For the seventh episode of the IDEEA podcast, Marina Franolic invites Takuya Aoyama, the Vice President of Hyatt International and long-time supporter of the Adria Hotel Forum, the predecessor of IDEEA Hospitality Investment Forum, and a seasoned industry veteran. Marina took the opportunity to get off-the-cuff insights from Takuya by doing a roll call of markets in the Central East Europe region and asking about his perception of those markets and whether Hyatt will seek to grow a presence in those markets if not already present.

Takuya's wealth of experience in the hospitality industry makes for a fascinating discussion, and his perceptions of these markets will provide a different and valuable perspective on the pros and cons of each one, which is essential to have when looking at hospitality investment and development opportunities.

Block the next 25 minutes and have a listen or watch the conversation in full.

SUBSCRIBE TO THE IDEEA PODCAST

TRANSCRIPT

Intro: Welcome to the IDEEA Podcast, a channel for the IDEEA Hospitality Investment Forum, which is an annual gathering for the Hospitality Investment Community in Eastern Europe. Tune in to insightful conversations between the IDEEA team and hospitality investment leaders and innovators across Europe. And now let's dive right into today's episode.

Marina Franolic: Hello, good morning everyone. We're here today at IDEEA Podcast with my dear colleague and I can even say friend, Takuya Aoyama, Vice President from Hyatt International. Takuya, it's really nice to have you here today. Welcome.

Takuya Aoyama: Thank you for having me Marina, pleasure.

Marina Franolic: Takuya and I met about nine years ago or 10 years ago when I started 00:54 AHF. And Takuya has been supporting the event right from the beginning. And I really appreciate that because with his insights, with his proposals, with his suggestions, comments on the program, he has been an advisory board member since the first day, I think we've really made a good job. And now actually this year we would have the 10th AHF, and instead of that we're going to have the first IDEEA. So Takuya, I hope that you're aware that one piece of this is also what you did through all these years, so thank you.

I will go to IDEEA that is happening on September 26th and 27th. We're looking at the SEE region; and today since Takuya has been active in this region for so many years, and knows its owners, countries, governments, development opportunities, everything really well, I will take this discussion today a little bit in a different way. Takuya, I would like to ask you about each country in the region. What is your opinion? Where do you think opportunities are? But also how would you [inaudible 02:17] to be part of part of that country or region? I would go in alphabetical way for each country just because I don't want to miss any. So I would start with Albania.

Takuya Aoyama: I noticed Albania has been receiving lots of lots of attention. The government is trying very hard to promote tourism and I think the brands have finally caught up. I think they are not only looking at Tirana, but they are looking beyond and Albania has great, beautiful coastline, relatively unspoiled. So that's obviously something very interesting for the development of tourism. And when you when you are there, you really feel that it's a nation on the move. There's a lot of energy, lots of things are happening very fast. So that really helps further development opportunities. So I'm quite, I wouldn't say bullish, I'm quite optimistic about being here. But I do hope that they learn from their mistakes that other markets have done. I do hope that they'll keep their own individuality as they move forward.

Marina Franolic: Takuya, as per Albania, it seems that the operators are coming and they're really interested in the market. What about the investors, because I noticed most of them are local investors still? Do you see any traction, any interest from the international investment funds or society?

Takuya Aoyama: You're right so far, the majority of investors are local business people, local companies. There are some or very few international monies that's looking to get in but I think the majority is to Albanian and I think that's natural. It's usually markets like this, the first money to go in is local.

Marina Franolic: Okay. Bulgaria?

Takuya Aoyama: Bulgaria, how do I put Bulgaria. Bulgaria is a small nation but like other countries in the Black Sea region it has lots of things to offer, obviously, starting from ancient culture and things like that. It has a very viable leisure market along the Black Sea coast, sunny beach in particular. I mean, if you haven't seen it go there, it's actually a very, very vibrant place. And the quality is coming up. It's not only a cheap destination, I think the quality is catching up and so we should have a look at it.

Marina Franolic: Okay, I haven't asked you. Do you see Hyatt coming into Albania, Bulgaria, what would be your preference, the location, the brand?

Takuya Aoyama: So we signed the management agreement to convert [inaudible 05:57] to Hyatt Regency. If I remember correctly, we did that 2018. And that project is still going on. And I am looking at a couple of opportunities outside the capital city but that's assuming that we have a base in Tirana. And then we will have built a proper brand recognition and sales marketing capacity.

Marina Franolic: What about Croatia?

Takuya Aoyama: Croatia! We haven't done much but the charm of Croatia is very obvious to many people. It's blessed with the coastline. And what makes Croatia particularly interesting, especially the northern part of Croatia is it's a drive to destination for many in Central Europe. I think this has helped during the lockdown years, and I think that market has continuing to play a big role. It's great to be able to drive that drive and not 100% relying on Airlift. I think that is a very, very, very good thing. As for Southern parts or other parts of Croatia. I still feel that inland Croatia needs to get more attention with regards to tourism development. From a hotel development perspective, obviously you have very obvious destinations starting from Zagreb to Dubrovnik, Split, Zada and then I think there's a tremendous amount of interest in getting to islands. And probably those properties on the islands, if they're branded, will be done through franchising, particularly with soft brands, because you have a seasonality and human resource and all those issues. And I don't international brands know how to deal with it.

Marina Franolic: Do you think that the seasonality can be resolved in any way, because we've been talking about it for the past 20 years?

Takuya Aoyama: We've been talking about it forever. I think people have been trying, but I don't think we have come up with a magic solution. I think everyone is looking at extending the season somewhat, but seasonality is going to stay.

Marina Franolic: And where would you like to see your brand standing out somewhere here?

Takuya Aoyama: Completely rationally speaking we should have one in Zagreb no matter what. But again, whenever I looked at the market, I tried to do it in such a way that we first go into the capital city and then branch out. But probably in a country like Croatia, Montenegro, because some of the resort destination has their own identity there, they're strong enough. I wouldn't actually, [inaudible 09:26] that we just go straight into the market like [inaudible 09:32]

Marina Franolic: Because there's a couple of transaction now happening. More and more brands are signing deals, even though everyone tells me that Croatia has been the hardest one to get to, to develop and to sign deals. And we know that we have some local companies that actually run most of the business and maybe that's also one of the reasons.

Takuya Aoyama: And I think they are doing very well, that's another thing.

Marina Franolic: They are doing an amazing job and it seems that it will continue in the same way. But I can see, as you said, more and more traction happening on islands, even though a couple of years ago no one would even consider the island as an investment. But now it's happening. So it seems that at least, not only couple of cities, but it will be more destinations that will develop. Okay, our hosts this year, Greece?

Takuya Aoyama: Greece is a regional tourism superstar. It has everything, it has been attracting a great number of tourists, and it has ancient cities such as Athens and Athens are going to remain Athens. And then on top of it, [inaudible 10:55] offering. So it will remain strong, no matter what. And I think brands are looking at not only getting their presentations in Athens, the community and then onward to the island. And we are doing the same. And as you know, this year's conference is happening at Grand Hyatt, Athens

Marina Franolic: Exactly. And it's amazing the hotel that just got completely new building this side. So we're going to see a new venue. But what is interesting is Greece actually depends on Airlift.

Takuya Aoyama: Yes.

Marina Franolic: Severely depends on Airlift. And the numbers are going through the roof. It's just amazing. So what do you think that they're doing better or different than the others? Or is it just because it's Greece, everyone knows about Greece and Athens?

Takuya Aoyama: I don't want to offend anybody, but I think you agree, it's easier done than let's say, than Bulgaria to promote the destination. There is a huge amount of risk. I mean, you don't really need to promote the destination, everybody knows this. And they can build on it but I think what is key is that not everywhere, but there are Greek hoteliers who are focusing very much on quality, authenticity and things like that. And that I think that's the right formula. If you see those properties, those properties will help in uplifting the market and keeping the market at a certain level, because there's always temptation to just sell for short term profit.

Marina Franolic: Okay, Montenegro?

Takuya Aoyama: Montenegro, as you may know, we recently signed our first property in Montenegro in Qatar.

Marina Franolic: Congratulations, I didn't know that.

Takuya Aoyama: Yeah, we didn't make a big announcement about it, but I went to the signing ceremony and I read a speech in Serbia.

Marina Franolic: So you did learn some Serbian over the years here?

Takuya Aoyama: Not really. What did I said? [Speaking Serbian 14:00]

Marina Franolic: You speak so well! Well done Takuya, really.

Takuya Aoyama: So that's our first project there. And again, what I said earlier about Croatia applies. I think in places like Montenegro, we could [inaudible 14:35] go straight into other destinations because they have their own [inaudible 14:43]. But again, the issue is their airlift and seasonality. That's it.

Marina Franolic: Croatia has seasonality, Greece has airlift, and Montenegro actually has both. It's in the middle and it has both, unfortunately. I'm not sure do you know how this season is going to end for Montenegro, because I know that they were quite severely hit because of the situation in Russia and Ukraine?

Takuya Aoyama: I only have an anecdotal thing to say. Yes, market from Russian speaking countries and Ukraine have always been very important to our country and they haven't completely lost that market but it has dramatically decreased. But I think the hoteliers have been working to replace that demand from Western Europe and elsewhere. And I think this year is an interesting year, because you may have the impact from the war but then on the other hand everybody was so dying to travel. We've heard all these horror stories. So probably they were in a good position to replace the lost amount.

Marina Franolic: What about Romania?

Takuya Aoyama: Romania! Okay, when it comes to Romania, I'm not...

Marina Franolic: Watch out, watch out what you're going to say.

Takuya Aoyama: I will say a few things; Romania is one of the biggest countries in that part of the world. And it has multiple destinations within the country. So the country has a setup similar to Poland. And what I would also say about Romania is okay, I'm just not talking about the hotel developed per se, but Romanian politics has been free of those extreme nationalist populist trend, they have actually stayed away very well from those things, which become very, very strong in Central and Eastern Europe. And I take that as a very encouraging thing. And I think once you have a good governance, you need to have a good institutional legal framework, then you start to develop more in general and tourism also is part of it. As far as the branded holders are concerned, all of them are there in Bucharest, only we are not there unfortunately. Brands like Hilton's and Radissons are already present in secondary markets. And secondary markets are interesting; they have direct flights with many Western European cities and have their own dynamic. I will continue to look for opportunities there.

Marina Franolic: Serbia?

Takuya Aoyama: Serbia!

Marina Franolic: I love the way you smile every time I say a different country, you know them so well.

Takuya Aoyama: We all know Belgrade is a great place to have fun. I think everybody agrees. I think Belgrade has already established itself as a sort of foreign capital in the Balkans? And that's interesting because when people hear about Serbia, many people don't associate Serbia as with fun. So it's a good thing to have. In terms of hotel development, it doesn't have coastline. But again, it has a couple of cities and destinations which have its own tourism attractions economic activity. So some people would obviously, look at places like Novi Sad. Once you have established presence in Belgrade.

Marina Franolic: How strong is the secondary market developing in Serbia for brands?

Takuya Aoyama: Not that strong. I think the issue is still the rates are not that high and the development cost is -- you know how much it costs to develop. So I think if anybody's looking at going into secondary market or attracting grants to the secondary market, probably some sort of soft brand, collection brand, maybe that way, that's a pragmatic way to go with a [inaudible 21:06] brand...

Marina Franolic: And a franchise.

Takuya Aoyama: They come in different structures.

Marina Franolic: And the last one, the smallest one but not the least one, Slovenia?

Takuya Aoyama: Slovenia! We used to say Slovenia had the best of both worlds. It looks and feels like Austria, but people are more half Balkan, and you can go to the coast, and also in the morning you can go ski in the mountains. So that is a great thing. I think although Slovenia it doesn't have the size, so once you establish the presence....

Marina Franolic: Where next?

Takuya Aoyama: Yeah! You can still go Maribor or the coast but it's not a very deep market, I would say.

Marina Franolic: Okay, now that we've passed all the countries, where do you see the international investment. So I see that the challenge in these markets over the years, first, it was difficult to get into the capitals. Now, brands mostly are there but now the secondary cities are not that interesting, just because if we compare it to the Western world, the attraction is completely different. The business, there is not so much traveling happening, because also the countries are small so one day you can extra travel and come back to the unnecessary need to travel and stay. Now where do you see the international capital being really interesting? We know about Greece. We are aware that in Greece, both the Western European funds, the American funds, also Israeli money is now coming in. For the rest of the region, where do you see that the international companies and actually the funds, so the money/investors will be focused on in next couple of years?

Takuya Aoyama: So a couple of things. One is that, so long as there is enough local money, then maybe there's no need for international capital to come in. And then depending on where the particular country is maybe it's not, because we can still -- there is a perception, there is a still a lot of things, diffusion and international money by definition, tend to go for very secure destinations, and they don't necessarily want to take political or geopolitical risks. And I think local business people might be in a better position to do something. And let's not forget, I mean, I always say so, many business people in those countries, I mean, they started from the scratch 30 years ago. They had the complete --their world changed in 1990, and they build their business from the scratch. So there is a very high level of entrepreneurship. So, yeah, that's one thing. And secondly, the little international money I've seen is like... Montenegro has attracted non-local capital in hotel development. But they are usually these branded residences and the hotel setup. And so probably, the main focus is the residential sale, then that sort of justifies adding a hotel. But other than that, I haven't really seen anything that is international at a large scale. And if you're international fun, then you would you'd rather go to Greece? Because that's part of the Euro Zone.

Marina Franolic: Yes, indeed, and I can see those resorts developing even more now here on the coast of Croatia. And I guess it will happen. I'm not sure about Bulgaria and Romania, to be honest, but I guess it's just easier to get the return on investment. It's faster, it's more secure. The only thing it's a little bit different type of investors that are coming in. Okay, thank you so much to Takuya. So Takuya will be joining us in Athens and September 26th and 27th at IDEEA. We have more than 60 speakers confirmed and the lineup is really impressive, I have to say. So as I said, it's going to be pleasure to be in Greece for the first time. Takuya, do you have anything else to add regarding IDEEA regarding the region?

Takuya Aoyama: I love this region. I think working in this region is much more fun than working in say, The Netherlands. It's a great place to be. And I'm very much looking forward to attending the conference this year.

Marina Franolic: Thank you so much. I'm looking forward to see you soon.

Takuya Aoyama: Likewise, thank you.

Marina Franolic: Thank you, bye.

Outro: Thank you for listening to the IDEEA Podcast, the channel for the IDEEA Hospitality Investment Forum. You can find a full transcript of this conversation in the Content Library on ideaa-forum.com. With other reports and insights. We look forward to welcoming you and your colleagues in person at IDEEA in Athens, Greece on the 26th through 27th of September 2022. If you haven't registered yet, please go to ideaa-forum.com to purchase your pass today and save before ticket prices increase. Please feel free to email us with any questions at hello@thebench.com.

Until the next episode, stay safe and keep well. Bye-bye for now.