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Belgrade | 2017

Tourism &
Hotel
Outlook

Regulated by RICS
Tourism & Hotel Market Outlook | 2017 | LeRoy Realty Consultants | 1

Services Turnover Index & GDP in Serbia


The growth of travel & tourism industry (Index 2010 = 100) Seasonally adjusted data
considerably outperforms that of the local 160 5%
CAGR = 109.4 4%
economy in the last 5 years and the outlook for 140

GDP, constant pirces y-o-y, %


3%
120
this year remains upbeat with a robust rise over 100
2%
1%
the current year. 80 0%
CAGR (GDP) = 0.64%
60 -1%
-2%
40
-3%
The turnover of accommodation and catering services 20 -4%
indicates a rapid acceleration following the ongoing 0 -5%
economic recovery in both the Eurozone and the local Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
market. International market seems more resilient to all
turnarounds and offers an untapped potential, with an 2014 2015 2016 2017
average annual growth of 10.9% over the last 5 years. Accommodation and catering services turnover GDP
Source: Statistical Office of the Republic of Serbia
The evolution of the market has been seen through a
systemic prioritization of tourism, promotional efforts,
international openness and better air connectivity, which
was further resulted in visitor exports growth over this time Economy & Tourism indicators in Serbia, 2011-2016
period. Likewise, this sector was one of the best performing
in terms of the growth of its key indicators, relative to GDP 0.8%
insignificant GDP growth rates. Total overnight stays 2.5%

Average growth 2011-2016, %


Total arrivals 5.9%
The trend of an increasing share of international visitors,
coming from and travelling to emerging and developing International tourist overnight stays 10.8%
countries, is a key driver for improving the competitiveness International tourist arrivals 10.9%
index based on which Serbia is ranked as 95th out of 136 Internat. tourism inbound receipts 7.9%
countries. As a result of all these positive trends, there is an
Number of hotel rooms 6.2%
evident growth in supply, with more international hotel
Passenger trafic - Belgrade Airport 9.5%
chains entering the market.
Flights - Belgrade Airport 5.5%

0% 2% 4% 6% 8% 10% 12%
Acceleration of tourism Source: Statistical Office of the Republic of Serbia, compiled by LeRoy

The growth of the foreign exchange inflow from tourism is


expected to step up, reaching 12-13% this year, which is far
more than the 7.9% compound annual growth rate (CAGR) Tourism performances in Serbia
in the previous five-year period. International tourist arrivals 1,200 1,500,000
*
Number of international tourist arrivals

grew at a pace of 18.7% in the first 7 months of 2017, thus


indicating to a considerable acceleration compared to an 1,000 1,200,000
EUR, mil (% growth)

*
annual growth of 10.9% in the preceding five-year period. 800
900,000
Economic upswing, cheaper airfares and the improvement 600
of trading fundamentals encourage higher confidence in the 600,000
400 +9% +9% +10% +13%
hospitality industry. These figures bring optimism in the
short-term market outlook, considering the present 200 300,000
competition, while the industry’s resilience to economic
0 0
volatility and uncertainty gives an incitement to new market
entrants and new investors in the hotel segment. 2014 2015 2016 I-VII 2017

International tourism inbound receipts International tourist arrivals

Source: Statistical Office of the Republic of Serbia, Ministry of Tourism


*Estimate 2017
Tourism & Hotel Market Outlook | 2017 | LeRoy Realty Consultants | 2

The inbound growth as a major driver Number of tourist arrivals and overnight stays in Belgrade
1,200,000 2,400,000
Belgrade market is highly dependent on the foreign tourist
*
demand as they account for 81% of all arrivals starting from
1,000,000 2,000,000
2014 onward. The year-on-year increase in visitor arrivals is

Number of overnights stays


evident, at a compound annual growth rate of 10.1% over *
800,000 +12% 1,600,000

Number of arrivals
the 2014-2016 period. This is expected to accelerate to
+1%
11.5% in 2017, thanks to the strong growth of international 600,000
-14%
1,200,000
tourist arrivals, which amounted to 19.9% in the first seven -5%
months of 2017. The domestic demand is still fragile and we 400,000 800,000
expect to recoup in the coming period, with the gradual +11% +9% +13% +20%
strengthening of the local economy. A total number of 200,000 400,000
overnight stays had a similar growth dynamic, with a 10.3%
annual increase over the 2014-2016 period and is expected 0 0
to grow further by about 19% in 2017, thus increasing a 2014 2015 2016 I-VII 2017
CAGR at a 12.7%, during 2014-2017.
Foreign arrivals Domestic arrivals Overnights stays

The majority of the demand is focused on hotels, which Source: Statistical Office of the Republic of Serbia, compiled by LeRoy
generate 82.7% of all overnight stays, followed by hostels *Estimate 2017
(6.0%) and spas (5.3%). Private apartments make up a
negligible competition of only 1.8% of all overnights, but it
should be noted that this segment of the market has a
certain share of unregistered accommodation. This can also Structure of Demand in Belgrade
be explained by a relatively affordable pricing of Belgrade 1.8% 2.5%
hotels as well as the demand structure in which business
travellers prevails. 6.0%
1.7% 5.3%
Overnight stays

Timid levels of the supply growth


I-VII 2017

During 2014-2016, the tourist demand (rooms sold) has


increased at a CAGR of 16.9%, while supply growth (new
hotel rooms) saw only a 3.6% gain and this imbalance is 82.7%
expected to continue, despite an increasing pipeline. A
double-digit growth of rooms sold, between 10-11%, is
projected for 2017, with nearly zero room supply. Hotels Apartments Spas Hostels Private rooms Other

Source: Statistical Office of the Republic of Serbia, compiled by LeRoy


This trend of demand, which outstrips new supply growth, is
helping to boost hotel performances. The new supply that
appeared in the period of 2012-2015 has lowered already
fragile performances of Belgrade hotel market, resulting in
Evolution of Hotel Supply in Belgrade
below average occupancy rates and further on the average
daily rate (ADR) decrease. Since 2016, the market is on its 0.0%
Growth of international tourist arrivals, %

6,500 +2.7% 25%


Total number of hotel rooms (growth %)

reversal path and hotel trading fundamentals have entered +4.5%


on an upward growth trajectory, further speeding up in the +9.3% 20%
first 7 months of 2017. 6,000

15%
Two-thirds of available rooms in Belgrade hotels belong to 5,500
the upscale market segment (4-star and 5-star). 4-star hotels 10%
dominate the supply with 56.2% share of all rooms available
5,000
in the market. 5%

Belgrade market is dominated by independent hotels 4,500 0%


despite the growing demand from hotel chains. During the 2014 2015 2016 I-VII 2017
last 4 years, global brands such as Crowne Plaza, Radisson No of Rooms International tourist arrivals
Blu, Luxury Collection by Starwood, Falkensteiner, Courtyard
by Marriott, AccorHotels and Holiday Inn Express entered Source: Statistical Office of the Republic of Serbia, compiled by LeRoy

the market.
Tourism & Hotel Market Outlook | 2017 | LeRoy Realty Consultants | 3

Double-digit growth of KPIs


A double-digit growth of key performance indicators, Structure of Room Supply in Belgrade
including the strong revenue per available room (RevPAR)
growth starting in 2016, driven by a jump in occupancy, has
dramatically improved the overall Belgrade's hotel 8.1% 10.0%
2.3%
performance.

Competitive pressure has led to ADR decline starting from


23.4%
2015, which decreased at a CAGR of 3.2% in the last 3.5

Hotels
years. On the other hand, the improved hotel performance, I-VII 2017
backed by an increasing demand and a growth in occupancy,
was the main factor driving the upward trend in the
observed period. RevPAR has increased at a CAGR of 6.8%,
supported by rise in room occupancy of 10.4% during the 56.2%
2014-2017 period. Room occupancy, in the best performing
hotels, ranges between 65-72%, while the average
occupancy was a slightly below 60% in the first 7 months of 5-star 4-star 3-star 2-star 1-star
2017. 3-star hotels appear to be the best-performing Source: Statistical Office of the Republic of Serbia, compiled by LeRoy
segment, with the highest occupancy of 65% in 2017, while
4 and 5-star hotels achieve an average occupancy of 58% in
the same period. The increased absorption has pushed ADR
up 8% in 2017, which also reflected in a robust RevPAR Branded vs. Unbranded Hotel Rooms in Belgrade
growth of 19%.
* Average number of rooms per hotel

New hotel brands keep coming


30%
Thanks to this tremendous progress in its hotel sector, 191*
Belgrade market has attracted investors’ attention that has
been translated into several new developments, currently in I-VII 2017
progress, which will change the hotel market landscape
considerably in the coming period. 5-star Hilton hotel with
242 guest rooms is set for opening in 2018. Also, 4-star 70%
Mama Shelter hotel with 125 rooms has announced opening 55*
in the pedestrian zone during the first half of 2018.
St.Regis hotel (125 rooms) and W hotel (120 rooms) have
been announced within Belgrade Waterfront project. The Branded Unbranded
construction of InterContinental hotel should be Source: Statistical Office of the Republic of Serbia, compiled by LeRoy
commenced soon. All these new developments will reshape
the market and the existing competition, bringing new
quality and underpinning the city’s new positioning on the
tourist map.
Belgrade Hotel Performance
80% 100
Room for advancement 70% 90
80
60%
The enhancement of MICE industry, both in the number of 70
events and the necessary infrastructure, is among the key 50%
EUR/day

60
prerequisites for sustainable growth in the hotel sector, 40% 50
together with better air linkages and a wide promotion 30% 40
towards new source markets. Thanks to the introduction of 30
20%
direct flights from Belgrade to Beijing, the abolition of visas 20
10% 10
for Chinese citizens starting in January 2017 and the new
0% 0
promotional strategy, the total Chinese tourist arrivals
2014 2015 2016 I-VII 2017
increased by 271.7% (y-o-y) in the first 7 months of 2017,
which is the largest growth of one single source market. ADR RevPAR Room Occupancy, % Bed Occupancy, %

Source: Statistical Office of the Republic of Serbia, LeRoy


Growth in the travel and hospitality sector is expected to
continue. New supply of cca 370 guest rooms in Belgrade in
2018 will temporarily inhibit RevPAR growth, but the overall
industry growth and the increasing share of international
visitors are expected to mitigate this short-term effect.
For further market information, please contact

Žana Šipovac MRICS | RICS Registered Valuer


Head of Valuation and Advisory
zana.sipovac@leroy.rs

Marijana Dolaš
Associate, Valuation and Advisory Services
marijana.dolas@leroy.rs

T + 381 11 26 32 300
F + 381 11 32 84 647
17, Cara Urosa Street - Belgrade
office@leroy.rs

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