The Polish income property market has recently faced a number of significant challenges. The development of the hospitality and short-term rental sectors has been slowed by the impact of the coronavirus and the war in Ukraine. In addition, rapid inflation has led to increased instability.
However, the hotel sector's performance in 2022 was almost close to that of the period before the pandemic. Currently, the country is experiencing a positive growth trend in both the short-term and long-term rental segments, as well as in the conclusion of agreements for the purchase of apartments in apartment hotels. So we can say that the sector is successfully recovering.
Author: Anastasia Gubanova, international development coordinator at Ribas Hotels Group, representative of the company in Warsaw
Trends in the market of profitable apartments
An apartment hotel is a property where investors can receive passive income by purchasing apartments. In general, income-producing real estate is a more stable market for investment compared to other real estate formats.
Currently, the apart-hotel market in Poland is recovering, and cities such as Lublin, Krakow and Warsaw have already achieved profitability rates that are equal to those of 2019.
The current state of the investment market in Poland is characterized by high dynamics, despite periodic turbulence in recent years. For example, the country experienced a fairly high inflation rate of 17-18%. This was a challenge for the market and led to higher prices for electricity, water and labor, including construction.
Nevertheless, investors' interest in apart-hotels remains high, and the sector continues to grow. Despite the suspension of some projects, the number of new apart-hotels is increasing, especially in key tourist locations.
Assessing profitability in the regions
Domestic tourism is highly developed in Poland. There is a sea in the north of the country and mountains in the south, where two seasons are popular - summer and winter. In this regard, rental housing for short and long term is in high demand, and investors can expect almost twice the yield compared to similar properties in Warsaw. In the capital, square meters are more often purchased as part of an investment strategy, pursuing the goals of prestige and strategic location.
The appeal of apart-hotels lies in their versatility - they can provide both short-term and long-term accommodation. In addition, they are a reliable means of insuring money for investors. The long-term format of accommodation ensures the safety of investments even in the face of possible changes in the market.
In terms of numbers, in large cities, the return on investment is 5-7% per annum, in tourist locations - up to 9% per annum. One of the advantages of investing in Poland, especially in tourist cities, is that the profits of Ukrainian investors with projects in Europe are official, protected, and taxable.
Who invests in apartments in Poland?
Investments in Polish apartments are concentrated mainly from entrepreneurs who do business in related industries to construction: furniture stores, manufacturers of household appliances, building materials, etc. This can be explained by the fact that people close to the industry are more open to investing and have a better understanding of how this market works. However, local residents can also be investors. For example, in Gdańsk, such real estate is mostly bought by citizens who are well aware of the seasonality of the location.
How does investing in an apartment hotel work for an investor?
There are two models of interaction between a management company and investors. In one case, the investor buys an apartment, which is then rented out, and the profit is generated from renting out this particular room. However, there is a drawback here: the investor cannot control the number of nights that guests spend in his or her apartment. Different categories of apartments have different occupancy rates and costs, as well as different degrees of wear and tear on the materials, which makes this control difficult.
In the second model, the hotel operates as a single complex. The apart-hotel ensures an even distribution of income from the overall occupancy of the complex, as well as the costs of utilities and staff salaries.
In general, apart-hotels on the Polish market are located in different parts of cities and have different formats. For example, there are full-service facilities close to the five-star level with a large number of staff who take care of each guest. At the same time, there is a quick check-in and self-service format that optimizes staff costs while providing comfort for guests.
It is important to analyze all the pros and cons and decide which format you are ready to invest in. When choosing it, you should pay attention to profitability, the amount of investment, the location of the project, and the hotel operator that will manage it. First of all, you need to choose objects in places that provide a stable income in different scenarios, minimizing dependence on seasonal fluctuations.
It is also worth analyzing the brand, management style, and reputation of the management company. For example, a reputable hotel operator plays a key role in establishing trust in a project. Its professionalism significantly affects the attractiveness of the facility for the end user and, accordingly, the quality of the services provided. The brand is also important when attracting foreign tourists, who usually focus on chain hotels for safety reasons.
What a developer should pay attention to
For a developer, it is important not only to choose a site but also to analyze in detail the product it sells, the infrastructure, and the partners it plans to cooperate with. After all, investors need to understand that they have reliable partners who will accurately implement the project.
For example, the hotel operator Ribas Hotels Group has developed a special mobile application for investors, where they can manage their real estate portfolio in real time without any extra effort. Each investor can easily receive data on the purchased room.
The application displays financial analytics for each property, apartment condition monitoring, booking calendar, balance sheet and payment history, and a marketplace of available investment properties of the hotel operator. This builds trust among investors.
Summarizing the above, the market of profitable hotel real estate in Poland is actively developing. Despite inflation and the war in Ukraine, the country is implementing new facilities and restoring investment flows. This market is also attractive for Ukrainian investors, given the possibility of taxation of profits earned in Europe.
For more information, please follow the link about joint investment in hotel business in Europe and Asia.
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