Russia’s major markets primed for performance boosts
 
Russia’s major markets primed for performance boosts
06 JULY 2016 7:10 AM

Hoteliers in Moscow and Saint Petersburg have seen their hotel markets begin to recover, according to sources and recent performance data.

REPORT FROM RUSSIA—The end of uncertainty in the Russian economy coupled with growth of occupancy and other performance indicators might increase the number of new hotel projects in Moscow and Saint Petersburg between 2016 and 2018, sources said.

Most market analysts said the investment interest in hotels in both cities continues to rise, as inbound tourism is growing and likely will continue to grow in the second half of 2016.

"In the first quarter of 2016, according to the Federal Tourism Agency, the overall tourist inflow to Russia has increased by 16.5% compared to the same period of last year, largely due to the flexible price policy of many hoteliers and active development of domestic tourism,” said Stanislav Ivashkevich, associate director of hospitality development at CBRE. “Demand may further rise in the summer months due to the influx of tourists from Asian countries, which are actively visiting Russia in connection with the devaluation of ruble.”

Ivashkevich added that he is optimistic both cities will see occupancy rise by 8% to 10% after the summer months.

Moscow
Tatiana Veller, head of Jones Lang LaSalle’s Hotels & Hospitality Group for Russia & CIS, said hotel occupancy in Moscow exceeded 60% in the first quarter of 2016, which was a 3% increase over the same period last year. Average daily rate also increased 3.6% to 7,700 Russian rubles ($120.26), which caused a 10% increase in revenue per available room, she said.

In May, occupancy in Moscow rose 13.2% to 67.2% in year-over-year figures, according to STR, parent company of Hotel News Now. ADR rose 15% to 5960.16 Russian rubles ($93.04), while RevPAR increased 30.2% to 4,007.33 Russian rubles ($62.56).

Analysts from New York-based Cushman & Wakefield report that the improved performance of Moscow’s hotels will boost the number of new projects commissioned in 2017. The city has already commissioned 16 branded hotels with 5,000 rooms in total. This is almost twice the number of projects commissioned to 2016, sources said, and the overall capacity of Moscow’s hotel industry should grow by 3,000 rooms by the end of the year.

In April, Moscow Mayor Sergei Sobyanin promised several dozens of hotels will open in the city between 2016 and 2018, noting that this would be possible due to the strong increase of tourist flow in the city. Last year alone the number of visitors to Moscow rose by 600,000 people, Sobyanin said.

The mayor added that the development of the city’s hotels has special importance as the Russian capital is one of 11 cities in the country that will host the 2018 FIFA World Cup. Alexander Gorbenko, deputy mayor of Moscow on regional security and informational policy, said about 60 hotel properties will be built in the city in the next three years.

Saint Petersburg
Like Moscow, Saint Petersburg’s hotel market continues to blossom, as strong occupancy has encouraged investors to fund projects that were scheduled to be commissioned in 2015 or 2016 but were postponed due to political and economic instability.

“In Saint Petersburg, occupancy (in) the market on average has declined slightly compared with the previous year by 2.6% and amounted to 44% (overall), but the result is still higher than in Q1 2014,” Veller said. “Due to a significant increase of ADR by 9% to 4,000 Russian rubles ($62.28), RevPAR rose by 8%, reaching about 1,800 Russian rubles ($28.03).”

According to STR, hotels in Saint Petersburg saw occupancy rise 5.4% in May 2016 to 73.8% in year-over-year performance. ADR increased 34.1% to 6580.50 Russian rubles ($102.47), which fed a 41.4% increase in RevPAR to 4858.89 Russian rubles ($75.66).

A market outlook from Russia-based GVA Sawyer noted that in 2015, hoteliers in Saint Petersburg did not commission a single branded hotel, despite the fact several properties with the overall capacity of 800 rooms were opened in the city. In 2016, Saint Petersburg’s hotel supply will grow by an additional 601 rooms with the opening of two Hilton hotels, while in 2017 new supply should be higher due to the number of delayed projects, according to the report.

Russia outlook
Sources said hoteliers in both Moscow and Saint Petersburg should start preparing for a gradual increase in ADR, but the increase depends on the price segment in which they operate.

“Good occupancy let hotels start (to) increase average prices, which did not rise almost for two years, except (for) luxury hotels,” said Marina Smirnova, partner and head of hospitality and tourism at Cushman & Wakefield. “I believe that the trend will continue, as against the backdrop of (growing) demand, hotels will be able to operate more actively with the average prices, but the increase will not be large, as groups of tourists, creating the demand for hotels in the summer months, are price-sensitive.”

Veller said Russia’s hotel industry will continue to stabilize as the recovery of Moscow and Saint Petersburg continues.

“Hoteliers in most segments today try to keep occupancy at the optimal level, planning the price (increase) for the future” after the situation stabilizes, she said. “Only the luxury segment in Moscow and Saint Petersburg may already begin to gradually understand the price as occupancy in this segment is quite high.”

Veller added that the recovery of some chain scales will take longer than others.

“Hotels in the economy segment and below have to gain occupancy at the expense of groups from Asia and the Russian regions, which are the cheapest segment,” she said. “However, hotels need these tourists as they are rigidly competing with each other, and the main tool here is price competition.”

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.