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Franchising Opportunities in Ukraine

There are only one active Ukrainian Hotel Management Company and several International ones in the Ukrainian hotel sphere. The current situation clearly shows that usage of franchising opportunities in the development of hotel business in Ukraine means entering market with low number of competitors and is highly attractive. The following characters of the hotel sphere give well thought out ground for choosing franchising opportunities: unfulfilled demand of the Ukrainian hotel sphere on one side and ebsence of organized booking centers that give ability to book a room at hotel at any place in Ukraine, on the other.

Analyzing the activity of the only active Ukrainian hotel network (Premnier Hotels) and international hotel networks that entered Ukrainian market (Radisson SAAS, Rixos, etc.) there are two variants of development of hotel business in Ukraine with implementation of franchising can be defined.

The first variant of development is buying a franchise of international hotel network. The main guests of a hotel in this case are tourists and businessmen from the western countries. As is generally known the number of tourists and businessmen coming to Ukraine from western countries rises. It is obvious that they prefer to book a room at every city of visit beforehand and knowing they will have a service provided on a level they have used to. Such international hotel networks as Hilton Hotels, Hayatt International, Kempinski are already entering Ukrainian market. Every international hotel network enters hotel sphere of Ukraine starting with the most attractive regions: Rixos – Carpathian mountains, Radisson SAAS – Kyiv. Today Kempinski is choosing from Kyiv, Odessa, Kharkiv and Yalta cities as a place for entering Ukrainian hotel sphere. So buying a franchise of a famous hotel network right at the beginning of its entery of Ukrainian market gives more abilities to take “the best pieces of pie” inside this network if to compare it with buying the same franchise when many attractive places have been already taken. It has also be mentioned that as the background of this process international hotel networks often have misunderstanding in the negotiations with Ukrainian partner and have to deal with impossibility of controlling the value of risks.

The second franchising variant for development of the hotel business in Ukraine is participation or creation of the Ukrainian hotel network. Today there is only one active hotel network – Premier-Hotels. It consists of 6 hotels: “Premier Palace” (5-star hotel, Kyiv), “Londonskaya” (4-star hotel, Odessa), “Oreanda” (service level of a 4-star hotel, Yalta), “Dnister” (service level of a 4-star hotel, L’viv), “Star” (service level of a 4-star hotel, Mukachevo), “Cosmopolit” (service level of a 4-star hotel, Kharkov). The main character of this hotel network is the diversity of the hotels. Since they have started their business as the totally separate hotels – today they have different style, different level and aspects of services provided, different price policies, etc. They all have a common booking-network but however every hotel in this hotel network tries to present itself as a single hotel on one hand and as a part of the network on the other.

Today businessmen also consider creation of new hotel networks controlled by the common Hotel Management Company in the other segments of the hotel sphere. For example, the 5star hotel “Donbass Palace” (Donetsk) considers possibilities of entering markets of Kyiv and Yalta, and as the result the creation of own Hotel Management Company and hotel network with unified level of service and prices in the 5star segment of the hotel sphere. However it is not less attractive to develop a hotel network in the segment of 3star hotels which would cover a wide territory of Ukraine, have centralized booking network and unified standarts of service. The guests of this network should be both Ukrainian citizens and foreign tourists. The main competitive advantages of such hotel network are maximum unification of standards and absence of competitors. As the result such hotel network should be the most attractive place to stay both for tourists and for businessmen. It will cause pay-back period to shorten and the development of such hotel network and each hotel itself to fasten. Today it is the most attractive segment of hotel sphere of Ukraine. But the main problem is that such development obviously requires large investment. Since the present moment there has been no such project implementation in Ukraine.

There are also other Hotel Management Companies being created in Ukraine besides the currently active hotel network “Premier Hotels” but the novelty of hotel franchising for Ukrainian market and lack of experience of Ukrainian businessmen in this field shows that the way for development with purpose of coming to international level of standards will be a long one. For example there is a hotel “Otrada” (level of service of a 5-star hotel,Odessa) which claims to be a Hotel Management Company and sells the franchises. But it is too early to speak about any hotel network in this case because so far this is the only hotel which uses name “Otrada” as the name for hotel network.

Using franchising opportunities for the development of the hotel business in Ukraine means having a competitive advantages at first place. There is no such hotel network in Ukraine which is managed by some Hotel Management Company and has totally unified standards of services provided and common price policy. On the other hand booking-networks which allow to easily book apartments in any place in Ukraine are poorly developed. In the major number of cases costumer is forced too search and book rooms in every single hotel. Obviously every single hotel has its own service level, prices, specifications, etc. This is why entering a hotel network, operated by the common Hotel Management Company will increase competitive advantages while creation of the all-Ukrainian hotel network will raise the level of competitive advantages to the new level which outstands the competitors.