Fate of Sochi hotels debated post-Olympics
Fate of Sochi hotels debated post-Olympics
06 AUGUST 2015 12:14 PM
Experts said it is too early to say whether the season is successful for the local hotel industry in Sochi.
GLOBAL REPORT—Russian officials, experts and market participants are making the first conclusions of the tourist season in Sochi, which received updated infrastructure and new branded hotels last year on the eve of Winter Olympic Games.
During the first half of 2015, tourist flow to Sochi increased 6.7% to 1.62 million compared to the same period last year, bringing the average occupancy rate in hotels of the city and nearby districts to 91%, according to the deputy head of city’s resorts and tourism department Elena Pavlovich. She said the number of hotel rooms sold in July, August and September of 2015 is 16% higher than during the same three months of 2014.
Experts said in general it is too early to say whether the season is successful for the local hotel industry, which has benefitted from an increase in demand amid the devaluation of the Russian ruble. However, the flow is limited due to infrastructure challenges and the fact that Sochi’s resorts have to compete with those in Crimea.
“Undoubtedly, ruble weakness boosts the Russians to stay local and go to Black Sea resorts this summer instead of looking abroad. But flight cost can become a real problem as airplane ticket prices (are) too high, and there are few direct flights from regional cities,” said David Jenkins, national director, executive VP, Hotels & Hospitality Group, JLL Russia & CIS.

“In my opinion, hotels will operate with such tariffs that will be allowed by the market. Tourist operators will be the main factor making up packages’ prices and driving price policy. Apart from that, (the) Sochi and Krasnodarsky region will share domestic demand with Crimea, where tourist operators decrease prices and organize charter flights to boost touristic inflow,” he added.

According to STR Global, sister company of Hotel News Now, occupancy in Sochi was up 20.7% to 34.9% in June. Average daily rate in the city was up 112.1% to 5,860.31 Russian rubles ($92.68), while revenue per available room was up 155.9% to 2,044.67 rubles ($32.34).

Number of new challenges
At the same time, experts believe the hotel industry is under pressure, as the tourist flow is rather uneven during the year. It jumps during holiday periods, which are observed during New Year holidays in January and long May holidays. Also it largely depends on seasonality growing in summer and winter months, and decreasing in the rest of the year.
“Tours to Sochi on May Day celebrations were in high demand. Since the end of January, tourists have been actively booking this direction,” added Director General of the Travel Center Pack Bag Elena Korneva. “Sochi today is popular among youth, who seek budget options, holidays, families with children and the elderly. They are particularly attracted by the opportunity to see with their own eyes the capital of the Olympic Games.”
“Speaking about the mountain cluster, there are three resorts in Krasnaya Polyana district – Laura (Gazprom), Roza Khutor, and Gorky Gorod. Before the Olympics a lot of hotels and apartments were built there, and the main challenge they face now is how to win seasonal (travelers) and optimize their efficiency,” Jenkins said.
According to Alexander Egorov, analyst of the investment company TeleTrade, demand for 4- and 5-star hotels in Sochi could grow this year 30% to 40% compared to last year, while tourism revenues will grow 40%. This also will increase ADR 20% to RUB 5,000 ($80) during the whole year.
Sochi’s hotels also face the decrease of foreign tourists. According to the data of Basel Aero, which manages Sochi airports, during the first half of 2015 the volume of tourists decreased to 83,000 people from 173,400 in the first half of 2014. This translates to a 37% decreased from the first half of 2013.
“I do think the main demand for hotel accommodation in Sochi in summer will make up those who can reach the resort by car, skipping air flights. At present it’s far too early to assess Sochi hotel market efficiency; we think 2015 will be a very important year for this assessment,” Jenkins said.

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