Is Kaunas ready for hotel development?

Although there has not been a significant breakthrough in the hotel market in Kaunas in the last decade, the growing development of infrastructure that attracts tourist flows raises more and more questions about the accommodation of visitors in Kaunas. Professional accommodation and hotel market experts say that when looking at the situation in Kaunas, the chicken or the egg question pops up, as in many other cities or resorts: which should come first – the influx of tourists and the subsequent development of hotels and infrastructure, or the increased hotel capacities that allow more tourists to stay in the city? On the other hand, looking at the occupancy rates of existing hotels in Kaunas, there are already signs that supply should start catching up with demand.

High-quality infrastructure must be accompanied by high-quality accommodation

Eglė Rukšėnaitė from E77 – a company that develops hotels and spas – argues, based on her many years of experience in this market, that as long as a city or an area does not have a critical number of certified accommodation, i.e., hotel rooms, it will not have enough potential to develop its tourism industry. In addition to that, equally important is a safe and comfortable infrastructure for tourism or events, such as halls, arenas, swimming pools, museums or historical and tourist attractions, and a transport system. All of these become attractions and reasons to visit, followed by the need for comfortable and certified accommodation.

In her opinion, Kaunas has already done an excellent job with the first task. It has created a high-quality infrastructure, and historical and cultural attractions for visitors, tourists, and event organizers. However, the future of successful tourism in Kaunas should now be determined by the emergence of new good quality accommodation, in particular, larger, economy and business class hotels, with a category that matches the quality and price of 3*/4* stars.

“Currently, there are only a few larger hotels in Kaunas offering a wider range of services, suitable for both foreign and domestic tourism markets, event organizers, companies, and tourism agencies. However, there are not enough certified and large accommodation facilities for the sector to expand on a larger scale and for the tourism sector to expand seasonality and attract more event organizers, who need guaranteed accommodation for a year in advance,” E. Rukšėnaitė believes.

Doubts dispelled by promising growth figures

Investors’ and hotel developers’ doubts are determined by a variety of factors. For example, the rapid increase in construction costs and the still low prices of hotel accommodations in Kaunas.

On the other hand, as Andrius Veršinskas, Head of Business Department at Kaunas IN, points out, the facts that counterbalance these doubts should also be taken into account, “The number of nights that tourists spend in Kaunas has increased over the last 7 years. If we compare the results of 2022 with 2014, we can see a ~55% growth. It is important to underline that this was not a momentary spike, but the result of a consistent year-on-year growth (except for the pandemic period). The following fact is also telling: the annual occupancy rate in Kaunas hotels has been the highest among all major Lithuanian cities since 2018. For example, last year the average annual occupancy rate for the entire year was 65%.”

Rukšėnaitė also points to the improving indicators, “In March 2022, during the low season, Kaunas recorded the highest hotel occupancy rate of 77.6 %. Kaunas Airport is also ambitiously demonstrating its potential, with plans to handle up to 2 million passengers a year by 2030. This is good news, even if Kaunas’ pricing still lags behind European cities and resorts, which is due to the lack of good quality hotels, without which there will be no steady supply of tourists who can pay more.”

According to her, Kaunas is now at a crossroads, where it is very important to find bold investors, who follow the current accommodation statistics and who are able to model future flows and the real shortage of hotels, especially taking into account the already existing infrastructure in Kaunas and the one still under construction (the Darius and Girėnas Stadium, the Science Island and its synergy with the Žalgiris Arena, and the reconstructed Zoo). The specialist has no doubt that the emergence of at least one high-quality, standardized, larger hotel could significantly change Kaunas’ image on the European tourism map and establish the city as a place worth hosting major sporting, cultural, and business events.

After the concert, celebrities go to sleep elsewhere

One of the main event spaces in Kaunas is Žalgiris Arena. Over the past few years, the venue has hosted such global stars as Dua Lipa, Robbie Williams, OneRepublic, the Olympic Qualification Tournament with Slovenian star Luka Dončič, the Indoor Football World Championships, and, of course, the Euroleague Final Four this year.

According to Mantas Vedrickas, a representative of Žalgiris Arena, concert organizers who bring big stars to Lithuania want a 5-star hotel, which Kaunas does not have. So usually, this problem is solved by celebrities simply not staying overnight in Kaunas and leaving the country immediately after the show.

“When you organize well-known international sporting events, where more than one team is involved together with a large number of service personnel, you can already predict that problems with accommodation in Kaunas are likely to arise. Especially if it’s a popular sport with a large fan base, as this means that the team will be accompanied by a large number of supporters. This is less of a problem for concert organizers, as the performer often does not even stay in the city where he or she is performing, and usually arrives only on the day of the performance,” M. Vedrickas speaks about the current situation of accommodation for event visitors in Kaunas.

However, as the Euroleague Final Four event in May showed, fans who supported the teams did not hesitate to choose other alternatives when they could no longer find a place to stay in Kaunas. For example, around 600 Greek fans stayed in Birštonas and Prienai alone.

According to the representative of Žalgiris Arena, as more and more entertainment and cultural venues appear in Kaunas, the events and accommodation sectors should start cooperating more closely. Darius and Girėnas Stadium alone has the potential to attract top-level football matches of the Lithuanian national team, athletics events, and concerts on the highest international level. We believe that for the time being, the lack of accommodation in Kaunas should not close the doors to these events, but we hope that it will encourage the construction of new hotels.”

A look at new objects and events in the low season

The last major expansion of the Kaunas hotel market took place in 2019, with the opening of the brand new Moxy Kaunas Center hotel, owned by an international chain.

“Over the past decade, Kaunas has seen hotel reconstructions, renewals, and expansions, however, rapid and vigorous new developments – especially by bigger international names – were very minimal. Meanwhile, there are many tourists who stay only in chain hotels for various reasons be it habit, reliability, or loyalty programs. If such a traveler doesn’t find a chain hotel they want, they might not stay or even visit the city. Especially as there are more attractions for a tourist who travels more – Vilnius is nearby as well as Riga. Finally, in the absence of certain infrastructure – hotels and more spacious conference halls (say, at least 500 seats or more) – certain events also do not come to the city. I think this is one of those cases where supply creates the possibility of demand,” A. Veršinskas says.

“From the professional side of accommodation and hotels, we see Kaunas as a city with a lot of potential to create a suitable and permanent tourist flow in the future. The city has a rich history, comfortable infrastructure, and an attractive geographic location. However, for the future, it would be necessary to hurry up and secure enough hotel rooms to generate traffic and to successfully maintain the existing infrastructure, to continue to nurture it and to ensure its functioning,” E. Rukšėnaitė, a developer of hotel projects, sums up and cautions that the failure to provide hotels of the right quality on time, could hinder the full use of the established infrastructure and inhibit the growth of tourism or event flows.