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. Last Updated: 07/27/2016

Ukraine Braces for Euro 2012

APUEFA president Michel Platini announcing the successful bid on April 18.
Winning the right to co-host the Euro 2012 football championship with Poland is providing Ukraine with the impetus to think big in its plans to upgrade and modernize its dilapidated leisure infrastructure.

On the drawing table is an ambitious project to build chains of top- and medium-range hotels for the lucrative sporting event, which market watchers say could net an estimated $3 billion in tourism and construction value.

But Ukraine, still mired in the political fallout of its Orange Revolution, may well find a revolution in the real estate sector no less of a challenge.

In a recent real estate survey, Colliers International classified Kiev's hotel market as "one of the least developed hospitality markets among the capitals of Central and Eastern Europe."

But Victor Korzh, Ukraine's minister of sports and youth and the vice president of the Euro 2012 planning committee, said last month that investors have been lining up to develop the necessary infrastructure for the event.

"There are serious investors ready to invest up to $7.7 billion in the construction of airports, roads, hotels and sporting infrastructure." Korzh said.

Korzh said construction work on hotels and other infrastructure would take place in Euro 2012 host cities of Dnipropetrovsk, Donetsk, Lviv, Kiev and Odessa.

The country will need a lot of outside investment to bring its real estate sector up to West European standards, especially as the government cannot afford to take part in the construction of new hotels, experts said.

"The sources of financing will purely be private, with the state only helping to upgrade some transport infrastructure," said Roman Ponomarenko, vice president of Ukraine's Youth Hostel Association.

There are other obstacles to contend with if Ukraine is to make the most of the opportunity to host one of the world's most high-profile sporting events.

"The main challenge is restricted land space for the development of European-standard hotels," said Natalya Pryaschazhnuk, director of Kiev-based Grand Rating real estate firm.

"Downtown Kiev, usually the preferred spot for real estate developers, is cluttered with office buildings, trading centers and apartments," she said. "There is a shortage of everything in the city centers – shortage of land, good roads and modern infrastructure."

A requirement set out by UEFA, the European football association, obliging host cities to provide four-star and five-star hotels to accommodate participating athletes and referees, could also make this a serious headache for competition organizers. According to UEFA stipulations, visiting fans must be provided with European-standard accommodation within a 50-kilometer radius of sporting venues.

And foreign investors will need some convincing before sinking their money into realty development outside city centers.

"When you factor in the poor investment climate, there's a big question mark on the success of this enterprise," Pryaschazhnuk said.

Ukraine may need to spend a minimum of around $200 million to construct the hotels required to accommodate participants in the 2012 European championship, industry insiders say.

Recent data indicate that even Kiev, with 13 hotels in the four-star and five-star category and 30 three-star hotels, is still in woefully short supply of accommodation. The situation is replicated in all the other host cities of Euro 2012.

If it is going to host the football championship successfully, Ukraine will have to build 22,000 more rooms in Kiev, 14,000 in Dnipropetrovsk, 17,500 in Donetsk and 12,000 in Lviv, according to Ukraine's Euro 2012 organizing committee.

One way to avoid the pressure of having to meet the financial burden of creating so much hotel space may be to place more emphasis on the construction of low-cost hotels, which would also meet the favor of fans seeking to economize, experts said.

Providing that planning for the competition goes as scheduled, the country will still be left with the problem of how best to utilize its stock of hotel space once the competition is over and trade dries up.

Ukraine is still not an attractive enough tourist destination for most hotels built for the championship to be fully utilized, said Gennady Gregoryan, general director of Kiev-based Victoria Realty. "Most will be a waste, unless of course prices can be reduced to a minimum to attract low-profile tourists," Gregoryan said.

Despite the difficulties that lie ahead, there remains considerable optimism. Many believe the championship will attract investment, stimulating the country's leisure industry, as well a range of complementary sectors.

Euro 2012 will generate millions of dollars in investment and change the country's real estate landscape, Gregoryan said.