & excursion resources, fully satisfaction of the health-improving & sports, cognitive, spiritual needs of domestic and foreign tourists and favourable conditions for investment activization. In 2007, investments in hotel development sphere made up 1232.4 million UAH which is 0.7% higher comparing to the previous year. During January-March 2008 the volume of provided services made up 573.1 million UAH and for the same period of the last year - 391.5 million UAH.

Over the past years international public hotel operating companies actively show interest and make negotiations about possible projects. In many ways coming of international brands and hotel management companies is a natural development indicator of hotel sector of Ukraine.

Currently three public hotel operating companies Global Hyatt Corporation (in July 2007, 5-stars hotel Hayatt Regency “ Saint Sofia Kiev” started operating under Hyatt brand), Rezidor Hotel Group (2005 – four-star Radisson SAS Hotel Kyiv), Rixos Hotel (2005 – five-star Rixos Hotel Prikarpatye) are doing business in Ukraine now and one national managing company “Premier International” which represents “Premier Hotels”. Hilton Hotels Corporation, InterContinental Hotels & Resorts, Marriott International, Kempinski Hotels&Resorts and Accor Group wanted to enter Ukrainian hotel market. In 2007 , InterContinental Hotels & Resorts, Hilton Hotels Corporation, Starwood Hotels & Resorts , Marriott International, Accor Group , InterContinental Hotels & Resorts, Magic Life, , Kempinski Hotels&Resorts, Continent Hotels & Resort, Choice Hotel International, Wyndham Worldwide have announced their close interest in Ukraine.