Ukraine Hospitality Investment: Economic Analysis - CBE6581 Module

This essay explores the potential for angel investment in Ukraine's hospitality industry, providing a comprehensive analysis of both macroeconomic and microeconomic factors. The report begins by examining macroeconomic developments in Ukraine, including GDP trends, GDP growth rate, consumption patterns, employment statistics, and price indices. It then delves into the microeconomic effects on the hospitality industry, assessing how factors like GDP, consumption, employment, and prices directly impact the sector. The essay further investigates the institutional and economic environment, highlighting government policies and initiatives aimed at supporting the hospitality industry in Ukraine and their influence on investment decisions. Ultimately, the analysis aims to provide valuable insights for investors considering expanding their business into the Ukrainian market.

Business Economics

Business Economics 1
Abstract
The report reflects the terms microeconomics and macroeconomics majorly. Microeconomics is
a division of the economics that studies the actions of individual or firms who are forming the
decisions related to the allocation of scare resources and the interactions among the individual
and firms. While on the other hand, the macroeconomics is a branch of the economics field that
studies how the cumulative economy behaves. It is essential for every investor to analyze these
factors before investing the amount in the market. Considering the same, the angel investor is
looking to invest the business in the market of Ukraine and in the hospitality industry. Therefore,
the analysis of the macroeconomic developments has been discussed which reflect how these
factors can affect the working of the country and the industry in which the investor is looking to
invest. Moreover, it reflects the initiative taken by the government for the hospitality industry.

Business Economics 2
Contents
Introduction......................................................................................................................................3
Analysis of macroeconomic developments.....................................................................................4
GDP.............................................................................................................................................4
GDP growth rate......................................................................................................................5
Consumption................................................................................................................................6
Employment.................................................................................................................................8
Prices..........................................................................................................................................10
Analysis of the microeconomic effects..........................................................................................11
Hospitality industry...................................................................................................................11
Microeconomic development affects hospitality industry.........................................................12
GDP affect the hospitality industry.......................................................................................12
Consumption affect the hospitality industry..........................................................................13
Employment affect the hospitality industry...........................................................................14
Prices affect the hospitality industry......................................................................................15
Institutional and economic environment.......................................................................................16
Government policies/initiatives in Ukraine for hospitality industry.............................................16
Government policy affects investors’ decisions and entrepreneurial initiatives.......................17
Conclusion.....................................................................................................................................18
References......................................................................................................................................19

Business Economics 3
Introduction
The report is based on the investment that the angel investor is willing to make in the South East
European economy. The angel investor is looking to expand the business in Ukraine and in the
Hospitality industry. The reason behind the selection of Ukraine is that it has everything to be
successful investment place. Moreover, the place is the going to be on new growth space in the
coming years for Europe as a whole. The country has best agricultural soils in the world with the
sophisticated industrial infrastructure. Along with this, the people of the country are well-
educated; hard-working that feels the culture and historically bound to Europe.
The hospitality industry has been selected by the investors because the place is the leading
players in the business as the premier hotels and resorts keep the track of the updated
international tourism sectors trends and seek to implement the latest innovations in the country.
The hotel business is one of the most promising and successful business areas in Ukraine. In the
year 2017, the company registers the website mobile traffic growth of 10% compared to the
figures of the year 2016 which reflects the technology development in Ukraine (Sidletska, 2017).
This technology development is essential for the company as technology use is increasing in this
industry. Therefore, the investors are willing to invest in the hospitality industry of Ukraine
(Raiffeisen Bank International, 2018). The reports include the evaluation of the macroeconomic
and microeconomic environment of Ukraine because the evaluation is essential for the investors
who are looking to expand their business in the market of Ukraine which is a part of the South
East European economy.

Business Economics 4
Analysis of macroeconomic developments
The analysis of the macroeconomic developments reflects the economic trends and analysis of
the country in terms of the GDP, consumption, employment, prices and many others which
might have changed from past few years (Stiglitz, 2012).
GDP
The gross domestic product in Ukraine was worth 93.27 billion US dollars in the year 2016. The
GDP value of the country presents the 0.15% of the world economy. The below diagram reflects
that the GDP of the country is decreasing since the year 2013 (Trading economics, 2018).
(Source: Trading economics, 2018)
The GDP of Ukraine till the year 2016 has been presented in the graph. Considering the GDP
graph it is expected that the GDP will increase in the coming years because after 2008 there was
a downfall in the GDP for few Years which increased in 2012 and 2013 (Trading economics,
2018).

Business Economics 5
The statistics graph given below reflects the GDP (Gross domestic product) of Ukraine from
2012 to 2016 in the billion U.S. dollars with the projection until 2022. The graph reflects that the
GDP of the country is going to increase until the year 2022 which is a positive sign for the
investors who are looking to expand their business in the market of Ukraine.
(Source: Statista, 2018)
GDP growth rate
The gross domestic product in Ukraine increased by 0.50% on the quarter in the last three
months of the year 2017, which is higher than an initial estimate of a 0.4% growth. GDP growth
rate in Ukraine averaged -0.04% from the year 2010 until 2017 (Trading economics, 2018).

Business Economics 6
(Source: Trading economics, 2018)
The image of the growth rate of the GDP shows that the company is able to achieve the rise in
the GDP since the year 2015. Though the rise in the GDP growth rate is quite less in few years
this growth rate is expected to increase in the coming few years.
Consumption
The consumption mainly includes the consumption of the resource by the people. Over here, the
consumption is explained on the basis of food and consumption of resources. The pattern in the
consumption is changing from past few years.

Business Economics 7
(Source: Mearns, 2014)
The country energy consumption is declining sharply after the post-independence as the country
has lost the subsidized energy imports under the communist regime and faces the market
realities.
The energy consumption is one of the important consumption that the investors consider while
expanding the business in the market. The graph reflects that the consumption of the natural
resources is decreasing in the country as more and more people are becoming focused towards
the sustainable resource and effective use of the resources in their business (Market Insider,
2013). The oil consumption has been decreased in the past few years due to the development of
the country and awareness about the conversation of the same.
Apart from the energy consumption, another consumption on which the country needs to focus is
the food consumption in the country. The exports of food estimates that an average person in the
country consumes 1,049 kg (2,321lbs) of food in the year 2015, which is 5.6% less than in 2014.

Business Economics 8
(Source: Finance.ua, 2016)
There is a slighter decline in the consumption of the food by the people as the people are
showing their interest towards the healthy diet. The people are consuming more of the fresh fruit
that contributes to make them fit.
Employment
Employment in Ukraine decline after the Maidan but now the employment growth is expected in
the country. Below given is the list of the commercial sector by the employment growth in
Ukraine. This reflects that the employment in the air transport has increased by 23.5% in the year
2017. This data reflects the change in the % from the year 2015 to 2017.

Business Economics 9
(Source: Kramar, 2018)
Moreover, the below graph represents the unemployment rate in Ukraine. The decrease in the
unemployment shows a positive sign for the country. In the year 2017, there was a major
decrease in the unemployment rate of the country but in 2018, the rate of unemployment is rising
which is one of the negative sign for the employment of the country. The unemployed rate in the
country enlarged to 9.9 in the fourth quarter of 2017 from 8.9% in the same period. There was a
rise in the number of unemployed people by 150 thousand to 1,761.3 thousand and employment
weakened by 473.5 thousand to 15,955.1 thousand (Kramar, 2018).

Business Economics 10
(Source: Trading economics, 2018)
Prices
The prices in the market can be explained with the help of the consumer price index (CPI). The
consumer price index is a degree that inspects the weighted average of prices of a basket of
consumer goods and services like foodstuff, medical care, and transportation. It is calculated by
taking the prices fluctuations for the particular item in prearranged basket of goods and
averaging them.
The image reflects the CPI in Ukraine which improved to 101.10 Index points in March from
100.90 Index points in the February of 2018 (Trading economics, 2018). This reflects that there
is slighter rise in the CPI of the country which means they are obliged to pay slighter more prices
for the goods of the products.

Business Economics 11
(Source: Trading economics, 2018)
Analysis of the microeconomic effects
The analysis of the microeconomic effect reflects the macroeconomic factors that can affect the
industry and their working in the country.
Hospitality industry
The industry in which the angel investor is looking for the expansion is hospitality industry. The
hospitality industry of Ukraine is increasing from past years which are providing an advantage to
the investors who are investing their amount in the business. According to the statistics, the hotel
market of the country recovers from recession slowly and gradually. The number of hotels at the
project stage is approx. 18, at the construction stage- 164 and at the renovate stage-70 (Sidletska,
2017). According to the report, the performance of the hotels in Ukraine industry has been
enhanced for the subsequent consecutive year in 2017 which helps the stockholders to get the
high return in the country. Moreover, after 3 years hiatus, global hotel brands opened and started
with the construction of the new projects for the hotels in Ukraine in the year 2017.