“First AIRBNB/Booking apartment”

Project summary

1. Introduction - City, District, Area, Neighborhood (Bucharest). You may include,

briefly:

 History

Known to most locals as Centru Vechi (the Old Centre), Bucharest's Old Town is defined by the
area bordered by the Dambovita river to the south, Calea Victoriei to the west, Bulevardul
Brătianu to the east and Regina Elisabeta to the north. The area is more or less all that’s left of
pre-World War II Bucharest. What the war didn’t destroy (and it destroyed a fair bit: allied
bombing was fierce during the early part of 1944) communism did, most notably in the form of
the grandiose Civic Centre project that saw almost a fifth of the total area of the city flattened to
make way for Bulevardul Unirii and Casa Poporului. Indeed, that anything survives at all is little
short of a miracle.
While much of Bucharest changed beyond recognition after 1989, nothing compared to the
transformation of Old Town/Lipscani during the boom years of the late naughties, which saw
what was very much a no-go area with almost nothing to offer visitors into one of the Romanian
capital’s liveliest entertainment districts. Much of that development, however, was ad hoc, as is
so often alas the Bucharest way: posh restaurants and trendy clubs opened in buildings which
looked as though they may fall down at any moment.
As such, the future of Old Town is a little unsure. What you can be sure of is that those venues
which remain open in the Old Town (less a Red Light and more a Red Disc district these days)
are as safe and secure as Bucharest gets.

 Geography

The area of the Bucharest Region is 1821 km2, representing 0.008% of the total area of
Romania, being the smallest region. It is located in the south-south-east part of Romania, in the
central part of the South Region and it is neighbored by Prahova County (in the north), Ialomita
(in the east-north-east), Calarasi (in the east-south-east), Giurgiu (in the south-south-west) and
Dâmbovita (in the west-north-west).
The Bucharest Region comprises only two administrative-territorial units: the Bucharest
Municipality (the capital city of Romania) and Ilfov county which surrounds the Bucharest
Municipality as a belt.
The historic center of Bucharest is a central area of the capital, with an area of about 0.50 km².

 Demography

The Bucharest region is the most densely populated region of Romania, with a population of
2,000,000 inhabitants (with a density of approximately 1200 inhabitants per km2), which places
it in the category of NUTS2 regions.

 Access: plain, train, bus, metro, etc.

The apartment is situated near train, bus, trolleybus, subway and taxi stations at a maximum
three-minute walk. You're staying in the heart of the city; all routes are connected here.
By plain:

By Train:

 Public or private institutions

- Fondul Monetar International/Internationaly Monetary Fund;
- Athena-Centru De Calificare Si Perfectionare;
- Curtea De Apel;
- Cec Bank.
  Economic development – accommodation segment development

Romania was one of the few EU countries to see a GDP rise in the first quarter of 2020. The
country’s GDP increased by 0.3% compared to the previous quarter and was up 2.4% against the
first quarter of 2019.
Private consumption and investments were the main drivers of growth, while industry and
exports took a dive, according to data released by the National Statistics Institute (INS).
In a separate release, the statistics office said exports almost halved in April compared with the
same month of 2019, while imports fell by a third, as the economy was affected by the lockdown
measures.
Although data for the second quarter is expected to show a significant GDP decline, the
Romanian government is confident that recovery will be swift. Still, it has said it expects a fall of
almost 2% for the full year.
(https://www.euractiv.com/section/all/short_news/bucharest-economic-growth-before-
the-pandemic/)
Bucharest is the most economically developed and industrialized city in Romania, producing
around 21% of the country's GDP and about one-quarter of its industrial production, while only
accounting for 9% of the country's population. Almost one third of national taxes is paid by
Bucharest's citizens and companies. In 2009, at purchasing power parity, Bucharest had a per-
capita GDP of €26,100, or 111% that of the European Union average and more than twice the
Romanian average. The city's strong economic growth has revitalized infrastructure and led to
the development of many shopping malls and modern residential towers and high-rise office
buildings. In September 2005, Bucharest had an unemployment rate of 2.6%, significantly lower
than the national unemployment rate of 5.7%
Bucharest's economy is mainly centered on industry and services, with services particularly
growing in importance in the last ten years. The city serves as the headquarters of 186,000 firms,
including nearly all large Romanian companies.
Regarding the accommodation segment development an average hotel rates in Bucharest were
78.1 euro/ night during 2017, higher than in Sofia (76.1 euro/ night), Warsaw (75.4 euro/ night)
and Bratislava (63.6 euro/ night), but below Vienna (96.9 euros/ night), Prague (87.5 euros/
night) and Budapest (84.3 euros/ night), according to the hotel industry research firm STR
Global, quoted by Cushman & Wakefield.

 Future plans, trends (economic in general and real estate and accommodation in
particular)

Airbnb now offers more than 4 million places for guests to stay, and recently announced an
upcoming partnership with Century 21 that will officially place the travel giant into the real
estate industry as a builder and seller of houses. In the past, hoteliers viewed companies like
Airbnb as a threat. But things are changing, to their benefit.
Here’s what’s really happening:
o Pressure from Airbnb and other competitors has pushed hoteliers towards better
practices — like adopting more creative and unique properties distinctly different from
the traditional hotel experience. The success of Marriott’s Moxy hotel is a great
example of what we have to look forward to in the coming years.
o As Airbnb continues to expand into hotels, hotels are expected to continue to expand into
home sharing, which means more opportunities for profitability. Especially when you
consider the advantages of staying in affordable rentals that are regulated and owned by a
corporate entity rather than the privately owned versions that are often hit or miss (or
downright creepy) all around.
o 71% of survey participants in the UK said they believed that hotels are still a better value
than Airbnb in terms of cleanliness, advertised “authentic” experiences, and location
options.
 Number of tourists arrivals and future perspectives
By adjusting the average daily rate with the occupancy rate (calculated by STR at 73.6%
for Bucharest in 2017), it appears that Bucharest hotels recorded an average of revenue of
57.5 euro/ night for each available room (RevPAR), a 6.4% increase compared to the
previous year. Moreover, the RevPAR maintained this positive trend in H1 2018,
increasing by 4.7%, to 60.2 euro/ night. Both domestic and international arrivals to
Bucharest were affected by the global economic downturn in 2009, and registered
decreases. This had a major effect on the hotel industry, with a strong decrease in
occupancy and average rate leading to a RevPAR decline of close to 30% in 2009; this
 negative trend continued and reached an all-time low close to €40 in 2013. Strong
recovery started from 2014, with an average RevPAR growth of more than 9% per
annum from 2014-16. However, the strong growth momentum slowed down in 2017 and
2018, leaving RevPAR some 30% lower than at its peak in 2007.

In the past, high barriers to entry have prevented new hotels from being developed in Bucharest.
However, the privatization process in Romania has allowed the hotel industry to develop at an
accelerated pace. Therefore, hotel supply in Bucharest has increased in the past few years and the
room stock is expected to increase by a further 5% by 2020.
In terms of transactions, the hotel market in Bucharest has recorded low levels of transactions
since the economic crisis in 2008. In 2018, one hotel transaction took place in Bucharest: the 95-
room Hotel Mercure Bucharest Unirii at €11.3 million (€120,000 per key). Overall, the market
recorded a value increase of 2.4% in euro (4.5% in local currency) compared to 2017 levels.
https://hvi.hvs.com/market/europe/Bucharest

 Map

In the immediate vicinity we find large shopping centers, public transport, schools and
kindergartens, which makes the property suitable and as an investment / rental.

Fig.1 – Apartment Map

2. Real estate market (a. buy/sell, b. rent)
a. Available properties – buy/sell
TYPE Area / Price Comments
Min. Max.
street
Studio Bucur, 24900 62000 usable area 49 mp; total area 58 mp
Obor, (mai aproape de CV)
Sector 2,
Avrig
Park
Residenc
e
1 bedroom Delta 66000 184000 Detached (semidecomandat), usable
Vacaresti, area 53 mp; total area 63 mp
Splaiul
Unirii
2 bedrooms Neo 103000 233000 Detached (semidecomandat), usable
Timpuri area: 84,3 mp; total area: 105,1 mp
Noi
3 bedrooms Splaiul 109000 330000 Decomandat, usable area: 80 mp;
Unirii total area: 100 mp
Vila Splaiul 230000 500.000 4 floors, 5 bedrooms, 7 rooms, usable
Unirii area: 400 mp, land 255 mp
b. Available properties – rent
TYPE Area / Price Comments
Min. Max.
street
Studio Splaiul 200 450 24 minutes from subway, usable area:
Unirii 46; total area 49
1 bedroom Splaiul 200 450 6 minutes from subway station;
Unirii usable area: 30 mp; total area: 42 mp
2 bedrooms Splaiul 350 825 1 minute from subway station; usable
Unirii area: 65 mp; total area: 70 mp.
3 bedrooms Splaiul 449 950 8 minutes from subway station;
Unirii usable area: 154 mp, total area 154;
Vila Splaiul 2500 4 minutes from subway; usable area:
 Unirii 230 mp, total area: 250 mp, total
field: 300 mp; 9 rooms, 1 floor.

Explain your choice - comments regarding:

 Property: location, type, built area, status, condition
 Price, transaction related costs;

Taking into consideration the fact that the apartment is built this year, we will need only to take
care of finishing part which includes especially the furniture and appliances. Fig 2, Fig. 3, Fig. 4,
and Fig 5 represent our ideas for the final design of the apartment:

Fig.2 – Living room design, available at https://www.pinterest.com/pin/280841726741734925/

Fig. 3 – Bedroom design – available at https://www.spatiulconstruit.ro/articol/idei-de-
amenajare-pentru-un-dormitor-modern/15454

Fig. 4 – Kitchen design, available at https://povesteacasei.ro/idei-de-amenajare-pentru-o-

bucatarie-lunga-si-ingusta/
Fig 5. – Bathroom design, available https://povesteacasei.ro/idei-de-amenajare-pentru-o-
bucatarie-lunga-si-ingusta/
3. Property proposal to the market:
 Competition (Comparatie cu AirBND)

Name Type No. of Category Facilities Min. rate Max. rate

rooms
Apartment Detached 2 Comfort 1 Parking 103000 233000
(Decomandat) spot;
ground
floor+6
floors;
Appliances
; Evevator;

You will include information about:

Concept
Located near Union Square, sector 3, in the central area of Bucharest, this apartment is built to
the highest quality and safety standards, with modern solutions to streamline maintenance costs.
We want that through this space, not only to offer a place where our guests can spend the night,
but to offer them an environment that inspires a lifestyle, an experience. Transposing the urban
style of Bucharest, where people never sleep as if they were at a marathon, in the design of our
apartment. For this reason, we have adopted a modern style, to keep up with the location where it
is located, choosing a simple but imposing furniture.

 Main and secondary segment of guests

- The main segment targeted is represented by young people with age between 18 – 25.
- The second segment we target are business people who came to work in Romania for
longer periods (3-4 weeks)

 Costs to adapt to your needs

 After making a cost estimation of furniture and appliances, we have a total of 11.000
euro (53,900Ron), divided by rooms like this:
- Living room: 4000 euro (sofa, smart tv, furniture, decorations, table & chairs,
drapery, armchair)
- Bedroom: 2500 euro (dressing, bed, carpet, other furniture pieces)
- Kitchen: 3000 euro (appliances, furniture, kitchen equipment)
- Bathroom: 1500 euro (mirror, sink and sink mask, other decorations)

 Main strong point(s)

- Central Area in the city convenient for many tourists;
- Proximity to restaurants and night-clubs, but also many art galleries and antique shops;
- Proximity to all transportation ways.

 Main week point(s)

- Expensive rent price
- High acquisition price

 Opportunities
- Many landmarks because of the central positioning
- Type of tourists attracted by the night life given by the Old Town spirit.

 Threats
Others hotels /hostels /Airbnb’s nearby.
The Pandemic situation

 Estimated occupancy
40% (Estimari bazate.. justificari)
 Fig. 6 - Estimation AIRDNA
 Costs to operate
1) Legal Taxes: 200 Ron /year
2) Utilities: 6,000 Ron /year
3) Maintenance: 2,000 Ron /year
4) Linen inventory: 1,000 Ron /year
5) Housekeeping: 0
6) Booking fees: 15%
 Estimated ADR
38 euro (186 Ron).

4. Business performance
 Key performance indicators (KPI's)

5. Financing and development of business

 Financing the business - Weighted average cost of capital (wacc)
 Time Value of Money - Long term rental simulations

6. Business valuation
 Discounted Cash Flow (DCF)
 Net Present Value (NPV), Internal Rate of Return (IRR), Sold scenario
General remarks and Expert’s opinions (at the end of each section)

Bibliography (ex. Web sites, market studies, statistical information, etc.)

Other information:
 TNR 12, justify, 1.5;
 Teams: 3-4 students;
 Work in class for each section and finish at home. Bring the section at school at next
meeting.
 Final project presentation in class in last 2 weeks. Send before the final paper to:
daniel.bulin@com.ase.ro and mihail.tanase@com.ase.ro