Private Enterpreneurs: Backbone of Bulgarian Tourism
Nedyalka Sandalska - Executive Director "Balkantourist" Ltd.

I accepted this invitation with the greatest pleasure because of the opportunity

» to make an attempt to convince once again the representatives of the international business community attending this conference, of the huge potential of the tourist industry in Bulgaria and its contribution to improving the national standard of living;

» to present to you the possibilities of this sector of our national economy to be profitable, using the potential and energy of Bulgarian private entrepreneurship, while preserving a good and mutually advantageous co-operation after the withdrawal of the State from ownership;

» to introduce to you the Bulgarian entrepreneur - the MG Corporation which I have the honour of representing and whose activities during the last few years have led to the establishment of a tourism group, leading in Bulgarian tourism and fully oriented to the contemporary market requirements.

The tourist industry of Bulgaria began its development in the 1920s. The motives for its subsequent advancement and to this day are the possibilities for utilising the favourable and unique combination of its primary natural resources. Bulgaria has the potential of a year-round tourist destination with an excellent combination of various and preserved gifts of nature, including 370 km of coastline with some of the cleanest beaches in Europe, suitable for summer holidays; mountain massifs with unlimited opportunities for winter sports and summer holidays; a multitude of curative mineral sources; natural phenomena and parks; diverse flora and fauna. The country has a rich historical and cultural heritage as one of the oldest nations in Europe. Bulgaria is a crossroads between two continents - Europe and Asia - and the Bulgarians are a spiritually elevated people, hospitable, friendly, with age-long traditions and rich folklore, music, cuisine and lifestyle.

The first state-run tourism company, "Balkantourist", established in 1948, operated with a certain number of hotels in the country and organised the tourist trips to and from this country.

Considerable funds have been invested in hotel construction since the mid-1970s. After the model of the big resorts in Spain, the resort complexes Zlatni Pyasatsi and Slunchev Bryag, Albena and Sveti Konstantin were built on the Black-Sea coast. Part of the hotel facilities of the industry satisfied as a target mainly the domestic demand and the demand from the former socialist countries; this determined the quality of the tourist products built and offered at the market. During the 1980s, Bulgaria re-oriented partially its investment policy in tourism, building the Grand Hotel Varna, the vacation settlements Dyuni and Elenite, the hotels in the Borovets resort - Rila and Samokov, the Sandanski Hotel, hotels in the capital - Sheraton Balkan and today's Kempinski-Zografski, as well as the hotels of the Novotel chain in Sofia and Plovdiv, which have attracted tourists from Western Europe, their share reaching up to 40% of the total number of foreign tourists.

During the period 1990 - 1994 tourism in Bulgaria suffered the negatives of the drop in travelling from Eastern and Central Europe. The higher requirements of the tourists to the quality of the tourist products, with offer at the international markets exceeding demand, affected the booking of the Bulgarian hotels and resorts. This fact as well as the general economic conditions in the country - high interest rates, high rates of inflation, unstable rates of exchange - led to a limitation of the opportunities to generate considerable resources for funding the indispensable modernisation and renovation of all existing facilities in resorts and cities.

With the very first steps for creating the market mechanisms of developing the Bulgarian economy, the Bulgarian private entrepreneurs oriented their interests towards tourism. As a beginning, a number of new small hotels and establishments of public catering, entertainment and trade were built on the Black-Sea coast, in mountain resorts, along the highways, in bigger towns and cities. The private tour-operator and tourist agency activities developed.

During the next years we witnessed the general financial stabilisation, the adoption of the needed legislation and the speeding-up of the privatisation process for the substantial part of the tourist facilities. For the big Black-Sea and mountain resorts, the privatisation was carried out on the basis of the privatisation of differentiated parts, thus contributing to enhance the role and initiative of private entrepreneurship. Some of the investors in the privatised tourist sites were well oriented towards the requirements of demand and offer and strove for higher rates of return of the invested funds.

During the last 2 or 3 years this process contributed to the initial, so much needed renovation of hotels and the improved quality of the offered tourist products.
It did not take long for the end results for the tourist industry of Bulgaria to become apparent. In the year 2000 the number of foreign tourists rose by 13% compared with the preceding year, and during the 10 months of 2001 alone - by another 20%, thus proving unquestionably the advantages of the change in ownership.

The past year 2001 saw mainly an increase of the tourists from the European Union, this being a record year for the number of German tourists with a 43%-rise. A rise was also registered in the number of tourists from Great Britain, France, Spain, Italy, Belgium and other countries. The countries in Eastern and Central Europe registered a considerable increase as well.

With this brief information, I would like to emphasise the fact that the tourist industry in Bulgaria is one of the few sectors that during the transition period managed not only to quickly restore their lost market positions, but also - by using most rationally the gifts of nature and the labour resources of the country - to create the conditions for developing the initiative of private entrepreneurship, for opening up new businesses and even for increasing employment.


MAJOR ADVANTAGES OF BULGARIAN TOURISM

» Competitiveness of the primary natural resources with possibilities for year-round development - Bulgaria is a crossroads between two continents; it has a coastline with vast and clean beaches, a diverse mountain relief and climate, a wealth of curative mineral waters, unique cultural, historical and architectural landmarks, many of them proving Bulgaria's contribution to the European and world culture, the traditions, customs and lifestyle of one of the oldest nations in Europe;

» the constructed tourist facilities, considerable in volume;

» certain market positions held at the international tourist markets;

» a qualified workforce.


MAJOR DISADVANTAGES OF BULGARIAN TOURISM

» a limited product structure and offered products whose quality does not comply with the requirements of the contemporary market;

» limited financial resources for modernisation of the facilities and for its market-oriented restructuring and development towards new tourist regions and markets.

The tourist business is a strongly fragmented sector. Its orientation towards the direct and personified meeting of the individual needs of each tourist requires more than any other sector of the economy to develop the initiative of private entrepreneurship in the realisation of this business and to provide an opportunity for individual chances of realisation to the Bulgarians wishing and capable of this.

All of the above-said can be summarised in one sentence: "The key factors for the development and growth of Bulgaria's tourist industry are there - a rich natural potential, a built tourist infrastructure and an established market presence."

Knowing in-depth the advantages and disadvantages of Bulgarian tourism and the achievements in the tourist countries that are our competitors at the international tourist markets, the MG Corporation laid the beginning of its commitment to Bulgaria's tourist industry 7 years ago - in mid-1994. The company "Balkantourist Holding" was established. The structure was set up on the basis of the professional experience and managerial skills of specialists who had worked for many years in international tourism, and who successfully coupled their vision with the most modern tendencies in the development of this industry. The experience of world-known hotel chains in the structuring and management of hotel business, tour-operation and tourist agency and transport, was studied and applied.

A long-term strategy of development was worked out with the following main aims:

» diversified product and regional business structure which will be adapted to the customer requirements and their changes, taking into consideration the behaviour of competitors, as well as the current tendencies in tourism;

» orientation towards certain market segments - high- and medium-solvent customers and the development of new markets;

» a complete technological cycle of offer and sales of comprehensive tourist products;

» formation and development of trade marks of its own, Grand Hotel being introduced so far.

The follow-up actions were fully subordinated to the realisation of the initial strategy, and each one of the investment transactions was not an end in itself and at any price, but was carried out only after achieving the strategic goals.

Our chances for a long-term and successful commitment to this business were also based on our resolution to be professional investors and to implement an effective professional management.

The realisation of our strategic plans and initiatives became possible thanks to the financial and moral support and the modern views of business development in the conditions of a market economy, held by the MG Corporation's managerial team.

In pursuit of the major goals, in mid-1994 we successfully concluded one of the first and most substantial privatisation transactions in tourism - that for the Grand Hotel Varna on the Black Sea, in 1995 - for the leading Bulgarian tour-operator, "Balkantourist", followed in 1996 by the transaction for the Rila Hotel in the mountain resort Borovets.

In the developed industrial countries, nearly 60% of tourist demand is formed by the families for vacations, and the other 40% are business and service trips. The renowned international hotel chains and investors target their interests mainly on the latter element of tourist demand while the vacation element is satisfied by national investors. Therefore, we decided that in Bulgaria, due to the definitely vacation and seasonal nature of tourism, it is possible to count on foreign investors to a limited extent. This provoked our interests for a long-term presence in the development of the tourist business in the country. As our subsequent practice has also shown, the attracting of foreign investors may be directed to certain perspective projects through modern schemes of business partnership - project funding; the creation of joint ventures, also abroad; management and franchising; partial funding of projects, etc.

During the years past, the tourist investment portfolio of the MG Corporation was formed as the biggest diversified group in tourism in Bulgaria with predominantly private participation.

The overall business is structured in a modern way, adopted in international practice:

Management - centralises strategic development, research and the realisation of new projects, attracts foreign investors and management of the activities where the savings from the scale are realised - corporate management of the money flows, marketing and advertising, standards subordinated to our long-term philosophy of reasserting and developing a trade mark of our own;

Hotels - acquired from privatisation transactions and subsequently realised large-scale investment programmes of modernisation, increasing the capacity and re-positioning in accordance with the requirements of the market and the international standards. In marketing studies of economic feasibility and selection of hotels we strove to find the maximum and effective combination by localisation, territorial location in regions where the development of tourism has in principle been intensive, market positions, coupling of low and high seasons and hotels with opportunities for re-positioning and development.

The acquired hotels and the new projects are situated in famous Black-Sea and mountain resorts of the country and in the bigger towns and cities, and they offer the conditions for vacationing, business and conferences, balneotherapy, sports and a broad range of facilities and possibilities for extra services and entertainment:


HOTELS ON THE BLACK-SEA COAST

» Grand Hotel Varna - 600 beds, the year round; 5-star; resort complex Sveti Iliya; diverse public catering establishments; balneo- and sports centre; conference and business centre. Fully renovated by stages;

» Lebed Hotel - 256 beds; 4-star; resort complex Sveti Iliya; fully renovated in 2001; diverse public catering establishments; open-air swimming pool;

» Delfin Hotel - 390 beds, 4-star; resort complex Sveti Iliya; fully renovated with increased capacity in 2001; diverse public catering establishments; open-air swimming pool; open-air and covered children's centre;

» Delfin Marina Hotel - 630 beds; 4-star; resort complex Sveti Iliya. Envisaged: buffet and a-la-carte restaurant, day bar, cafe, fitness halls, cartoon centre, shops. Delfin Marina Hotel is part of the Marina project. The hydrotechnical facility forming the territory gained from the sea - the enclosing installations and the Peninsula project in the marina - has been built, and the water area has been formed for yacht docking and servicing, as well as a water area for aquatic sports practising.

In order to restrict the further negative impact of the marine environment on the territories gained from the sea, irrespective of the conservation works done and in the presence of the built high-category hotel facilities in the adjoining area, finalising the hydrotechnical and coast-consolidation works, the marina with all extra buildings and services related to its exploitation, is a priority for investors.

The architectural space composition of the marina is subordinated to the requirement for creating an architectural artistic image and structure of the services, corresponding to the highest international category. The individual sub-sites and parts that will be constructed, include:

*A yacht-club with possibilities for simultaneous servicing of 100 yachts of different classes;
*A sea terminal including an office building with premises for processing arrivals and departures, a gas station for refueling the yachts, service workshops for the yachts, storehouse areas;
*A restaurant, snack-bar, cafe, trade complex of boutique-type shops, offering specific goods related to yacht-visitors;
*An advanced Beach Centre offering a broad gamut of tourist services, related to aquatic sports and beach entertainment in the southwestern part in front of the Rubin Hotel.

» Rubin Hotel - 866 beds; 4-star; resort complex Sveti Iliya; fully modernised, renovated and extended in 2001 with an envisaged new wing for 2002; situated in the immediate vicinity of the territory of the future Marina and Beach Centre;

» Rusalka Hotel - 80 beds; 3-star; resort complex Sveti Iliya; fully renovated in 2000; a small cosy hotel in the immediate vicinity of Grand Hotel Varna;

» International Hotel - 820 beds; 5-star. The symbol of Zlatni Pyasatsi, situated at the centre of the resort and immediately next to the beach itself, opened its doors in the summer of 2001 after a nearly 10-year-long forced interruption. During the first stage, 475 beds were constructed. After the realisation of the second stage, the International Hotel offers a hotel product for family tourists and young people, buffet and a-la-carte restaurants, pizza restaurant, winery, day and lobby bars; a swimming pool, balneo- and sports centre, underground parking lot, multi-functional hall, shops;

» Grand Hotel Zlatni Pyasatsi - 1400 beds; 5-star. A new project. Situated in the central zone of resort complex Zlatni Pyasatsi. Envisaged: buffet and a-la-carte restaurants, day and lobby bars, winter garden, cafe, balneo-centre, open-air and covered swimming pools, fitness hall, conference and business centre;

» Vacation Settlement Paradise Beach - 800 beds, 4-star - A joint project between "Balkantourist" Ltd. and ITC (INTERNATIONAL TOURIST CLUB), Germany. ITC owns the commercial network KALIMERA. The project will be the first one in Bulgaria under this trade mark and will fill a market niche in tourist demand at the international market. The project is fully harmonised with the requirements for the protection of the environment and the landscape.

The vacation settlement Kalimera Paradise Beach will be situated on an area of 40,000 sq. m, at a distance of 5 km from the Bulgarian Black-Sea-coast resort Slunchev Bryag, which is well-known at the international tourist market, and the Town of Nessebar, and 30 km from the Bourgas International Airport, with good access to the resort Slunchev Bryag and other infrastructure sites.

Beside the accommodation facility, also envisaged are: a lobby bar, information centre, areas for sale of extra tourist services, souvenir shops; restaurant, video room, Internet cafe, day bar; tavern; open-air swimming pool and bar - it is around the pool that the everyday entertainment for the tourists takes place. Near the pool are envisaged two bars, a bier-hall, disco-club and solarium; amphitheatre - a complex evening-time entertainment facility; sports area including a fitness hall, sauna, massage hall and 3 tennis courts; Kalimerini children's club with a children's club for the age group 3 - 12, a children's playing ground and swimming pool; marine-club offering opportunities for practising aquatic sports; covered parking lot.

» Perla Resort

The Perla Resort project is one of our latest investment initiatives. The project offers:
*Broad possibilities for a future comprehensive development of various types of accommodation means and facilities for satisfying the requirements of tourists for comfort and diversity during their vacation, coupled with opportunities for conference tourism, business meetings, active sports and entertainment;
*Further diversification of the regional location of tourist sites in the area of the southern Black-Sea coast, which at present is comparatively less developed for tourism but has excellent gifts of nature.

The territory of Perla is situated 50 km south of the Town of Bourgas, ranking fourth in size in Bulgaria, and near the international airport and the international highway to Turkey. As a whole, in this part of the Bulgarian Black-Sea coast, no big resort complexes and hotels have been built, complying with international standards, and the infrastructure is not well developed.

However, the southern Black-Sea coast is probably the most attractive part of the coast, with fascinating and exotic bays, broad and clean beaches, crystal-clear sea water, a mild climate, rich flora and fauna. The major natural attractions of the project are the Stamopolo bay with a large beach, the National Hunting Reserve Perla and the National Natural Park Ropotamo, which are situated in its immediate vicinity.

The project covers initially the marketing and development of the constructed Perla Hotel, 4-star - a former government guest-house with a limited bed-capacity but with great possibilities for business, conference and sport tourism, situated on an area of 12.7 ha, of which only about 80% is built. The definitive shaping of the Perla resort envisages a total of 3,420 beds at three stages: first stage - 720 beds, second stage - 1,200 beds, and third stage - 1,500 beds.

Hotels in the capital and cities

Grand Hotel Bulgaria, Sofia - 141 beds; 3-star. Situated in the ideal centre of the capital - Sofia, fully renovated in the last two years, Grand Hotel Bulgaria has gradually restored the most positive feature of its past - a centre of intellectual life in the capital city.

Grand Hotel Veliko Turnovo - 365 beds; 4-star. Situated in the centre of the former capital. Fully renovated are the common premises and the sports centre.

Boutique Hotel Arbanasi Palace - 38 beds; 5-star. Situated near the historical museum-settlement of the same name. A former government guest-house, renovated in 2001, with possibilities to satisfy even the most demanding visitors.

Conference Centre Bistritsa, Sofia - 120 beds.

Mountain and spa resorts

» Rila Hotel - 1,470 beds; 3-star. Situated in the oldest mountain centre of Bulgaria - Borovets which began to develop as far back as the early 20th c. The hotel has the architectural design of the French resort Les Arc with a hotel and studio parts. The hotel parts have been fully modernised for the current season, extended and modernised are all facilities and premises offering extra tourist services - a covered swimming pool, fitness halls, solarium, gambling halls, halls for children, a covered shopping mall, ski-school.

» Persenk Hotel, Pamporovo - 100 beds

» Priroda Hotel - 60 beds

The market share of the Corporation in the hotel sector is:

» 6.5% of all rooms in the hotels in Bulgaria;

» 38% of the rooms in 5- and 4-star hotels.

Sales networks - the vertical integration of the hotels with a sales network of their own is carried out through the "Balkantourist" tour-operator which is leading for Bulgaria and whose trade mark has been present at tourist markets for more than 50 years, as well as through a developed network of tourist agencies in the cities and resorts.

The main business of "Balkantourist" is:

» As tour-operator and servicing agent for the leading European tour-operators for summer and winter vacations - 60% of the business. Trade partners of "Balkantourist" are tour-operators ranking among the first ten.

» Tourist retail sales - 40% of the business. "Balkantourist" offers tourist programmes by special interests, round and weekend trips, hobby and eco programmes, incentive programmes, organising conferences, seminars, business meetings, attendance of sport and cultural events, hunting and fishing, booking and sale of air tickets, excursions and entertainment, full tourist information. Its trade partners around the world are about 400.

» Tourist-guide services - the services are used of about 100 licensed guides in 10 languages at full-time or part-time working day. A licensed professional centre for training tourist guides functions with "Balkantourist".

» Bus transport - 22 de luxe "Neoplan" buses and 17 mini-buses.

» Rent-a-car - 49 cars of Budget International with licensed rights for Bulgaria.
At present the "Aviotransport" unit with an aircraft fleet of its own is being formed.

» Processing of all internationally recognised credit cards, operation through licence in the territory of Bulgaria with the business of Diners Club International.

Market share:

» "Balkantourist" receives and services about 10% of all foreigners visiting Bulgaria in an organised way, including 4.3% of tourists from Germany, 10% of tourists from Great Britain and 57% of tourists from Israel;

» The Bulgarian citizens using the services of "Balkantourist" for vacations in the country and abroad, are 68,000.

For the period 1994 until the end of 2001 the MG Corporation:

» has invested in its tourist sector EUR 95,805,870 /187,380,000 leva/;
» has allocated for 2002 for the started projects another EUR 69,637,950 /136,200,000 leva/.

I have acquainted you in most general terms with some of the MG Corporation's investment projects and the aims and tasks of its tourist line, thus trying to show the unlimited opportunities for the development of tourism in Bulgaria after the carried out privatisation of the facilities. The new owners of tourist sites have the ambition and the capabilities to build up and display the new modern image of our tourist industry.

In this connection, I would like, on behalf of all private entrepreneurs, to express our support for and approval of the clearly defined intentions of the Government of Bulgaria to assist the development of tourism as a leading branch of the national economy of major economic and social importance, and in particular its intentions to continue to render financial support to the national advertising of Bulgaria, to bring into the industry's management representatives of this business, to contribute to building up and maintaining the necessary infrastructure and to assist the attracting of foreign investors to realising projects for the development of tourism.

We are confident that with the joint efforts of the Bulgarian State and the Bulgarian entrepreneurs, with the selfless work of all Bulgarians engaged in this business, we shall turn Bulgaria into a heavenly corner of new, united Europe.

While thanking you for your attention, I would like to express my certitude that the Bulgarian entrepreneurs can be your worthy and reliable partners in the 21st century.