Spain's Eurostars Hotel Company has rented the City Hotel Sofia for 10+5 years. This will be the first Bulgarian hotel of the chain, which is part of diversified Hotusa Group with an annual turnover of 1.2 billion euro. The deal is not that large but it is interesting, because it is a sign of a more notable demonstration of foreign interest in the Covid-hit segment.
The City Hotel Sofia was the first hotel in the Bulgarian capital under Best Western's franchise but last year it terminated the 15-year partnership. The long-term rental contract is a good alternative to the hotel's sale, which was the owner's initial intention.
Landing in Bulgaria
The four-star City Hotel Sofia will now operate under the name of Eurostars Sofia City. The hotel offers 61 rooms in downtown Sofia.
"The incorporation of the Eurostars Sofia City is part of the company's international expansion strategy, reaffirming with this new establishment our firm commitment to obtaining a presence in the main cities and capitals of Europe," Spanish media outlet nexotur.com quoted the president of Hotusa Group, Amancio Lopez Seijas, as saying. "Likewise, this new hotel adheres to the parameters that establish the Eurostars brand: modern facilities, located in destinations of historical value and tourist-cultural interest, optimal for all types of travelers and situated in a strategic location."
The hotel has been rented out for 10 plus 5 years, owner Yasen Nakov said. For that period, the Spanish group will take over the management and will pay him an unspecified monthly rent. In Nakov's words, the rent will be lower during the first year and the expected receipts for the whole period are close to the amount he would have received if he had sold the hotel.
Yasen Nakov is the initial investor in the hotel, which opened in the early 2000s. The City Hotel Sofia gained popularity by being the first facility under the Best Western brand in Sofia, with the partnership dating back to 2005. However, Nakov said, the partnership was terminated in 2020 on his initiative.
Tough market, strong competition
After the pandemic hit the hospitality business, explains Nakov, the occupancy rate of City Hotel Sofia fell from some 85% to just 30% at the best; the staff decreased from 37 to 10 people. At the same time, besides an annual fee (which consultants assess at 10,000 to 15,000 euro), Best Western also got a share of the turnover generated through its system.
Given the falling revenue, these terms became unacceptable for the hotel owner, the more so that in 2017 he invested some 1 million euro in renovation and hoped for a payback. Since the appearance of the Booking platform, the benefits of Best Western's reservation system have decreased. Besides, the hotels in Sofia operating under the brand have become too many, Nakov added.
The revenue of City Hotel Sofia amounted to 1.104 million levs (564 million euro) in 2020, down from 2.884 million levs in 2019. The hotel posted a loss of 72,000 levs last year, compared with a 986,000-lev profit the year before. The company also has an outstanding debt of 655,000 levs, with half of the amount being a short-term debt. Property register data show that the hotel was mortgaged for a 5.87-million-lev loan from Procredit Bank in 2019. Nakov explained his hotel is being used as collateral on a revolving credit for his agricultural projects, on which he is now focusing.