switch on ukraine

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National Agency on Holding and Preparation of Euro 2012Department of Infrastructure Development

2 Mechnikova Str.Kyiv 01601 Ukraine

Phone: +380 44 281 9975Fax: +380 44 281 9975

[email protected]@ukr.net

With the support of theUkrainian German Development Cooperation


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Ukraine at the International Hotel

Investment Forum in Berlin March 2011

Tourism Sector and Investment and Cooperation Projects

in Ukraine

National Agency on Preparation

and Holding in Ukraine

UEFA EURO 2012


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2

Imprint

With the support of theUkrainian German Development Cooperation,Kiev/Berlin March 2011Cooperation Partner: Centre for Tourism Development

Explanation

Part 2 of this booklet contains two different kinds of information aboutinvestment projects in Ukraine seeking for international partners.

Section A is a list of projects with very detailed information that aresupposed to allow a potential investor a judgement to what extent theproject meets vital criteria for making decisions.

Section B contains more general information about projects arrangedaccording to geographical criteria.

We have translated and published the information in the way we receivedit and did not do further editing. If you have questions or would like toclarify facts, please contact directly the contact person provided or callthe below given address.

The editors

For more information please contact us. We help you finding

your suitable project and partner:

National Agency on Holding and Preparation of Euro 2012

Department of Infrastructure Development

2 Mechnikova Str.Kyiv 01601 Ukraine

Phone: +380 44 281 9975Fax: +380 44 281 9975

[email protected]@ukr.net

Disclaimer:

All information has been compiled with due diligence. We cannot take anyguarantees or liabilities on the correctness of data presented.


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Contents

Foreword by Vice Minister Mr Borys Kolesnikov Lets switch on Tourism! ........................................... 5

Part 1 Market Analysis ....................................................................................................... 6

Ukraine - Huge Development potential............................................................................................... 6

Incentives for Euro 2012 investments .......................................................................................... 7

Tourism in 2011 - Back on the growth path ...................................................................................... 7

Russians remain important group ................................................................................................. 7

Outbound tourism growing as well................................................................................................. 8

Key Facts at a glance ...................................................................................................................... 8

The Ukrainian Hospitality Industry ...................................................................................................... 9

10 percent of Hotels in Kiev ........................................................................................................... 9

Hotel Capacity in Ukraine close to 80.000 beds .......................................................................... 10

Hotel Supply in Ukraine way behind international average ......................................................... 10

Use of capacities slightly lower than in EU countries ................................................................... 10

Average staying period .................................................................................................................... 10

Increase in top class hotels............................................................................................................ 11

Focus regions of tourist industry ................................................................................................... 12

Origin of tourists in Ukraine by country ......................................................................................... 12

New system for categorization of hotels looming ......................................................................... 13

Hotel Services.................................................................................................................................. 13

Incomes from Hotel Accommodation ............................................................................................ 14

Growing SME sector in tourism ...................................................................................................... 14

Investments in development of the hotel infrastructure .................................................................. 15

Economic Program shows results ....................................................................................................... 16

Annual growth rate of 4 percent expected .................................................................................... 16

Foreign Trade ................................................................................................................................... 16

Views from outside Investment climate improves ........................................................................... 18

Legal Framework of Investment Activities ..................................................................................... 18

National Target Programme for Euro 2012 ................................................................................... 18

Attractive conditions for investments ............................................................................................ 19

Indicators for doing business in Ukraine ....................................................................................... 19

Profile of second largest Country in Europe ....................................................................................... 20


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Contents

Part 2: Investment Projects in UkraineSection A Detailed Investment project descriptions ......................................................................... 21

Project Cosmopolit, Kharkiv............................................................................................................ 21

Project Radgospna, Kharkiv............................................................................................................ 31

Project Adome, Donetsk.................................................................................................................. 39

Project Artemivsk, Donetsk ........................................................................................................... 45

Project Golden Ring of Health, Crimea ......................................................................................... 51

Project Kalamitska Bay, Crimea.................................................................................................... 55

Project Prague, Kyiv ........................................................................................................................ 57

Project Crowne Plaza, Kyiv ............................................................................................................. 63

Project Lytvynovka, Kyiv region ..................................................................................................... 69 Project Obukhiv, Kyiv region .......................................................................................................... 79

Project Glybochychka, Kyiv region ................................................................................................ 89

Project Morshin-Absolyut, Lviv region ........................................................................................... 97

Project Kashtan, Lviv region .......................................................................................................... 103

Project Pomirky, Lviv region .......................................................................................................... 111

Project Koljarevskogo, Lviv ............................................................................................................ 117

Project Olymp, Lviv ......................................................................................................................... 123

Project Kristal and Almaz, Lviv ................................................................................................... 133

Project Strijska, Lviv ....................................................................................................................... 139

Project Volosianka Village, Lviv region ......................................................................................... 145

Project Fortress of Hetmans, Tchernivti region............................................................................. 155

Project Amadeus, Khmelnytsk region ........................................................................................... 165

Project Arkadia Zhemchuzhina, Odessa ....................................................................................... 170

Section B Projects General Information ............................................................................................ 174

Project Arena, Kharkiv region ........................................................................................................ 174

Project Temp, Kharkiv ................................................................................................................... 176

Project Central, Donetsk ............................................................................................................... 178

Project Ukraina, Donetsk .............................................................................................................. 180

Project Grand-Hotel, Donetsk region ............................................................................................ 182

Project Druzhba, Donetsk ............................................................................................................. 184

Project Staro, Kyiv .......................................................................................................................... 186

Project Boryspil Plaza, Kyiv region ................................................................................................ 188

Project Morshyn, Lviv ..................................................................................................................... 190

Project Villa Shevchenko, Lviv region ........................................................................................... 192

Project Villa Oksana, Lviv region ................................................................................................... 194

Project Villa Maria, Lviv region ...................................................................................................... 196

Project Lypynskogo, Lviv ............................................................................................................... 198


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Foreword

According to most international data and domesticstatistics, Ukraine remains a highly attractive market

for the tourism and leisure industry. All of us are very

much looking forward to Euro 2012 and I may take the

opportunity to cordially invite you to visit us from 08.

June till the finals in Kiev on July 1st. We are well aware

that nobody makes a large scale investment just for a

wonderful tournament. Investments must pay off! We

see this event as a milestone in the development of

the Ukrainian tourism industry and as a tool to leverage

the development and international integration of our

economy.

Our participation at the International Hotel Investment

Forum in Berlin sends a clear message to hotel operators

and investors alike: come to Ukraine. Look for your

opportunity and you will find it. If you invest then now

is the right moment. Major investments in the hotel

industry will benefit from substantial incentives.

And our Government is determined to continue creating

a favorable business environment and to particularly

promote the tourism industry. Here we see an important

sector which in the past did not get the attention it

deserves. This will go well beyond 2012.

We are sure many of those more than 1 million visitors

who will come to Ukraine to celebrate a holiday of

the European family and the billion television viewers

will like Ukraine. For us Euro 2012 is a chance we are

determined to take.

We would like to draw your attention to the highlights in

our country. We switch on Ukraine. This booklet offers

some investment projects which may be of interest to

you. There is much more.

Come in, talk to us and switch on your Ukraine.

Yours sincerely

Borys Kolesnikov

Vice Prime Minister

Foreword by Vice Prime Minister Mr Borys Kolesnikov:

Lets switch on Tourism!


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RT1:MARKETANALYSIS

PART 1 MARKET ANALYSIS

Tourism in Ukraine has a huge potential. Just to catch

up with the average market supply number of hotels per

thousand inhabitants Ukraine would need almost ten

times more hotels compared to what it has in 2011.

With a population of more than 45 million people and

being the second largest country in Europe, Ukraine

has little less than 1.000 Hotels. In most other tourist

destinations in Europe the ratio of hotels per thousand

inhabitants is much higher. A great number of hotels

still date back to the old soviet times. They are in great

need of modernization.

The internationally renowned consulting group Roland

Berger recently estimated the growth rate for tourism in

Ukraine in the coming years with 8 percent annually in

the coming years. Official Ukrainian sources are more

modest and forecast a steady growth of 4 percent per

year. To stimulate investments the Government provides

strong iincentives. New modern airport terminals are

being built to serve the visitors for Euro 2012, where all

together more than 1 million guests are expected.

Currently, every year between 20 and 25 million peoplevisit the country. Ukraine's tourism industry recovers

from the crisis and shows a clear upward trend. Visitors

come mainly from neighbouring countries, the lion's

share from Russia.

Crimea and Kiev attract some 60 percent of the in-

bound tourism. In the West it is Lwiw (Lemberg) that

sticks out with some one million visitors per year. In

rankings of the World Tourism Organization, Ukraine was

in 2008 among the top 10 of international destinations.

This brochure is meant to give an overview on latest

market developments in Ukraine. It is based on figures

provided by the National Statistical Office of Ukraine.

26,0

25,0

24,0

23,0

22,0

21,0

20,0

25,4

20,721,1

2009

Ukraine: Incoming tourists in million

2010

2008

Ukraine Huge Development potential


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RT1:MARKETANALYSISIncentives for Euro 2012 investments

One of the conditions for Ukraines hosting Euro 2012

finals is the qualitative and timely preparation of the

hotel enterprises. Ukraines major task in preparing

the accommodation infrastructure is meeting all UEFA

requirements on the quantity of the hotel rooms in

regards with the categories 3*, 4* to 5* to accommo-

date UEFA family.

According to UEFA requirements Ukraine is to provide

15.555 rooms in category 3*-5* hotels for accommoda-

tion of UEFA target groups. 366 hotels are to be secured

by the end of November 2011. In order to do that it isplanned to reconstruct 267 operating hotels and to

finish the construction of 99 hotels. In particular, 45

hotels should be built in Kyiv, 24 in Lviv and 15 hotels

in Donetsk and Kharkiv each, with the total capacity

of 15.137 rooms.

The state provides attractive incentives for investors and

operators. All hotels with more than a 3 stars category

have begun to modernize in 2011 and will be finished in

September 2012. The hotels will enjoy profit tax vacation

for 10 years.

After a sharp decline as consequence of the financial

crisis in 2009 Ukraines travel industry is back. In 2010,

little more than twenty one million foreign tourists visited

Ukraine. This is about 2 percent or 380.000 persons more

than in 2009. The increase of the incoming stream volume

in the year of 2010 was due to increase of the number

of trips mainly with a private purpose.

Russians remain important group

Private trips increased by 4 percent. With 20 percent or

1, 2 million persons the greatest increase was recorded

for the tourists from Russia by 20 percent, Slovakia by

14 percent or 70.000 persons, Hungary by 16 percent

or 124.000 persons followed by Belarus and Germany.

However, the organized tourism decreased by 17 per-

cent. The greatest decrease of the tourist stream isobserved from Belarus, Canada Poland and Russia.

Trips for business purposes decreased by 10 percent.

The greatest decrease of the tourist stream is observed

from Latvia, Poland and Russia.

In the incoming tourist streams the share of the orga-

nized tourism decreased by 7 percent in 2009 and up

to 6 percent in 2010; the share of the private tourism

decreased by 89 percent in 2009 and up to 90 percent

in 2010; the share of the business trips remained at 4

percent, as it was in 2009.

Decrease of the incoming tourists from the EU countriesoccurred mostly due to the descent number of travellers

from Poland, Great Britain, Denmark and Romania.

Increase of the incoming tourist from the Commonwealth

of Independent States (CIS) occurred mostly due to the

rising of the number of travellers from Azerbaijan,

Belarus, Kyrgyzstan, Uzbekistan and Russia.

Table 1: Type of tourism

Type N of people In percent Compared toprevious year

Business trip 0,7 million 4 % -10 % or 84,5thousand persons

Organized 1,2 million 6% -17 % or 234,7tourism thousand persons

Private 19,2 million 90 % - 4 % or 700,4tourism thousand persons

Table 2: Tourists by area of origin

Country Tourists Percentage Change comparedin Million to previous year

CIS countries 15,4 million 73 % + 5 % or 747,9of stream thousand persons

EU countries 5,3 million 25 % - 7 % or 393,4of stream thousand persons

Other 458,1 million 2 % + 6 % or 26,6countries of stream thousand persons

Tourism in 2011 Back on the growth path


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RT1:MARKETANALYSIS

Outbound tourism growing as well

The outgoing tourist stream in 2010 was 17,2 million

persons and in comparison to 2009 increased by 12

percent or 1, 8 million persons.

The outgoing tourist stream increased due to the trips

for the private purpose and business trips. Business

trips increased by 3 percent due to the increase of the

number of Ukrainian tourists travelling to the following

countries: Germany (by 11 percent or 5.300 persons),

Russia (by 45 percent or 54.700 persons), Slovakia (by

46 percent or 11.000 persons), Turkey (by 2 percent or

8.000 persons) and Hungary (by 16 percent), Russia

(by 27 percent or 53,700 persons) and Turkey.

Increase of the outgoing tourist stream from the EU

countries was mostly due to the increase of the number

of Ukrainian tourists travelling to the following countries:

Poland (by 35 percent or 1 million persons), Germany

(2 times or by 193.300 persons), Italy (by 13 percent

or 13.100 persons), Greece (by 61 percent or 24.000

persons), Hungary (by 12 percent or 186.700 persons).

Increase of the outgoing tourist stream from the CIS

countries was mostly due to the increase of the number

of Ukrainian tourists travelling to the following countries:

Georgia (by 32 percent or 7.700 persons), Belarus(by 9 percent or 98.800 persons), Kazakhstan (by

63 percent or 1.900 persons), Russia (by 5 percent or

251.900 persons) and Turkmenistan (by 42 percent

or 2.800 persons).

Key Facts at a glance

Table 4: Area of destination

Area People Percentage Changein Million

CIS countries 8,3 49 % + 3 % or 269,3thousand persons

EU countries 7,7 45 % + 22 % or 1, 4million persons

Other countries 1,1 6 % + 17 % or 161,8thousand persons

Table 5 Rating of the main 10 countries of the

outgoing tourism:

persons share 2010/2009Total for 2010 17 180 034 100 % + 12 %

1 Russia 5 233 972 30 % + 5 %

2 Poland 3 999 602 23 % + 35 %

3 Moldova 1 889 724 11 % - 5 %4 Hungary 1 789 308 10 % + 12 %

5 Belarus 1 135 094 7 % + 9 %

6 Romania 503 195 3 % - 8 %

7 Turkey 459 061 3 % + 4 %

8 Slovakia 383 961 2 % + 2 %

9 Germany 383 325 2 % 2 times

10 Egypt 328 623 2 % + 39 %

Total for 10 countries 16 105 865 93 %

Ukraine 2010 TRAVEL & TOURISM ECONOMIC

RESEARCH

10-year trend

7,5 percent Gross Domestic Product (GDP)

The contribution of Travel & Tourism to Gross DomesticProduct (GDP) is expected to decline from 7.5 percent(UAH80.8bn or US$10,171.9mn) in 2010 to 6.4 percent(UAH212.6bn or US$21,652.7mn) by 2020.

-2,4 percent Growth

Real GDP growth for the Travel & Tourism Economy isexpected to be -2.4 percent in 2010 and to average4.2 percent per annum over the coming 10 years.

6,1 percent Employment

The contribution of the Travel & Tourism Economy toemployment is expected to fall f rom 6.1 percent of totalemployment, 1,207,000 jobs or 1 in every 16.5 jobs in2010, to 5.2 percent of total employment, 1,047,000 jobs,or 1 in every 19.4 jobs by 2020.

10,9 percent Visitor Exports

Export earnings from international visitors are expected togenerate 10.9 percent of total exports (UAH48.9bn orUS$6,155.8mn) in 2010, growing (nominal terms) toUAH136.1bn or US$13,864.4mn (7.5 percent of total) in2020.

15,9 percent Investment

Travel & Tourism investment is estimated at UAH26.5bn,US$3,331.8mn or 15.9 percent of total investment in2010. By 2020, this should reach UAH79.3bn, US$8,077.1mn or 15.4 percent of total investment.

Source: Ukraine, World Travel & Tourism Council Report

Table 3 Rating of top 10 countries of visitors to Ukraine

persons share 2010/2009Total for 2010 21 122 157 100 % + 2 %

1 Russia 7 881 321 37 % + 13 %

2 Moldova 4 057 678 19 % - 6 %

3 Belarus 3 056 157 14 % + 2 %

4 Poland 2 085 245 10 % - 18 %

5 Hungary 941 240 5 % + 16 %

6 Rumania 909 553 4 % - 15 %

8 Slovakia 609 279 3 % + 13 %

7 Germany 225 356 1 % + 6 %

9 USA 122 955 0,6 % + 2 %

10 Uzbekistan 104 719 0,4 % + 9 %

Total for 10 countries 19 993 503 94 %


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RT1:MARKETANALYSIS

In 2009 there were 1.684 different hotel facilities

comprising 174.400 accommodation units in Ukraine.

According to the functional structure of the hotel enter-

prises on the territory of Ukraine the temporary

accommodation services in 2009 were provided by:

858 hotels,

26 motels,

5 hotel and office centres,

9 campsites,

54 youth tourist camps and mountain shelters, 184 hostels,

548 other places for temporary residence.

The number of hotels in Ukraine has increased by 20

enterprises or 2,4 percent in comparison to the year of

2008. Despite of this growth Ukraine is still a good deal

behind his neighbour Poland. In comparison Poland in

2009 there are 1.809 Hotels and in 2010 1.900 Hotels

and figures will go up to 2.100 hotels. (Source: Germany

trade and invest) Germany, one of the leading countries

in hotel business has about 17.800 Hotels.

The most widespread form of accommodation in Ukraine

are hotels (51,0 percent of overall quantity of hotel

enterprises) and other places for temporary residence

(32,6 percent), the latter along with the traditional hotel

enterprises offer to their clients the full range of services

on reception, accommodation, food and serving.

In some regions, especially during vacation season,

other places for temporary residence are able to accom-

modate more clients than the main hotel enterprises.

They include season recreation zones, little summer

houses, cottages etc., that seem to provide temporary

accommodation during the vacation period. In 2009there were 407 such enterprises or 74,3 percent of

overall quantity of other places for temporary residence.

Most of them were in Kherson (99), Mykolajiv (93),

Louhansk (42), Cherkassy (25), Dnipropetrovsk (22)

and Chernihiv (19) regions.

Hostels occupy third place in systematization of hotel

enterprises by type. In 2009 there were 184 enterprises

comprising 11.900 accommodation units. Other types

of enterprises, such as motels, hotel and office centres,

campsites, youth tourist camps and mountain shelters

that due to their accommodation capacity and functio-

nality are widespread in many countries and play an

important role in the branch development, in fact are

not well developed in Ukraine.

The increase in the hotel quantity was observed in the

Lviv region by 7 hotels, in the Crimea region by 5 hotels;

in Transcarpathian and Donetsk regions and in the city

of Kyiv by 4 hotels in each one respectively; in Kyiv,

Mykolajiv and Chernivtsi regions by 2 hotels respective-

ly; in Zaporizhya, Ivano-Frankivsk, Cherkassy regions

and in the city of Sevastopol by one hotel in each listed

area respectively.

Along with that fact there was a decrease in the number

of hotels comparing with 2008 in Louhansk region by 3

hotels; in Poltava, Kharkiv, Khmelnytskyi and Chernihiv

regions by 2 hotels in each region respectively; in

Vinnytsya, Zhytomyr and Odesa regions by one hotel

in each one respectively. The decrease in the number

of hotels mostly occurred due to their sale to somephysical persons or transfer for reconstruction of

housing, offices and medical buildings.

10 percent of Hotels in Kiev

In Ukraine most hotels are located in the city of Kyiv

(10 percent of overall number of hotels), Lviv region

(6 percent), the Crimea (7,2 percent), Dnipropetrovsk

region (6,9 percent), Donetsk region (6,5 percent),

Odessa region (5,5 percent), Louhansk (4,8 percent)

and Chernihiv (4,3 percent) regions, and that is connected

with high level of their industrial development, the

presence of touristic centres or resort areas.

Table 6 Quantity of hotel enterprises by type, their

single and average accommodation capacity in 2009

Quantity, by type, In N Capacity inunits percent of beds average of

enterprises

All types enterprises rooms rooms beds

Hotel 1684 76019 100,0 174398 45 104

Motel 858 42798 51,0 77610 50 90

Hotel and 26 467 1,5 910 18 35office centre

Campsite 5 62 0,3 102 12 20

Youth tourist 9 220 0,5 504 24 56camp and mountain shelter

Hostel 54 2334 3,2 5753 43 107

Other places 184 4609 10,9 11878 25 65for temporary residence

548 25529 32,6 77641 47 142

1 All data are from the Ukrainian National Statistic Office 2011

The Ukrainian Hospitality Industry1


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The total accommodation capacity of Ukrainian hotelsfrom 2000 to 2004 inclusive was constantly reducing

while using less than one third of the accommodation

reserve. Significant improvement of the situation is

being observed starting from 2006 and this positive

tendency still remains.

Hotel Capacity in Ukraine close to 80.000 beds

In 2009 the total accommodation capacity of hotels

has increased in comparison to 2008 by 2,000 beds

and thus has amounted to 77.600 beds. In 2009 the

average accommodation capacity of the hotels was not

high and comprised 90 beds while the average accom-

modation capacity of other places for temporary resi-

dence was 142 beds and the capacity of one youth tou-

rist camp and mountain shelter 107 beds.

Hotel Supply in Ukraine way behindinternational average

The hotel provision index is determined by the number

of hotel beds for 1.000 citizens. 1,7 hotel beds for

1.000 citizens was Ukraines index in 2009 comparing

to 1,6 in 2008; 4,6 hotel beds was the index of Kyiv in

2009 comparing to 4,5 in 2008 which is significantlyless than in the prevailing majority of the worlds de-

veloped countries. For instance, the number of hotel

beds for 1.000 citizens is approximately 10-20 in Bulgaria,

Hungary, Poland, Great Britain, USA, France and

Germany; 23-25 in Italy, Spain and Canada. The hotel

provision index for 1.000 citizens in the Crimea was

higher than Ukraines average one 4,5 hotel beds com-

paring to 4,1 in 2008; 3,5 hotel beds compared to

2008s 3,3 was the index of the city of Sevastopol; the

regions of Transcarpathians, Lviv, Ivano-Frankivsk,

Odessa and Chernivtsi had the hotel provision indices

that did not differ much from the ones in 2008 ranging

from 2,6 to 1,8 hotel beds.

Use of capacities slightly lower than inEU countries

The average annual coefficient of capacity usage of

Ukrainian hotels changed every year during the previous

10 years. The coefficient amounted from 0,25 in 2000

to 0,28 in 20012002, reached 0,32 in 2003, grew to

0,34 and remained such in 20042006, increased to

0,35 in 2007, but then it tended to go down to 0,31 and

0,23 in 2008 and 2009 respectively. Minimal usage of

the hotel capacity 0,10 was observed in Louhansk

and Kherson regions, 0,12 in Ivano-Frankivsk region,

0,15 each in Zhytomyr and Ternopol regions, 0,16 eachin Donetsk and Chernivtsi regions, while the maximum

one 0,35 was in the city of Kyiv. The coefficient

ranged from 0,30 to 0, and 27 in Kharkiv, Kyiv and

Chernihiv regions and in Sevastopol. It should be noted

that the coefficient in EU countries is 0,36.

The total duration of staying period affects to some

extent the coefficient of capacity usage of hotels. In the

whole the coefficient dynamics was positive during pre-

vious years, nevertheless as from 2008 on there has

been a noticeable tendency towards a reduction of

duration of staying periods in hotels. Thus, in 2008 the

whole staying time reduced in comparison with 2007

by 981.400 people per day or by 10,4 percent and was

8.437.000 people per day; in 2009 comparing to 2008

this coefficient decreased by 2.055.500 people per day

or by 24,4 percent and was 6381.400 people per day.

The decrease of the total duration of staying period

occurred almost in all Ukrainian hotels. The biggest

reduction of staying time comparing to 2008 was obser-

ved in Kyivs hotels by 644.200 people per day; in

Volyn region by 114.300 people per day, in Lviv region

by 113.300 people per day, in Dnipropetrovsk region

by 112.200 people per day and in Odesa region by

105.600 people per day. It is the result of the worldseconomic crisis that influenced all economic sectors in

Ukraine and the hotel economy in particular.

Average staying period

As from 2000 the average duration of a visitor staying

period (including foreign visitors) in Ukrainian hotels

was about 3 days, in 2008-2009 a bit more than 2

days.

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RT1:MARKETANALYSIS

0,4

02

0

0,25

20032006

The coefficient of the hotel capacity usagein 2000 2009

2009

2000

0,32 0,34

0,23


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The efficiency of the hotel usage depends on many fac-tors: service quality, star category of hotels, and pres-

ence of structural subdivisions that provide additional

services, comfort and technical equipment of the

rooms.

In 2009, there were 42.800 rooms (in 2008 42.200) in

the country hotels, in the whole their living space

increased comparing to 2008 by 44,2 thousand meters

square and was 975,800 meters square. The average

living space of one hotel room was 22,8 meters square

(in 2008 22,1 meter square). The increase in the num-

ber of rooms and their living space was connected withthe growth of hotel quantity in some regions.

Thus, in comparison to 2008 the room number in

Dnipropetrovsk region increased by 265 hotel rooms

or 11,2 percent, in the Crimea by 227 rooms or 5,4

percent, in Kyiv region by 173 rooms or 15,2 percent,

in Lviv region by 158 rooms or 4,8 percent, in Ivano-

Frankivsk region by 146 rooms or by 11,8 percent and

in Zaporizhya region 141 rooms or by 11,9 percent.

Along with those facts there was some reduction in the

room quantity in some regions that mainly occurred

because of the hotels bouilding up, sale to some

physical persons, reconstruction of rooms for housing,

offices or rooms for medical purposes.

But the decrease in the number of rooms did not neces-

sarily involve the respective decrease in the size of their

living space. Thus, in Donetsk region the number of

rooms reduced by 97 units, but the living space of

rooms increased by 3994,0 metres square, in Louhansk

region the number of rooms reduced by 46 units, while

the living space increased by 19,9 sqm, in Vinnytsya

region the number of rooms reduced by 25 units, and

the living space increased by some 4.000 sqm. It pro-

ves that hotels were rebuilt and reconstructed in orderto increase the living space of the rooms, to improve

the room layout and to provide more convenient and

comfortable condition for living.

The average room capacity in Ukraine did not changed

in 2009 compared to 2008 and was 1,8, from 1,5 to

1,6 in Zaporizhya, Donetsk, Kirovograd, Louhansk and

Kharkiv regions, from 2,0 to 2,4 in the Crimea and the

regions of Vinnytsya, Transcarpathians, Rivne, Ternopol,

Ivano-Frankivsk and in the city of Sevastopol.

Increase in top class hotels

In 2009 there was an increase in the number of de luxe

and semi de luxe rooms to improve hotel services. Thus,

during 2009 their quantity in Ukraine in comparison to

2008 increased by 705 units or by 7,5 percent and

equalled 10.100 rooms or 23,5 percent of overall room

quantity in the Ukrainian hotels. There was a significant

growth in the number of de luxe and semi de luxe rooms

in Kyivs hotels (by 328 rooms from the number of such

rooms in 2008), in Ivano-Frankivsk region (by 82 rooms),

Chernivtsi (by 80 rooms) and Dnipropetrovsk (by 75

rooms) regions.

In comparison to 2008 the number of single rooms in

the Ukrainian hotels decreased in the whole by 163

rooms or 1,5 percent. The growth in the number of

these rooms was observed in the hotels of Kyiv (by 263

rooms comparing to the number of single rooms in

2008), in the regions of Donetsk (by 108 rooms),

Chernivtsi (by 37 rooms), Volyn (by 29) and Odessa (by

25 rooms). There was a growth in the number of single

rooms in the hotels of 9 regions, too, among which are

Dnipropetrovsk (by 145 units compared to the quantity

of single rooms in 2008), Louhansk (by 59 units),

Zaporizhya (by 42 units) and Lviv (by 36 units).

During the year 2009 the number of double rooms

in Ukraine increased by 142 units or 0,8 percent in

comparison to the corresponding number in 2008, was

18.800. The hotels of the Crimea, Kyiv, Zaporizhya, Lviv

and Transcarpathian regions shared the biggest rise in

the number of such rooms (from 58 to 149 units range).

At the same time there was a decrease in the quantity

of double rooms in the hotels in 12 regions, Odesa (by

135 double rooms comparing to 2008), Volyn (by 133),

Louhansk (by 86) and Rivne (by 46 rooms).

The number of triple and extra bed rooms reduced by

64 units or by 2,1 percent in comparison to 2008. This

reduction was observed in more than half of the regions;

especially in the hotels of Volyn, Odesa and Kherson

regions and in the city of Kyiv (ranging from 45 to 18

units). The reduction is the result of changing the

rooms layout in order to create more convenient and

comfortable living conditions, reallocation of the rooms

or changing the type of hotel enterprise from hotel to

hostel.

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Along with those facts there was an increase in thenumber of triple and extra bed rooms in the hotels of 8

regions of Ukraine in 2009 in Rivne and Ivano-Frankivsk

regions and the Crimea (by 44, 29 and 27 rooms

respectively in comparison to 2008) with the new hotels

functioning on these territories.

3.622.200 persons were provided with the accommoda-

tion services in 2009 in Ukraine that was less than in

2008 by 21,1 percent; among them 2.753.100 persons

or 76,0 percent of the whole number of visitors were

accommodated in hotels. In Ukraine during 20002007

(except insignificant decrease in 2002 and 2005) thenumber of persons using hotel services tended to grow

in a positive way. As from 2008 this number began

reducing. And in 2009 this quantity reduced by 874.000

persons or by 24, 1 percent comparing to 2008.

Focus regions of tourist industry

More than 59,0 percent of persons accommodated

in hotels in 2009 as well as in 2008 were staying in

6 regions of Ukraine, they are the city of Kyiv 737.400

persons, the Crimea 221.200 persons, Lviv region

211.400 persons, Odesa region 194,800 persons,

Dnipropetrovsk and Kharkiv regions 133.300 and125.000 persons correspondingly.

One of the most important elements in hotel economy

is the number of foreign tourists bringing income (export

of services) to the country that facilitates development

of the branches involved in providing the services. All

this contributes to the increase of gross domestic pro-

duct and life conditions of people. However, in 2009 com-

pared to 2008 the volume of export of accommodation

services reduced significantly (by 46, 5 percent) compri-

sing 99,5 million US dollars, almost half of reduction

(46,8 percent) was for accommodation services of hotels

which are 83,2 million US dollars. The total number of

foreign visitors accommodated in Ukraine in 2009 is

795.000 persons (21,9 percent), 745.000 of themstayed in the hotels that is less than in 2008 by

198,500 or 21,0 percent.

Though practically the whole territory of Ukraine has

potential for a developed tourism industry. However, the

intensity of foreign visits differs in its particular regions.

72,2 percent of foreign tourists have stayed in the

hotels of Kyiv, the Crimea, and Lviv and Odessa regions.

But the duration of their staying period decreased in

2009 comparing to 2008 by 204.000 persons per day

or by 13,3 percent. The main reason for the decrease

was the rise in hotel prices, and the accommodationprices in particular.

Origin of tourists in Ukraine by country

Despite of wide "geography" of tourists visiting the

country (foreign tourists from 211 countries came to

Ukraine in 2009), a bit more than one third (34,6 per-

cent) from their quantity are tourists from CIS countries

275.000 persons (215,000 from Russian Federation,

43.000 persons from Belarus, 16,600 persons from

Moldova). As far as other countries are concerned

German tourists were the most frequent visitors

69.000 persons, 57.000 persons cave from Poland,

54,500 from USA, 25.000 persons from UK, 24.600

from France, 24.500 from Italy, Turkey 21.200 persons,

Austria 15.000 persons, Holland 13.700, Canada

10.000, Sweden 9.800 and Czech Republic 9.700

persons.

Russian Federation

32,7% 27,1% 8,7% 7,2% 6,9% 5,4% 3,1% 3,1% 3,1% 2,7%

Germany

PolandUSA Belarus

Great Britain

France Italy Turkey Others

Systematization of foreign tourists by country,where from they came to Ukraine in 2009

4.000

2.000

0

2.839

20032006

The number of persons accommodatedin hotels in 20002009 (per thoussand)

2009

2000

3.107 3.528

2.753


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13

The volume of services provided by all types of accom-modation enterprises comprised 73, 5 million US dollars

or 73, 8 percent of overall scope of export of accommo-

dation services in 2009.

The level of comfort is one of the most important quality

characteristics of accommodation. The criteria for

assignment to certain categories of hotels are quality

of rooms and public facilities, availability of shower and

bathrooms, furnishing standards, kindness, quantity

and quality of technical equipment, premises design,

personnel quantity and qualification, level and range of

food service etc. For now, there is a national standardISO 4269:2003 Tourism services. Classification of

hotels and hotels and motels have 5 category

classification (rating from one to five stars).

New system for categorization of hotels looming

According to the data of certification organs there were

the following categories of hotels functioning in Ukraine

2009: 9 five-star hotels, 56 four-star hotels, 323 three-,

two- and one-star hotels, the rest 470 hotels did

not have a category. The big number of hotels without

a category can be easily explained by the list of reasons.

Many of them do not meet the requirements for logistic

support, nomenclature and the quality of services provi-

ded, service level; some of them received the certificate

only for living; some hotels carry out current repair or

rebuilding and reconstruction or are in state of build up;

newly-built hotels did not yet manage to receive a cate-

gory; a significant number of hotels was transferred to

property of physical persons who do not need to receive

a star certificate as it requires financial expenses.

Unfortunately, at present the hotel infrastructure of

Ukraine does not meet demand for hotel services either

by quantity or by quality; material base and technical

equipment of majority of hotels are physically and

morally out of date and do not respond to international

standards. The list of additional services of Ukrainian

hotels is significantly poorer than in the majority of

European hotels that offer more than 80 items of

additional services. Practically three quarters (74,1 per-cent) of overall quantity of hotels listed the following as

the objects of services restaurants, cafes and bars.

Most dining places like in 2008 ., functioned in Kyivs

hotels 100 units or 15,7 percent of total quantity of

all restaurants, cafes and bars functioned at the premi-

ses of Ukrainian hotels, in Lviv region 84 or 13,2 per-

cent, the Crimea 63 or 9,9 percent, Donetsk region

48 7,5 percent, Odesa region 45 or 7,1 percent and

Transcarpathian region 40 or 6,3 percent. Each hotel

in the Crimea, the regions of Donetsk, Ivano-Frankivsk,

Lviv, Odesa, Kharkiv, Chernivtsi and Transcarpathian

region, Kyiv and Sevastopol had a dining place.

Practically each second hotel in 13 regions of Ukraine

had a functioning restaurant, caf and bar. Each third

hotel in Zaporizhya region had at least one restaurant,

while each forth hotel in Rivne region had a caf and a

bar at its premises. Along with that the hotels of some

regions do not have dining spots at all; on each eighth

hotel in Louhansk region and each ninth one in

Chernihiv region had a restaurant, a caf or a bar.

Hotel Services

More than one third of hotels (37, 3 percent) had par-

king places, and a bit more than a half (57, 8 percent)

saunas and laundries. The significant number of par-

king places function near the hotels in the Crimea 60

or 18,8 percent of overall number of parking sites near

hotels, in Kyiv 28 units or 8,8 percent, in Lviv region

23 units or 7,2 percent, in Donetsk and Odessa regi-

ons 19 units or 5,9 percent in each one, and in the

Transcarpathian region 18 or 5,6 percent. Ivano-

Frankivsk, Odessa, Soumy, Kharkiv and Transcarpathian

regions are the best parking secured regions, each

second hotel had a parking place there. At the sametime in some regions there were no parking places

on the territory of hotels, because only each sixth in

Chernihiv region and each eighth in Louhansk and

Rivne regions had such objects. The significant number

of saunas and laundries functioned in the hotels of the

Crimea 62 or 12,5 percent of overall number, in Lviv

region 56 or 11,3 percent, in Kyiv 54 or 10,8 per-

cent, in Donetsk region 41 or 8,3 percent and in the

Transcarpathians 37 or 7,5 percent. At the same time

the saunas and laundries are practically absent in the

hotels of some regions: only each fifth hotel in Mykolajiv

and Rivne regions and each 14th one of Louhansk regi-

on had such service item in their list of services.

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Table 7 Certification of hotel services as per 1.2.2011

Total Categories

5* 4* 3* 2* 1* Withoutcategory

2545 13 72 178 98 97 2087


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The income of the accommodation enterprises of Ukrainein 2009 comprised 4, 5 billion Hrivnas (approximately

450 million Euro) (taxes excluded), and 90,0 percent of

that sum was the income of the hotels, the rest 10,0

percent was earned by the accommodation enterpri-

ses of other types. The total hotel income excluding

taxes decreased in 2009 by 208 million Hrivnas or 4, 8

percent in comparison to 2008 and it was 44, 5 billion

Hrivnas (approximately 450 million Euro). Almost half of

the total income (44,1 percent) was received from the

main activities accommodation price, 17,4 percent

from providing with the additional services, 38 percent,

and 5 percent from other activities.

In comparison to 2008, the structure of the hotel income

underwent some insignificant changes. Thus, along with

the decrease of the income from the main activities

by 0,9, there was the increase of income from the

additional services by 0, 5 and from other activities by

0,4. This suggests that in the conditions of the worlds

economic crisis the hotels losing income from their

main activities, so that the hotels have to offer some

additional services and facilities in order to generate

income.

Incomes from Hotel Accommodation

The income of the hotel accommodation services ex-

cluding taxes comprised in 2009 1,8 billion (about

180 million Euro), that is less than in 2008 by 128

million Hrivna. (or by 15,6 percent comparing prices).

The hotels of Kyiv received 42,3 percent of this sum,

the Crimea hotels got 13,3 percent, the hotels of

Lviv region 9,0 percent, Odesa hotels 6,9 percent,

hotels of Dnipropetrovsk region 3,9 percent, and

of Donetsk region 3,7 percent.

The income from one person accommodation in

Ukraines hotels in whole was 23.000 Hrivna (about

2.300 Euro, excluding taxes), while the hotels of Kyiv

received about 60.000 Hrivna, the hotels of Kharkiv

region 27.000 Hrivna, the Crimea hotels 27.000 Hrivna,

and the hotels of Zhytomyr region only 4.200 Hrivna.

The income from rooms function for one person per

day was little less than 300 Hrivna. The highest index

among all Ukrainian regions was in the city of Kyiv, in

Lviv, Odesa and Ivano-Frankivsk regions and in the

Crimea; and it ranged from 460 to 300 Hrivna.

In 2009 comparing to 2008 the income for foreigntourism decreased by 1,8 million Hrivna and was 913,7

million Hrivna. (42,3 percent of overall income from the

main activity). The hotels of Kyiv earned the highest

income for foreign tourism 574,5 million Hrivna. or

62,9 percent of the total income received from foreign

tourists. A significant contribution to Ukraines overall

foreign income was made by the hotels in the Crimea

(7,6 percent of the overall income), as well as the hotels

of Lviv, Odesa, Kharkiv and Donetsk regions (from 6,8

to 3,2 percent).

The hotel economy is the business sphere where onlythose hotels can compete who offer high quality services

to their clients, which is impossible without professionally

trained personnel. In 2009, the hotel personnel included

27, 1 thousand persons, which are 1.903 persons or

6,6 fewer than in 2008. The reduce of personnel quantity

was connected with job cuts because of the economic

crisis. It was an inevitable step for the sake of cost cuts

on staff wages. Thus, the countrys average quantity of

personnel in one hotel was 32 persons. An average

monthly wage of a person decreased in comparison to

2008 by 26,2 Hrivna and was about 1.800 Hrivna or

about 180 Euro per month.

Growing SME sector in tourism

Physical persons entrepreneurs can compete signi-

ficantly with the hotel enterprises including big hotels.

The number of landlords is increasing remarkably.

They can provide a range of services to better prices.

According to the data of State Tax Administration in

2009, the number of physical persons entrepreneurs

with a temporary accommodation services was about

6.300 persons overall, and thereof 2.736 persons or

43,5 percent of all entrepreneurs who are running thehotels themselves. The number of physical persons run-

ning hotels has increased in 2009 by 526 persons or

23, 8 percent compared to 2008. Their overall income

was 335,2 million Hrivna (59,0 percent of physical per-

sons proving with the temporary accommodation ser-

vices), that was 52,7 million Hrivna or by 18,7 percent

more than in 2008. The highest quantity of physical

persons acted in the Crimea (268 persons of 9,8 per-

cent of the total number of entrepreneurs providing

with services on temporary accommodation), in Trans-

carpathians region (259 persons or 9,5 percent) and in

Lviv region (238 persons or 8,7 percent), they received

more than a quarter (26 percent) of overall hotel in-

come in Ukraine. A big income from providing with

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temporary accommodation services was also receivedby entrepreneurs in Dnipropetrovsk region - 25,7 million

Hrivna. or 7,7 percent of overall incomes from the hotel

enterprises run by physical persons in Ukraine. The

income of entrepreneurs in Kyiv was 7,3 percent of

overall income from private hotels, in Odesa and

Donetsk regions 7,2 percent to 6,9 percent respec-

tively.

Obviously, the hotel economy is an important componentof tourism industry. Its effective function indicates posi-

tive changes in the countrys economy. It is also the

important precondition of intensification of international

relations and country integration into the world commu-

nity. Improvement of accommodation quality in Ukraine

according to the international standards is the priority in

development of hotel industry; along with improve of

tourism technologies, introduction of new kind and

forms of servicing that will allow satisfying the needs of

clients to a greater extent.

One of the main precondition for the development of

the hotel economy in Ukraine is creating a favourable

investment climate and seeking funds to build new

hotels and reconstruct the functioning ones.

The year of 2009 resulted in investments of about 1,4

billion Hrivna and 788,6 million Hrivna (corresponding

to 84,8 and 66,2 percent of investments in 2008). The

share of investments for the development of the hotels

and other places for temporary residence has mastered

to 1,5 percent. The funds of the state budget made it

possible to master 19,8 million Hrivna, or 0,9 percent

investments for these activities.

3.407 accommodation units were put in operation in

Ukraine in 2009, 1.662 of them in 36 brand new

hotels. Reconstruction of already functioning buildings

helped to increase the number of accommodation units

by 1.745; almost half of them (49,3 percent) were put in

operation in the city of Kyiv and the Crimea. The tourist

camps for 353 accommodation units also began to run.

Since January 2010, the direct foreign investment in

the development of hotels and other places for temporary

residence have amounted to 258,9 million US dollars

which was 0,7 percent of the total direct investment in

Ukraine.

31 countries of the world have invested in Ukraines

economy. The biggest investments for the development

of the hotel economy of Ukraine were made by Cyprus -

76,1 million US dollars, Great Britain 48,5 millionUS dollars, Switzerland 38,2 million dollars, Russian

Federation 25,3 million US dollars, USA 23,2 million

US dollars and British Virginian Islands - 14,0 million

US dollars.

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Cyprus

29,4% 18,7% 14,7% 9,8% 9,0% 5,4% 13,0%

RussianFederation USA

British VirginIslands

Others

Great Britain

Switzerland

Distribution of the direct foreign investmentsin development of hotels and other places for

temporary residence by January, 1st 2010

Investments in development of the hotel infrastructure


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Since 2000, Ukraine has implemented significant

positive economic and legal reforms. The economy has

grown at an annual rate exceeding 7 percent over the

period of 2000 to 2008. This growth was fueled by strong

domestic demand, and solid consumer and investor

confidence. The economic and financial crisis that un-

folded in 2008 has shook investor confidence and

has stalled the inflow of capital. Ukraine remained in

recession throughout 2009, with a recovery anticipated

during 2010. In 2010 the Ukrainian government has

adopted the Economic Program for 2010 2014, whichcontains a large number of positive economic and social

measures and reforms over the medium terms.

Annual growth rate of 4 percent expected

In 2010, the Ukrainian economy is expected to grow by

about 4 percent annually. In the first half of the year,

the recovery was mainly export-led. In the second half

of the year, as the external conditions worsened, the

growth was supported by restoring private consumption

and investment demand. In 2011, real GDP is forecast

to accelerate slightly to 4.5 percent annually by vigorous

investment demand. The latter fact, however, will also

spur imports. The current account, thus, is projected

to widen to about 3 percent of GDP in 2011, with net

exports dragging down the pace of economic growth. Due

to slower transfer of higher natural gas prices to other

utility tariffs and administrative measures and to sup-

press food price growth, inflation will be kept around

10 percent in 2010. However, the utility price growth is

set to resume strongly next year, Ukraine has kept the

2011 inflation forecast at 10 percent.

At the beginning of December 2010, soon after theapproval of the new Tax Code, the Government presen-

ted the Draft 2011 Budget Law. Due to new taxation

rules with lower corporate taxes and some new tax

breaks, the draft envisages a moderate increase in bud-

get revenues, up by a nominal 11.4 percent annually. At

the same time, reducing the deficit, expenditures are

projected to increase by about 4 percent. Expenditure

tightening allowed the government to target the state

budget deficit at 3.08 percent of GDP in 2011. Approval

of the 2011 Budget Law with a general government

deficit below 3.5 percent of GDP in 2011 is one of the

key IMF requirements for Ukraine to receive December's

IMF tranche. To reduce budget expenditures, Ukrainian

authorities launched a public administration reform at

the beginning of December 2010 and plan to reveal the

details of pension reform by the end of the year.

Foreign Trade

Russia and the European Union are responsible for

more than half of Ukraine's trade. The USA is a relativelysmall trade partner, accounting for only 2.9 percent of

exports and 3.3 percent of imports. In 2008, metals

accounted for more than 41.2 percent of Ukraines

exports, however, due to decline in the global demand,

the share of metals in the exports structure declined

to 33.4 percent in 2009.

Ukraine is a member of the International Monetary

Fund (IMF), the World Bank, and the European Bank

for Reconstruction and Development (EBRD). Ukraine

also cooperates with the Organisation for Economic

Highly Positive Reforms/Actions Taken by Ukrainebetween 2000 and 2008

WTO accession (and all reforms embedded in this process)

Reduction of non-payment and barter transactions, especial-ly in budget-related transactions and the energy sector

New Joint Stock Company law that brings corporate governance closer to OECD standards

Agricultural land titling

Allowing entry of foreign banks

Adoption of the Budget Code, establishment of the budgetclassification system and introduction of equalization formula

into inter-governmental fiscal relations

Establishment of the Treasury system, including TreasurySingle Account that services the budgets of all levels ofgovernment

Creation of internal audit function and improvement ofavailable fiscal information

Reduction of tax expenditures, including dismantling FreeEconomic Zones (FEZ) loopholes

Introduction of flat rate for personal income tax The im-plementation of the Trends in International Mathematicsand Science Study (TIMMS) and independent evaluation/examination in schools.

Source: Ukraine. Country Economic Memorandum. Strategic Choicesto Accelerate and Sustain Growth, WB, 2010

Economic Program shows results


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Ukrainian authorities regularly declare their willingness

to encourage foreign investment and the broader public

is well disposed towards foreign investment. Below an

overview on international observers of the economic

development of the country is presented.

Legal Framework of Investment Activities

Ukrainian legislation generally creates equal opportuni-

ties for both domestic and foreign investors. There areonly few restrictions on foreign investments, e.g. foreign

companies cannot hold legal title to agricultural land.

Ukraine has already established a favourable legal fra-

mework for investors to date. This domain is specifically

regulated by the following Laws of Ukraine: on Investment

Activities; on Treatment of Foreign Investments, on

Elimination of Discrimination in Taxation of Business

Entities Established Using Properties and Funds of

National Origin etc. These acts provide:

sovereign guarantees of investment protection

irrespective of its form of ownership;

application of the national treatment of currency

regulation and tax collection on the territory of

Ukraine to business or other legal entities established

with involvement of foreign investments irrespective

of form or time of the latter;

indemnification for damages, lost profit and non-

pecuniary damages that have resulted from action/

inaction of government bodies of Ukraine or their

officials or their improper performance of their

legislatively established responsibilities in respectof foreign investors;

investment recovery to investor in kind or in currency

it has been made without any duties or fees as well

as recovery of any returns on such investments in

cash or in kind in case of investment activity termi-

nation.

In the same time, the issue of improving legislative

and organisation framework to enhance the relevance

of mechanisms providing beneficial investment climate

and create the basis for preservation and increase of

competitiveness of the domestic economy remains

high on the agenda.

The Government approved by its Resolution No. 1107,

2008, the Agenda for the Cabinet of Ministers of

Ukraine to Overcome Effects of the World Financial

and Economic Crisis and Assure Sustainable

Development. It focused on the prevention of further

unfolding of the crisis, slowing-down of the economy

of Ukraine and degradation of living standards of its

residents.

Respectively, one of the priority tasks of the Government

concerns the provision of incentives to investment activities,namely: boosting up investing activities, contributing to

the increase of volume of foreign direct investment in

Ukraine, and creating conditions for accelerated techno-

logical modernisation of domestic production facilities

to improve their energy efficiency and competitiveness.

The actions of the Government are aimed at: securing

stable operation of enterprises of the real economy sec-

tor in crisis conditions, first of all, in those sectors that

have been hit most by the world financial crisis; provid-

ing governmental support to the above sectors, also in

the form of sovereign guarantees; and implementing

an efficient policy in the domains of energy saving and

domestic industrial production sector technological

upgrade.

National Target Programme for Euro 2012

One of the mid-term set task of the Government concerns

the elimination of infrastructure-based limitations to

develop previous traffic arteries and their integration

into the overall European infrastructure; to develop rail-

road transport, sea ports, airports, modern telecommu-

nications facilities, as well as the execution of the NationalTarget Programme of Preparing for and Holding Finals

of UEFA Football Championship 2012 in Ukraine.

In July 2010, the Verkhovna Rada adopted the Law of

Ukraine to Change Some Laws of Ukraine on Hotel

Infrastructure Development and Preparation for Holding

the Final Part of European Football Championship 2012

in Ukraine. The Law envisages a temporary (effective

from 1 January 2011 until 31 December 2020) profit

tax relief on hotel services (hotel room sales and ancillary

hotel services) provided by three, four and five-star

hotels.

Views from outside Investment climate improves


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The Government has taken on ambitious activitiesaiming at improving the current situation in practically

all the economy sectors from metallurgy to building and

construction. A number of laws and Cabinet resolutions

have been elaborated and adopted to resolve issues in

various sectors. These specifics include resolutions to

provide favourable environment for investments in the

construction sector, improve and cheapen licensing and

permit-issuing procedures, implement a competitive

framework for land plot and related development rights

acquisition, provide incentives for the use of alternative

energy sources and fuels, expanding the domestic

market for local machine-building, agro industrial etc.companies.

Attractive conditions for investments

In furtherance of Government commissions a sustainab-

le increase of investments in the national economy took

place and the implementation of an innovation and

investment-based model of economic development was

established. The Ministry of Economy makes regular

efforts to further improve the legislative framework in

the investment domain.

E.g., legislative framework has been set up to secure

development of:

public and private partnerships in Ukraine;

updated legislation in the domain of mineral resource

management;

concession activities;

out-of-court dispute settlement;

industrial parks;

clustering of the economy of Ukraine.

Noteworthy, the investment policies of the Government

of Ukraine are aimed at creating attractive conditionsfor investing activities and thus requires public support

from investors. Moreover the need to speed-up expected

changes in the legal-regulatory domain demands more

proactive stance from investors who should propose to

the Cabinet of Ministers of Ukraine their draft legislative

acts with clear-cut and balanced mechanisms of solving

specific issues in the investment domain professionally

developed by joint efforts with central bodies of the

Executive.

Foreign direct investment account for 5 billion 986 million

US dollars in the economy of Ukraine in 2010, which is

6.2 percent more than in 2009 (State Statistics Service

reported 5 billion 634 million US dollars). The EU invested

4 billion 605.8 million US dollars (76.9 percent of thetotal volume), CIS countries invested 849.2 million US

dollars (14.2 percent), and other countries of the world

531.0 million US dollars (8.9 percent). Investment was

made mainly in the form of cash contributions, which

sum up to 5 billion 684.8 million US dollars (95.0 per-

cent of invested amount). Increase in the total foreign

capital in the economy, given its revaluation, losses,

exchange rates, etc., amounted to 4 billion 655.0 million

US dollars for 2010.

Increase in foreign capital was observed at enterprises

engaged in financial activities (in the amount of 2 billion628.5 million US dollars), real estate transactions, leas-

ing, engineering and provision of services to entrepre-

neurs (485.6 million US dollars), trade, repair of motor

vehicles, household goods and items of personal con-

sumption (447.9 million US dollars), as well as at indu-

strial enterprises (766.2 million US dollars).

Both domestic and foreign investors still encounter

difficulties at a practical level. These do not relate speci-

fically to the issue of foreign ownership or investment,

but rather to enforced arbitrarily administrative hurdles,

or random delays.

Foreign investments are not to be subject to nationalisa-

tion, expropriation, requisition, or any other measure of

similar effect, except it is in the public interest. In such

cases, compensation must be provided to the investor

based on the market value of the property.

(source: Source: PriceWaterhouseCoopers)

Indicators for doing business in Ukraine

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Table 10: Doing Business 2011 data for the Ukraine

Topic Rankings DB 2011 DB 2010 ChangeRank Rank in Rank

Starting a Business 118 136 18

Dealing with 179 181 +2Construction Permits

Registering Property 164 160 -4

Getting Credit 32 30 -2

Protecting Investors 109 108 +1

Paying Taxes 181 181 No change

Trading Across Borders 139 139 No change

Enforcing Contracts 43 43 No change

Closing a Business 150 145 -5

Source: Ukraines rank acc. to International Financial CorporationsDoing Business 2011 Annual Report


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Ukraine is the second largest country in Europe in terms

of area (603,700 sqkm) and the fifth biggest country

in terms of population (46.2 million people). Ukraine

adjoins the Russian Federation to the east and north-

east, Belarus to the northwest, Poland, Slovakia and

Hungary to the west, Romania and Moldova to the

southwest, and the Black Sea and Sea of Azov to the

south and southeast, respectively.

Ukraine is a republic under a mixed semi-parliamentary

semi-presidential system with separate legislative, exe-cutive, and judicial branches. In February 2010 Victor

Yanukovych was elected as the President of Ukraine.

Administratively, Ukraine is composed of 24 regions and

the Autonomous Republic of Crimea. The cities of Kyiv

and Sevastopol also have a special legal status.

Ukraine's population is estimated at 45.7 million people

at the end of 2009, which is 5.7 percent lower than the

population disclosed in the 2001 census. Five cities

have a population close to one million people, including

Kyiv with 2.7 million people.

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Profile of second largest Country in Europe


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PART 2 Section A:Detailed Investment project descriptions

PART2:IN

VESTMENTPROJECTSIN

UKRAINECosmopolit

I. Project Cosmopolit, Kharkiv HHHHH

1. GENERAL INFORMATION

1.1. Type of project: Reconstruction

1.2. Name of project: Reconstruction of 2B-4 and -6 buildings including expansion

of hotel and office- commercial premises at 1,

Akademika Proskoury str., Kharkiv.

1.3. Term of project implementation: 03.11.2010. construction permit is obtained

04.11.2010. start of construction

31.03.2012. putting into test operation

Hotel classification (stars): De luxe (*****)

1.4. Type of hotel: Business hotel with working and vacation conditions.

1.5. Number of rooms: 90 = 29 (available funds) + 61 (room funds due to reconstruction)

1.6. Room category: Single, Twin. Suite

Type Economy Standard Semi-suite Suite

Single 2 59 14

Twin with two separate bed 13 2

With extra bed 59 14 2

1.7. Approximate price (room price for one person):

Single .................................................90-150 EUR

Twin .................................................. 135-200 EUR

Suite ................................................. 250-350 EUR

Apartment ......................................................... EUR

Note: Armani and DSquared theme interior in the suite rooms.

1.8. The hotel can offer the Restaurant: 1

following facilities: Conference-hall

Swimming pool

Fitness centre

Sauna

Medical care

Business-centre

Parking

Currency exchange

Note: Buildings are designed in such a way that crossings of guests and personnel flows are minimized to

let the former freely conduct their activities: whether participating in business meetings or attending

SPA centre simply in slippers and bathrobe directly from their rooms.


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PART2:IN

VESTMENTPROJECTSIN

UKRAINECosmopolit

1.9. Restaurants:Type Total number Cuisine Price Interior Other

of seats

1. Restaurant de luxe 3 halls, Italian and Average Venice hall,

DaVinci belongs to 150 seats national cheque: Anieri

restaurant chain 50 EUR library-hall

Kozyrna karta

2.Lounge-hall bar 50 seats Theme bar Average Lounge style

cheque:

15 EUR

3. Breakfast hall 90 seats Buffet, Included incontinental, the room

English price

1.10. Conference-hall:

Type Total number Quality Price Interior Technical

of seats equipment

Conference hall in 200 90 EUR/hour 5* hotel interior. Projector,

building console 450 EUR/day Exit to the roof presentation

where open board, monitor,

terrace is Wi-Fi, sound

located. system, ofsynchronized

interpreting.

Room for negotiations 10 10 EUR/ 5* hotel interior Presentation

in the hotel building 45 EUR/ board, monitor,

Wi-Fi

Conference hall in the 120 40 EUR/ Business class Projector,

building of business 200 EUR/ interior presentation

centre board, monitor,

Wi-Fi, sound

system, system

of synchronized

interpreting.

Room for meetings 12 25 EUR/ Business class Presentation

and seminars 110 EUR/ interior board, Wi-Fi

Hall for trainings 30 35 EUR/ Business class Presentation

and seminars. 140 EUR/ interior board, Wi-Fi,

sound system

1.11. Fitness centre:

Note: Situated near the SPA zone, exit to the swimming pool, 5.3 m height.


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2. LOCATION

2.1. Address: 1, Akademika Proskoury str., Kharkiv, Ukraine 61070

2.2. GPS-coordinates: 36.278984 50.04488

2.3. Place characteristics: Business centre

Park zone

Note: Business complex is located in the park city zone along the entry road from 105 highway

Moscow-Kharkiv to Sumska central street.

Distance to: City centre : ................................6 km

The nearest airport: ............. 18,5 km The nearest railway station: . 10,7 km

105 highway : ......................0,5 km

2.4. Transport connections (types of public transport):

Underground..................... Yes 6 km

Bus/Trolleybus ..................Yes directly

Tram ...................................... Yes 1 km

River tram ........................................No

Route taxi ..........................Yes directly

Note: There is transport connection from the railway station to the city centre and some parts of the city.

The opening of the new route is being negotiated; it will connect business centre, airport and

Metalist stadium.

2.5. Map:


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3. CONSTRUCTION QUALITY AND TECHNICAL EQUIPMENT

3.1. What is the base of building?

29 rooms and DaVinci restaurant are located in the four-storey building (metal frame, HVF). Hotel room

funds under construction will be in the seven-storey building (monolith ferroconcrete frame, HVF).

3.2. Technical information:

Building ground: Ferroconcrete founding.

Number of storey: 7

3.3. Building/decoration characteristics:

Business complex has own gas boiler. Facades made of mirror glass and keramogranite tiles combine

the buildings in one architecture ensemble.3.4. Type and state of technical equipment:

It is planned to use the sun vacuum collectors for hot water supply during sunny time.

Also a backup diesel generator will be set.

3.5. Features:

Type Quantity Status Description

Electricity Power 670 kW Supply chain in the territory

Gas 60thousand 3/month Supply chain in the territory.

in winter Own gas distribution point.

8thousand 3/month

in summerDrink water 10003 Urban network 2 entries

Waste App. 12003 Urban network 2 entries

3.6. If building/ reconstruction is on, please describe state of building:

State of object: Modernizing reconstruction and new construction.

Building state: First phase of project:

Reconstruction of Business centre - 7 storeys (S=7 882 m2) 100% (acting

Business centre)

Construction of hotel-restaurant - 4 storeys (S=2473 m2) 100% (acting

Cosmopolit hotel and DaVinci restaurant)

Second phase of project:

Planning stage (before the start of construction) 100%

Construction stage 6%

Business complex in the whole 61%

Present building expenses:

First phase of project:

Equity of 2890 thousand EUR and TULCO loan (Swiss company TULCO Holding AG),

the rest of which comprises 4444,4 thousand EUR for 01.01.11.

Second phase of project: Equity of 370 EUR used:

Planning stage (before the start of construction)92,6 thousand EUR Construction stage...77,4 thousand EUR


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If building/ reconstruction is on, please describe state of building?

Does constructing continue\ or is it stopped?

Construction works continue.

Present situation with contractual agreement:

Contract with building company is valid

4. CONSTRUCTION PERMITS AND LAND RIGHTS

4.1. What permits for construction/licenses have you got?

Type Issued Valid till Notes

Project of land use 13.12.2002 01.06.2027 Contracts of land leasing

05.11.2003 01.10.2028

Project documentation 27.10.10

State expertise 27.10.10

Construction Permit 03.11.10 01.06.12

Sanitary epidemiological station 13.09.10 13.09.13

21.10.10 21.10.14

Fire safety 26.10.10

City plan grounding approved 11.08.10 01.06.12

4.2. What permits/licenses would you need to get?

We already have all permits and licenses.

4.3. Is the land purpose in line/will it be in line with project implementation of hotel construction?

Present land purpose 1. Operating and maintaining administrative buildings and constructions.

2. Operating and maintaining economic block and the entry to a

non-residential building

Future land purpose 1. Operating and maintaining the hotel building, administrative buildings

and constructions

2. Operating and maintaining the hotel building.

5. What land rights have you got at the moment?

Rights Given by? When? Valid till NotesLand ownership Leasing

Building ownership Kharkiv City Bureau 22.05.2002 The entry to a

of Technical Inventory 15.04.2005 non-residential

14.07.2010 building, office,

14.07.2010 restaurant, hotel;

Land leasing Executive committee 13.12.2002 01.06.2027

of Kharkiv municipal 05.11.2003 01.10.2028

council

Leasing of building Own property

5.1. Do you have a possibility to purchase land (get property acquisition)in case of absence of land ownership?


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II. UKRAINIAN PARTNER

1. Name of juridical person/physical person-entrepreneur:

LLC Telesens Ventures.

2. Address, phone/fax number, e-mail address, other contacts:

2.1. 1, Akademika Proskoury str., Kharkiv, Ukraine 61070

+38057 7 199 535/+38057 7 199 535, [email protected]

3. Date of foundation (for juridical person): 16.08.2001

4. Registered number (EDRPOU National State Registry of Ukrainian Enterprises and Organizations):

31632075

Extract from EDRPOU is in the annex of this form: Yes

5. Founders (for juridical person):

LLC Managing company Telesens Holding

6. Governing body: General meetings of shareholders, Director.

7. Main activities of Ukrainian partner: 70.20.0. Real estate leasing;

71.33.0 Office equipment leasing;

74.60.0 Investigating activities and providing security services;

74.13.0 Market research;

74.14.0 Management and commercial consulting;

51.90.0 Other wholesale trade.

8. Registered capital:

nominal: 14 912 067,54 . paid-in: 14 912 067,54 .

9. Are there any daughter enterprises, subsidiaries?

Affiliate enterprises:

9.1. LLC Management company Telesens Holding , Registered number (EDRPOU National State

Registry of Ukrainian Enterprises and Organizations): 33203976,

1, Akademika Proskoury str., Kharkiv, Ukraine 61070

9.2. LLC Hotel Kosmolit, Registered number (EDRPOU National State Registry of Ukrainian Enterprises

and Organizations): 33290037, 1, Akademika Proskoury str., Kharkiv, Ukraine 61070

9.3. LLC DaVinci, Registered number (EDRPOU National State Registry of Ukrainian Enterprises and

Organizations): 32950077, 1, Akademika Proskoury str., Kharkiv, Ukraine 6107010. Who is the contact person for this project?

Name and contact information Demjanenko Svitlana

Ph. +38057 7 199 536

Position: Executive Director

11. What is the investment strategy of Ukrainian partner?

Long-term operation

12. Are there any current contractual relationships on the project?

All necessary agreements are reached.

13. Have you (your colleagues or contractual partner) got previous experience in similar projects?Yes

First project phase construction of Business complex (2001-2005):

Reconstruction, building, putting into operation the 10356 m2 Business complex.


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14. What is your experience in hotel/ tourist/ restaurant business?

Managing the five star hotel for 5 years.

Managing Class de luxe restaurant for 6 years.

15. What is your motivation for implementing this hotel project?

Holding the leading position on the market of commercial real estate of Kharkiv.

Increasing current capitalization up to ~ $29 million.

Including in to worlds brand hotel network (ex. Mariott, Radisson).

Satisfying UEFA demands on the 5* accommodation in Kharkiv during Euro 2012.

III. PROJECT FINANCING

1. Total investment: First building phase:

Building and putting into operation the business complex, S=10356 m2 (estimate costs before recon-

struction~$8900 thousand EUR):

Office building of the business complex - 7 storeys (S=7 882 m2);

Hotel and restaurant building - 4 storeys (S=2473 m2).

Equity of 2890 thousand EUR and TULCO loan (Swiss company TULCO Holding AG), the rest of which

comprises 4444,4 thousand EUR for 01.01.11.

Second building phase:

Planning stage (before the start of construction) .........92,6 thousand EUR

Building stage ..............................................................5166,7 thousand EUR

Building costs ..............................................................3731,9 thousand EUR Settlement costs ........................................................ 1434,8 thousand EUR

Refinancing TULCO loan ............................................ 4444,4 thousand EUR

2. Justification of costs: (table with all important cost figures)

Description ......................................................................Amount, thousands, EUR

Project developing, obtaining necessary permits .........92,6

Refinancing loan .............................................................4444,4

Building works (new building) ........................................3089,6

Building works (reconstructing business complex) ......498,5

External networks ............................................................25,3

Equipment .......................................................................1434,8Other ................................................................................118,5

Total ..................................................................................9703,7

3. Equity:

Foreseen for the project in total: ................................3334 thousand EUR

Available .......................................................................74 thousand EUR

Already invested in the project ...................................3260 thousand EUR

Note: Equity of 2890 thousand EUR was used during the first phase (business center construction) and equity

of 370 thousand EUR during the second phase. Available equity (74 thousand EUR) will be invested in

further construction.


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4. Loan:

Foreseen for the project in total: ..................... 9260 EUR

Available ........................................... EUR

Already invested in the project ........................ EUR

Note: 9260 thousand EUR loan is planned to use in parts, 4444,4 thousand EUR for refinancing TULCO loan,

and - 4815,6 thousand EUR for financing the second construction phase.

5. Finance model: Please think carefully about financing aspects of the project and answer the

following questions:

What is in your opinion the term to amortize investments?

Planned payback term - 6,2 years

What costs are foreseen for production (electricity, personnel) and operation(current repair, capital repair)?

Average operating expenses during 2011-2018 (current production and

maintenance) -1716765 EUR annually (loan costs excluded). Please see p. III.6.

for details.

6. What annual turnover can be expected after completion? What annual turnover will be in the future?

3417615 EUR on average during 2011-2018 annually.

Year Income, Expenses, Net operating profit, Operating

EUR EUR EUR profitability

2011 1 494 000 973 779 520 221 53%

2012 2 912 401 1 444 063 1 468 339 102%

2013 3 140 885 1 478 506 1 662 379 112%

2014 3 418 493 1 520 354 1 898 139 125%

2015 3 721 086 1 867 575 1 853 511 99%

2016 4 050 912 2 102 156 1 948 755 93%

2017 4 410 421 2 204 972 2 205 450 100%

2018 4 192 719 2 142 711 2 050 007 96%

Total 27 340 918 13 734 116 13 606 801 99%

Are you going to establish amortization fund for operation costs or will the financing

be from the current turnover?

From the current turnover.

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