What’s Ahead for the Hotel Industry in Serbia

Path of steady recovery

The end of travel restrictions from the pandemic period has led to a strong recovery of the Hotel Industry in larger cities, where there has been an increase in key hotel parameters, such as room occupancy and average room price. The increase in the price of renting apartments also affects the growth prices of private accommodation (AirBnB), which further affects the increase in demand for hotel facilities. For the further development of tourism capacities, the key issue is the infrastructure, because it is necessary for guests to get to the destination as easily as possible, but also that the offer they can provide to guests is also very important.

Many investors are looking around tourist real estate in Serbia, particularly in hotels located in major cities such as Belgrade, Niš, Novi Sad, and Kragujevac. Investors are also focusing on hotels with additional content that are well-connected to larger cities. Conference tourism is another important segment for the entire country, particularly for Belgrade as a regional business hub, where the connection with cities in the region by air transport plays a key role.

One of the major issues is high labor costs due to a shortage of employees. Although many workers have returned to the industry, the supply-demand imbalance is likely to persist, particularly as the economy slows.

Another challenge is inflation, which is expected to decline slowly throughout 2023 but will remain at relatively high levels. This decline will depend on various factors such as harvests, consumer spending, energy prices, interest rates, and China’s reopening, among others. Interest rates are also expected to continue rising as the NBS tries to control inflation.

The hotel industry is also facing supply chain disruptions, however, adapting supply chains takes time, and this issue is not yet resolved. Availability of service providers is also becoming an issue as supply shortages ease. Many properties delayed repairs during the pandemic, but operators now need their facilities in full working order since occupancy levels are much higher. The service businesses that support hotel operations are also in peak demand and short-staffed, resulting in premium charges and persistent inflation.

Borrowing costs are also expected to be more expensive, and financing and refinancing may be more difficult. Lenders are becoming more cautious and selective, or taking a pause on new loans until they have better visibility into the economy.

In conclusion, the hotel industry in Serbia is on the path of steady recovery but is facing important challenges in 2023, which will impact revenue and expenses.

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