Carpathian Provence and the hotels of tomorrow: where Ukrainian investors are putting their money during the war.

According to forecasts from analysts at Ribas Hotels, after the war in Ukraine ends, up to 14.5 million tourists per year may wish to vacation in the country — this includes both domestic tourism and international visitors. However, there are not enough accommodations for this number of guests — the current state of Ukraine's hospitality industry can only service a maximum of 10 million tourists annually.

Currently, there are at least 45 new hotel and apartment complex projects — primarily multi-story buildings — totaling 6,670 rooms, as well as 108 cottage-type hotel communities with 3,097 homes, which are akin to private suburban developments. These projects are planned to be constructed in Ukraine between 2024 and 2026, as indicated by the relevant research from Ribas Hotels.

This story is not only about construction but also about finance. Such projects are open to investment from individuals who are offered opportunities to invest in construction.

“In Ukraine, there is a very limited selection of investment tools, so real estate likely takes the top spot among obvious opportunities for long-term investment,” says financial analyst Dmitry Churin.

The share of transactions financing hotel construction is playing an increasingly significant role in the Ukrainian commercial real estate market. Partly due to the market's decline from a record high of over $800 million in 2007 to approximately $50 million in the first half of 2024. Additionally, there is an activation of the hotel segment compared to the warehouse and office segments.

“This segment is developing very rapidly — the devaluation of the hryvnia, inflation, the public's skepticism towards the banking system, and the lack of accessible investment opportunities have transformed investments in income-generating real estate into an effective financial tool for increasing savings,” say analysts from Ribas Hotels.

Hotel Market: From Death to Resurrection

Since 2013, the hotel real estate market in Ukraine has been declining by an average of 175 properties per year. The reason is quite straightforward: buildings are “aging.” Sanatoriums, health resorts, boarding houses, recreation bases, camps, and campsites from the Soviet era are reaching the end of their lifespan. Additionally, since the beginning of the full-scale invasion, 12 hotels have been destroyed: in Kyiv, Chernihiv, Kharkiv, Odesa, Kherson, Zaporizhia, and Mykolaiv.

In their place, new buildings have emerged — hotels (+9.1% in quantity per year), motels (+10.7%), and hostels (+28.7%). Currently, there are 3,392 hotel-type properties in Ukraine. In two years, this number will increase by another 153.

The majority of announced projects are located further away from the front line: Ivano-Frankivsk, Zakarpattia, and Lviv regions. Fewer are in Kyiv, Odesa, and Vinnytsia, where there is a need to accommodate delegations and tourists.

Moreover, the legendary Kyiv hotel "Ukraine" has recently been sold to private hands. It was auctioned by the State Property Fund for 2.5 billion hryvnias to businessman Maksym Kryppa. In July, the "Kazatsky" hotel on Independence Square in the capital was also privatized for 400 million hryvnias.

Additionally, plans for the modernization of other existing hotels in Kyiv — "Express," "Dnipro," "Prague" — and the launch of the Renaissance Kyiv hotel near the Golden Gates are underway. All of them will have to compete for guests with new establishments.

“The total number of announced projects across the country is 153, potentially creating about 6,100 jobs. This is based on the calculation that a hotel with a large number of rooms requires around 40 employees,” say representatives from Ribas Hotels.

From the perspective of workers in the Ukrainian hotel industry, new job opportunities are certainly positive, but it is also important to consider salary levels.

“Average salaries in large hotel chains in the Ukrainian market have been rising in recent years. In smaller hotels, average salaries may be below market rates.

In Ukraine, average salaries for hotel staff or hospitality complexes, such as administrators, maids, and cleaners, can range from 12,000 to 20,000 hryvnias per month, depending on the region and class of the hotel. As for cooks, their salaries range from 20,000 hryvnias,” says Victoria Komar, head of the recruitment department at Ribas Hotels Group.

The New Face of Ukrainian Hospitality

The main advantage of new hotel complexes and cottage communities is their technological advancement and alignment with the current needs of guests, including energy efficiency requirements.

A real construction boom is taking place in the Carpathians. Yaremche will soon receive the Smart Hills condo-hotel with 315 apartments — featuring a SPA, restaurant, rooftop terraces, co-working spaces, a gym, and shelters. Additionally, the "Kraiobraz" condo-hotel with 80 apartments is being built. Externally, these hotels appear quite cosmopolitan, which is not necessarily viewed as an advantage.

“In the Carpathian region, there are mountains, certain traditional architecture, and a corresponding ambiance, but now we see new developments in the style of Provence, Bavaria, and Austria, while we do not see Hutsul culture,” notes Maryana Oleskiv, head of the State Agency for Tourism Development. “And this is not what foreign tourists will come here for, as they are not looking for France or Austria in Ukraine; they will come for Ukrainian authenticity.”

The condo-hotel Ahni Moon Resort with 143 apartments in Bukovel will maintain a traditional aesthetic. However, it also incorporates modern comfort features: an outdoor pool, restaurants, gyms, and terraces.

In addition, five more hotel properties are under construction in Bukovel, including a massive 10-story condo-hotel Glacier with 810 apartments.

Three projects, including cottage towns, are being developed in the Carpathian village of Mykulychyn, already known for its bases.

In other regions, the Hilton Resorts - Gefest hotel with 145 rooms is being built in Arkadia, a recreation area in Odesa. A large hotel, ARC Hotel, will also emerge here.

Three modern hotels will be established in Vinnytsia: WOL, Bogun, and Uspenskiy. Meanwhile, the local "Oktyabrsky" hotel appears promising for modernization. Uzhhorod will also see the construction of a sizable hotel, The Five Hotel, which resembles hotels in Washington, for example.

Between 2022 and 2024, quite atypical trends have emerged in the Ukrainian hotel real estate market, as noted by analysts at Ribas Hotels:

• a significant increase in the duration of stay (weeks and months instead of just a few days);
• the emergence of conditionally free shelters for temporarily displaced persons (quick modular homes, dormitories, adapted accommodations for guests);
• staying with relatives or acquaintances or long-term apartment rentals collectively form 55.7% of demand for real estate — meaning hotels must compete quite intensely with those renting out their properties, whether at train stations or online.

This requires additional flexibility from the market, as occupancy rates could be better. The average occupancy rate has stabilized in the range of 34-38%, reaching 43-50% in popular and safe locations (Kyiv, Vinnytsia, Rivne, Ternopil), and in some regions, it exceeds 60-70% (Lviv, Ivano-Frankivsk, Zakarpattia regions), comparable to leading tourism centers around the world.

Regarding the structure and quality of demand for hotels and cottage communities, the experiences of Ukrainians vacationing in Turkey and Egypt — very popular pre-war destinations — have a significant impact.

“Ukrainians expect an all-inclusive type of vacation, where there is food, a pool, everything for relaxation within a specific territory, from which there is no need to leave and explore the surrounding area. Not everyone, but many have such expectations,” shares her observations Maryana Oleskiv, head of the State Agency for Tourism Development.

According to her, there is currently a boom in the construction of hotel facilities for vacations in the format of "sun, beach, nature," because there is a lack of offerings in this segment, while demand exists.

“Now they are building what will potentially and actually be in demand — both as an investment and practically. Citizens need quality living conditions,” comments Sergey Mamedov, deputy head of the Board of the Confederation of Builders of Ukraine. He notes that the market for cottage complexes is open to new projects, and the state program "eOselya" supports demand for real estate.

You Can Not Only Stay in Hotels — You Can Earn From Them

The market for hotel real estate is expected to grow, making it a potentially profitable investment