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Ukraine's Lodging Industry Seeing Recovery

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Industry Overview

Hotels current value sales grew by 7% in 2017 to reach UAH8.8 billion. Compared to 2016, when sales increased by just 2%, such a performance can be seen as a strong recovery. However, a weak economy and unstable political situation continue to impact hotels in Ukraine in 2017. In addition, undeveloped lodging infrastructure and weak marketing activity also hampered the development of hotels in 2017.

Hotels by category

Mid-market hotels posted strong sales growth of 12% in 2017, with prices reaching UAH1.2 billion. In addition, the other two categories also posted value growth, with luxury hotels current value sales increasing by 9% to reach UAH4.1 billion and budget hotels value sales growing by 3% to reach UAH879 million. Traditionally, luxury and mid-market hotels have been popular among international tourists because they are less sensitive to national currency fluctuations and typically run by international operators.

While local consumers showed demand for economy and partly mid-market hotels, this can be attributed to the fact that Ukrainians are switching from international destinations to domestic tourism due to weak purchasing power. Overall, price and convenient location remain the major factors of choice in this area.

Business and leisure segments

The ratio between different segments (business, group, leisure, etc.) in lodging varies by region and city. In business centres such as Dnepropetrovsk, Kharkiv and Zaporizhzhya, the share of the business segment is higher, while the leisure segment leads sales in tourist regions like Transcarpathian and Carpathian, Odessa and Kherson. In Kiev and Lviv, the sales shares of the business and leisure segments are relatively balanced.

Overall, supply will exceed demand, especially in hotels, with players being forced to keep prices low in order to increase the number of customers. However, the number of tourists will be greater than the number of available rooms during the tourist season in tourist locations such as Lviv, Odessa, the Black Sea coast, Prykaprpattya and Zakarpattya. As a result, prices will be seasonally adjusted.

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