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PRESS » Apartments under a Microscope (Development News Slovakia, 5/2009)

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Construction of apartments has become a very attractive opportunity for the developers in recent years, whereas they are more often not used only as a form of so called ’second housing‘, where the owner spends his holiday and weekends, but also as an interesting long-term investment with a financial effect expected. Experiences from the world show that such a project is not terminated by a final building approval, as it is its effective operation and administration in the following years that decide about it real success.

At the end of March a special seminar with foreign participants took place in a lodging house Ravence in Liptovský Trnovec by Liptovský Mikuláš called “Operation and Administration of Apartments Resorts – their Present and Perspectives”. The event was organised by the developers group CREDO in co-operation with the monthly Development News. The CREDO group is launching a programme of municipal and recreation apartment hotels in co- -operation with an experienced operator in this area – the French company Orion International belonging to the group Pierre & Vacances.

As the President of CREDO group RNDr. Daniel Dobrota underlined at the opening, that in spite the topic of apartments was not new at the market, it seemed that not all the projects built in Slovakia in recent years could be considered as successful from a long-term point of view. Especially if presented not for personal use of the owners, but first of all as a profitable investment.

Ingrid Boutabba, the Marketing Director of the company Orion International, presented the experiences of the biggest French apartment hotels network Citéa belonging to the group Pierre & Vacances and operating 55 residences with more than 5 000 apartments in 2008. This number shall be increased this year by other nine projects with almost 900 apartments. It begins to transfer this successful housing model abroad under the brand name of Orion International wishing to overtake one hundred new or reconstructed residences in its hands during next 5 years, 40 of them located in the West European countries and 30 both in the East European countries and Asia (China, Vietnam). In our region the company has recently opened its first hotel in Prague, the next are to come in Hungary, Poland, Rumania and Russia. According to the agreement on exclusive co- -operation with CREDO, the 3-star project Live Centre in Liptovský Mikuláš should be the first project in Slovakia. I. Boutabba said: “At the markets of the Eastern and Western Europe we find the biggest potential in the area of municipal and apartment hotels in particular, as this is the segment Citéa is most successful. It depends only on investments. Although the French companies are very conservative and do not like to take any risk before coming to the market, after your country became an EU member and the Euro was implemented, you became a very interesting territory for new investments. We have checked the experiences of our partners gathered at the Slovak market in an automotive company who know our product and they encouraged us unambiguously.“


The participants of the meeting were very much interested in parameters of these hotels during the discussions. According to Ms. I. Boutabba the standard labelled as ’**+‘ is based on a combination of good price and high standard of services. She thinks the basis of potential success is an effective marketing that cannot rely on internet only. “Especially in the area of leisure tourism quick orders are common today and seasonal sales targeted to two basic groups of clients: those who always want to travel to a different place and those who like to come back and know what to expect.” The share of respective rooms is well run, although their size may differ in accordance with the layout solution: up to 60% are one-bed studios with approximately 25 sq m of living area; 30% are bigger one-bed studios with an option to use an extra bed and only a tenth of the rooms are two bedroom apartments with the area up to 45 sq m. The structure shows that these hotels address especially the business clients who find services in a cost- -effective hotel that correspond with hotels of higher category with the range and quality of service. Therefore this segment becomes popular also in times of the economic crisis as confirmed by the inter- -annual increase of number of clients. “The fact that we begin in Liptovský Mikuláš is related to our exclusive partner for the Slovak market, but we definitely see a huge tourist potential, too,” Ing. Peter Molitoris, the Manager of Orion International for the development in Central Europe added. “Our plans in Slovakia include the capital of the county, that is usually the entrance gate for foreign investors, but at the same time we monitor offers to take over or to construct hotels in big cities as Košice, Žilina, Banská Bystrica, Nitra or Trnava.” According to his opinion the municipal apartment hotels are so successful, because they offer a kind of comfort to the business clients reminding them to their houses. “For example a kitchenette is available so that they may prepare a refreshment even during the night and do not need to visit expensive hotel restaurants where house clothes are not very accepted.”


RNDr. D. Dobrota underlined that even at his very first visit in Citéa hotels he was attracted by a very precisely and meaningfully defined details of the area, layout solutions up to very detailed calculations of cost-operation relation. “In case of similar projects in Slovakia there are obviously three obstacles, namely the architects, developers and investors, because each of them has his own look at the project: the architect wants the people to like to project, the developer looks at the project as if he would build it for himself and the investor wants the project to bring profit.” He is therefore sure that only a strong and an operation expert can make a project effective.

Ing. Jarmila Melichárková, the Executive Director of CREDO, mentioned that the majority of the apartments purchased in Slovakia were bought for the personal use of the owners as it was a relatively high investment only a well situated citizen could afford. “Long-term experiences with smoothly functioning apartment resorts used during the whole year for tourism development have been missing in our country.” There are problems also with the legislation that does not allow solving an operation of such a resort in a sufficiently transparent way and so a special attention is dedicated to experiences with contractual rules that must clearly define the share of responsibility, costs and yields of each participant, so that it would be in fact more advantageous for the owner to let a partner to operate his property, instead of taking care about it himself through the whole year.

Martin Štric, the Executive Director of RK SPIRIT (RK = Real estate agency) can see the main reason why various apartment projects built till now brought disappointment in the overall decrease of tourism and he declared it on the example of the project Crocus at Štrbské Pleso. Although the project started with good results, “this season is the worst in the last 15 years,” he said. In spite of good snow conditions there was a notable absence of the Russian tourists and the traditional guests from neighbouring countries were discouraged by the exchange rate of the Euro. He is therefore sceptical in relation to success of similar projects. He expects they shall be sold out at the end. The operation of such projects shall not be effective within tourism until the governmental support of Slovakia as a tourist destination does not become better.

Eric Heidema from the company VVMZ, that took part in preparation of the project Silver Resort of the group Letterstone, is convinced that the current unfavourable situation is related with market normalization. “The success of a project cannot depend on one season only. Slovakia is typical with good opportunities for landscape tourism and therefore the projects have to planned for a whole-year use and not that the winter season should cover the operation costs for the whole year,” he thinks. He also mentioned that the apartment projects are difficult to operate if one part is planned to be rented and the other part to be sold with no option for rent. In Slovakia people are used for weekend stays at cottages out of towns and cities, but possibly they shall not buy the projects with currently exaggerated prices.

Katarína Kupcová from real-estates and consulting company Lexxus, a. s., did not fully agree with his opinion. She illustrated her opinion with an example – the project Hrabovo by Ružomberok, in case of which the developer CPI Holding is also the operator and private apartments work with no problems with apartments for rent. But based on her experience she confirmed the decrement of interest in new apartments at present; the sporadic clients are first asking about the price and the discounts.

Her colleague Ing. Filip Žoldák presented the latest survey on apartments offer at the market carried out by Lexxus. During the last half a year 214 apartments in 40 projects were sold. The biggest interest was in the apartments in the High Tatras with the highest number of free apartments at present. More projects make adjustments in the layout because the biggest demand is after smaller and cheaper apartments with the area of less than 50 sq m with furnished kitchen, sufficient storage place and option of extra beds. The projects brought more than 4 600 apartments to the market; more than 2 000 are not sold. There is also a fact specific for the local market that part of the purchasers is represented by corporate clients. Private clients are discouraged by the price that is equal to price of a new flat in Bratislava. According to his opinion the current circle of investors is exhausted and the question is who is going to buy the apartments in the projects coming to the market.


Ing. Molitoris finds the strong Euro only an excuse because it is the same in France or Austria. He agrees the promotion is not sufficient and he pointed the example of Croatia that became the main holiday destination of the French thanks to massive advertising campaign. “The success of apartment projects may be supported to larger extent also by complex packages of services, for example accommodation combined with a flight ticket and ski-passport,” I. Bourtabba mentioned. She thought that motivation was important. In Western countries the ownership of a real estate is not a prestigious issue only, but especially of financial advantage. Namely in France lot of owners use their apartment very seldom, but it is an advantageous way of investing free means as it allows depreciation of the real estate that does not loose its value, and it is not so risky as other forms of investments. And if it brings some profit, then it is an extra bonus. Similarly there is a programme in Holland encouraging the citizens to buy a real estate abroad. But it is conditioned by contracts of good quality protecting all parties against possible problems during the long period.

Ing. Miroslav Tym from the company Dubra & Partners dedicated himself in more details to the topic of financing. According to his experiences the credits for hotels are generally very problematic from the point of view of the banks, because it is difficult to reliably assess the real yields from the future operation. The banks are therefore more ready to support projects for sale that can show a certain interest of the buyers, but they hardly accept a project where the investor informs in advance that the credit shall be repaid from the future rent. So the banks see the form of mortgage financing of the future owners as a better perspective in case of apartments. Some banks have even stopped the financing of real estates at all, now. He expects that this ’trench war‘ shall last minimally till half of this year and the banks shall be ready to support only smaller projects. ”In spite of the crises, the banks have extra liquidity today in the Czech Republic and in Slovakia, and they must do something about it,” he added.

Dušan Štric from RK Spirit expects that it may last even ten years till real data shall be available in Slovakia to be able to seriously assess the profitability of similar projects. Till then selling the apartments to private owners shall be safer than uncertain calculation with the rent.

Ing. Žoldák confirmed that some hotels are considering selling rooms as offices and apartments for both recreation and housing purposes as an outcome from the current situation, if the layout of the building makes it possible.

We should not compare apartments in Slovakia and for example in Austrian Zell am See, that are successful during the whole year, Eric Heidema said. “In Slovakia the plots of land and the construction are significantly cheaper, but on the other hand there is significant lack of services of good quality and the overall infrastructure.” There were many projects in the past built and oriented to foreign buyers and those are not coming today, therefore these projects shall have a problem. On the other hand he is convinced that there are huge opportunities to use the apartments for tourism development in Slovakia.


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