The client

A Turkish conglomerate with major interests in construction, energy, cement and tourism in Turkey and overseas.

What did Hotel Solutions Partnership achieve for the client?

The client was originally intending to develop a full service five star hotel as this was desired by the local authorities. Consequently, the client needed independent guidance as to the appropriate product for the market. HSP was able to clearly indicate and justify its recommendations, based on the client’s objectives and capacity to invest, in a methodical and logical manner presented in the market study and investment appraisal.

Consultants

Gabrielle Gambina and Ewa Kossakowska

Background

The client owns, amongst other assets, a number of luxury hotels across Turkey. The client is currently working on a mixed use development located in Skopje, the capital city of Macedonia. Bringing a modern touch to the historic city centre, the development will have a total area in excess of 300,000 square metres which will include a shopping mall, cultural centre, residential towers, class A office accommodation, extensive car parking and a hotel.

It is envisaged that the development will be the leading real estate development in Macedonia. The hotel will be built to a high standard and operated under an internationally reputable brand.

While the local planning authority envisaged a luxury hotel as part of this development, the client wanted to understand what type of product and scale would be suitable in this location. A previous feasibility study carried out 10 years earlier by our consultant Gabrielle indicated that the market was ripe for a five star business hotel. However, given the time lapse and economic developments in the market, the client instructed HSP to update the study. To this end Hotel Solutions Partnership (HSP) was required:

• to survey the current and future hotel market in Skopje
• to review the accommodation demand generators and economic indicators, including foreign direct investment, airline routes/ capacities, planned regeneration, infrastructure, etc
• to analyse tourism statistics
• to advise on the most suitable accommodation product for Skopje within the context of the planned mixed use scheme
• to provide financial projections for the recommended accommodation option.
• Project objective

Project scope

• In the first phase of the scope of work Ewa visited the site. A briefing was held with the client’s project team located on site. Subsequently, Ewa visited all hotels deemed to be of competitive relevance and interviewed the management of these hotels. She also met with leading officials in the statistics department, tourism authority and economic development authority to understand the current and future economic and tourism outlook for Skopje.
• Following on from the primary research, Ewa and Gabrielle carried out secondary desk research and analysis to build a picture of the potential visitor profile and tourism scenario in Skopje hotels. Of particular relevance were the hotel rates being offered by the competitive hotels on a daily basis.
• Internal discussions within the team indicated that a full service hotel with extensive food and beverage outlets, conference centre, spa, etc was not a wise investment at this point in time. Most hotel guests did not dine in their hotels but in the many outlets available in the city centre. MICE business was not substantial. Moreover, hotels in the city are struggling to maintain/ boost occupancy levels, with a low average RevPAR being achieved across the city’s hotels. Given the nature of the visitor to Skopje, the team recommended the development of a long stay product offering the customer the comforts of a home away from home, thus offering a differentiated product from that available. Therefore, the product has an identifiable USP in the market. Moreover, from an investor’s perspective the serviced residence suite product has lower operating costs than a full service hotel and it lends itself to conversion into residential apartments. It also compliments the mix of uses proposed for the development.
• The team was also asked to look into the potential for a casino as part of the hotel. To this end, a gaming expert was interviewed. The feedback was that walk-in business is essential for city centre casinos, which therefore should ideally be based in or around retail centres.
• After a debrief with the client, it was agreed that the team should pursue their recommendation of serviced residence suites for the financial and investment analysis stage. It was also agreed that the alternative product to be considered could be a budget hotel, or select service, hotel.
• Financial projections were prepared for both scenarios, together with investment returns analysis.
• The final report together with potential operators and operating structures, including management, franchise, ‘man-chise’, was discussed in detail with the client.