Romania - Hotels and Catering

With a population of 22 million and with easy access to Eastern Europe, the Balkans and the Middle East, Romania is a growing market for UK business. Romania is the second largest consumer market in Central and Eastern Europe. Since EU accession, there has been increasing interest in Romania from UK business. The UK is Romania’s 10th largest inward investor with over €4 billion of investment and more than 4,000 UK companies. Bilateral trade accounted for over €1.6 billion in 2009.

Despite the economic downturn Romania remains an attractive destination for foreign investment. Romania has received € 31 billion of structural and agricultural funds over the period 2007-2013.

Recognising the importance of tourism for economic growth, the Romanian government chose 'sustainable development and promotion of tourism' as one of six priority axes for its Regional Operational Programme (ROP). The EU is allocating €3.7 billion to this Programme via the European Regional Development Fund (ERDF) during the current period (2007-2013).

Market Report

Summary

The hotel and restaurant equipment market in Romania is a fast growing sector. Romania’s food service industry is younger than those in other European countries, and is still in the early stage of its development. In 2008, the most recent year for which data are available, there were 22,636 food service facilities. More than 1,100 of these were restaurants in the capital city of Bucharest. Increasing living standards have allowed more people to go to restaurants more frequently. This trend was also sustained by improvements in purchasing power despite an average net wage/month in October 2009 of 1,375 RON/employee (approximately $460). However, even this figure is skewed by some relatively large salaries in Bucharest in comparison with rural areas.

An important driver to the development of food service business has been the rapid growth of new business centres in business districts or office parks in major cities in Romania. These concentrations of customers are mainly served by fast-food, restaurants and in some cases by catering services. There are Romanian cities in which the number of restaurants does not meet demand, or in which restaurants are used exclusively as wedding halls, and are closed the rest of the time.

As in other countries, decreasing spare time and desire for convenience have spurred growth of fast-food restaurants and catering services, as well as prepared foods. Fast-food restaurants have led all other food chains in the country due to low average income levels, expanding at a rate five times faster than traditional restaurants. McDonald’s (with 60 units in Romania) remains the leading fast-food brand. The commercial catering market is particularly underdeveloped; foodservice consumption per year per inhabitant is equivalent to a third of the level in France.

The food service industry is expected to continue growing at an average annual rate of 5% through 2012. Table service restaurants, still an underexploited segment, will grow quickly as well. Forecasts by industry experts estimate that the total turnover for the Romanian food service market will reach $2.5 billion in 2010. Market conditions are favourable for western companies to take advantage of the opportunities in this dynamic industry.

Market Demand

Romania’s macroeconomic outlook remains difficult to decipher in the short term, but has shown signs of improvement. Local economists’ forecasts were showing slightly positive growth by the end of 2010. However, the demand for restaurant and foodservice equipment may overcome the general weak environment for investment.

Romania’s market for hotel and restaurant equipment has been growing rapidly over the last several years and is expected to continue to do so. Presently, hotel infrastructure in Romania (apart from Bucharest) is mostly used for leisure tourism. More than 72% of hotels are equipped with foodservice facilities, but these facilities are almost entirely lacking in motels. In the food service sector, the fast food and casual restaurants segments are showing the greatest growth rate. Tourism properties have increased slowly and steadily in the absence of any coordinated national tourism strategy. Often these properties are restaurants or inns in the countryside, and often with a rural theme.

Meals consumed out of home represent almost 5% of all daily meals, i.e. almost 50 per year per inhabitant, or 1 meal per week, a level that is still below other European countries but which is growing rapidly with the gradual internationalization of consumption habits.This growth in demand has led to restaurants’ recognition of the advantages brought by more advanced technology and equipment, designed to improve efficiency and reduce expenses, in gaining a competitive edge. The industry consultants indicate that high quality equipment in the mid-range of prices have the best opportunities. The low-end of the equipment market may represent as much as 30% of total sales, but is also nearly saturated with equipment from domestic producers or imports from Turkey, China and Greece. The premium/high end priced equipment is much smaller, with 3-5% of total sales, but has the potential for growth.

The Restaurant Market

The Romanian hotel and restaurant market has shown significant growth over the past few years and is estimated to be worth $1.5 billion annually. The food service sector has been rapidly developing since early 1990s, not only in larger cities such as Bucharest, Cluj, Timisoara, Iasi, and Craiova, but also in the smaller regional cities. Eating in a restaurant is still an urban habit. Restaurants are mainly situated in the capital and in the major cities of the country. Fast food is more accessible than more formal concepts and has been one of the fastest growing segments, including take-away and coffee shops.

Catering and food delivery services are also expanding rapidly, but for the moment the number of these services remains small enough to keep competition very modest. Consequently, there is strong demand for systems and equipment, specific to food delivery, that allows companies to become more efficient, reduce expenses, and remain competitive. Food service equipment is in constant demand. Presently, a wide selection of imported and domestic food service equipment is being offered on the Romanian market across three major categories: premium/high priced equipment, medium, and low-priced equipment.

The Hotel Market

One of the main issues in Romanian real estate development has been the redevelopment of large, prime locations that would have been dedicated to industrial uses in the Communist past. These properties are being dedicated to mixed residential projects, commercial and entertainment areas and hotel projects. Renovated properties alongside historic landmarks and buildings, with interesting locations are providing new opportunities on the hotel market.

Most recent and major investments have been concentrated in the premium hotel property range – with four and five star ratings--, and developed large capacity hotels (e.g. – more than 200 rooms). In the period from 2003-2008, most of these took place in Bucharest, while in the country investments favoured small and average-sized hotels of up to 100 rooms, at a three and four star level. There is a visible change is in the investment approach, which now pays attention to compliance with the professional development criteria of major new hotel brands, and international standards, and is more likely to use the expertise of specialized consultants.

International hotel chains in Romania have begun to expand into secondary cities and the countryside. Groups like the World Travel and Tourism Council have regularly forecast aggressive annual growth rates for tourism development in Romania such as between 5-7% per year for the next ten years. The recent slower pace of development of Romania’s transportation infrastructure would temper those predictions, but Romania still offers a unique tourism offering that includes undeveloped countryside and historic cities and churches. The country is often described as representing the way Europe “used to look.”

However, the Romanian market is dominated by 3 and 4 star hotels representing over 69% of existing hotel facilities. Bucharest’s hotel capacity is now dominated by 4 and 5 star properties, which together represent 7.369 hotel rooms (73 % of the total number of hotel rooms).

In Bucharest there are seven five star hotels at the moment: Intercontinental, JW Marriott, Athenee Palace Hilton, Casa Capsa, Howard Johnson Grand Plaza, Radisson SAS, Crowne Plaza, and a few five star hotels are under development (one, for example, is in the vicinity of Baneasa bridge with investment worth €12 million, another within a project which includes office spaces?Glass House). More of four and five star hotels are in the project stage.

Outside Bucharest the luxury hotel market counted in 2008 only ten five star hotels. The new 5 star projects will be located both in the downtown area, and also in the South-East, Western and Northern parts of the capital, and they are expected to generate as many as 900 new rooms in the next three to five years.

Competitive Factors

There are no companies, domestic or foreign, in a position to monopolize the Romanian market for hotel and restaurant equipment. According to experts in the industry, the Romanian market for hotel and restaurant equipment is growing steadily. While several years ago foreign suppliers had one or two authorized distributors, today, the trend is toward increasing the number of authorized distributors, which creates competition not only among suppliers, but also among distributors.

Another trend of note is that in order to maintain market position and to stay competitive, distributors are now including in their offers technical consulting (regarding the type and arrangement of equipment, compliance with the legislation, training, maintenance services, etc.).

There are a number of highly professional firms dealing with food-service equipment which offer a wide range of equipment, including turnkey restaurant projects. Companies such as Horeca Expert, Bilancia, Maxigel, DAAS, Conti Group, Fresco are all capable of handling complicated certification issues (if they arise), advising on promotional strategies and minimizing the expenses related to importing equipment into Romania. Most of these companies have also put in place a service network around the country (but there still is room for improvement).

Generally, hotel and restaurant equipment from Western manufacturers is well received, due to a good reputation for high quality and reliability, comfort, labour saving features, and high productivity. The hotel chains report their preference of sourcing from European suppliers that can offer local assistance and maintenance.

Best Prospects

The current stage of the market reflects the current needs of the customers. These needs may be divided in 3 main categories:

Brand new commercial projects (restaurant, fast-food, pastry shops, etc);
Institutional (volume) customers (factory canteens, hospitals or other public buildings, catering companies);
Individual sales, upgrades or replacements in an existing or renovated location.

A list of some of the equipment used in the hospitality industry which is in demand appears below:

electric commercial and industrial stoves; convection ovens;
freezers, refrigerating machinery, refrigerating and freezing showcases;
hot beverage service machines, including commercial coffeemakers;
food mixers, juice extractors, shakers, slicers, blenders, grinders;
vacuum cleaners, floor polishers, kitchen waste disposals;
laundry-type washing machines.

Romanian company representatives are very familiar with European suppliers of hotel and restaurant products and equipment and the latest technological developments in the industry. Romanian companies attend industry trade shows where 90% of foreign exhibitors are European. With the anticipated significant growth in the building of hotels in Romania, there is a corresponding need for quality, long-lasting equipment, ranging from security systems to kitchenware. In addition to the growth spurt in the hotel industry, the market for household appliances and kitchen equipment is also increasing.

Local Agents and Distributors

The most effective channel to enter the Romanian hospitality equipment market is through a Romanian agent or distributor, with previous experience in the hospitality equipment field on the Romanian market. Local agents, distributors and joint venture partners can contribute significantly to the success of a Western supplier by bringing knowledge of the market, industry knowledge, access to key contacts, and other resources. These companies are familiar with the local market conditions and the financial abilities of prospective customers. Many of these firms also have sales or show rooms and provide pre-sales adjustments and after-sales service of the equipment.

Trade shows are a very important tool in the marketing arena. Participation in a well-organized trade show is one of the best ways for a company to enter the Romanian market and to facilitate contact with potential buyers and distributors.