Strong summer season bodes well for Russia
 
Strong summer season bodes well for Russia
02 NOVEMBER 2015 7:18 AM
Russia’s major markets saw notable gains during the summer months—a trend that could continue in the near term. 
REPORT FROM RUSSIA—After one of the strongest domestic tourism seasons on record, hoteliers in Russia are encouraged that short-term recovery could pave the way for longer-term stabilization in performance. 
 
JLL’s Hotels & Hospitality Group reported that domestic tourism reached an all-time high during the June-to-August period, highlighted by gains of 10% in occupancy and 9% in revenue per available room (in ruble terms) in Moscow’s “quality hotel market,” according to a news release.
 
That puts the Russian capital alongside other European business centers Frankfurt, Germany (70.3% occupancy), and Brussels, Belgium (75.1%), according to JLL. 
 
In August alone, occupancy in the Russian capital reached 72.5%, the highest in two years, according to Cushman & Wakefield. In Saint Petersburg, occupancy was even higher at 85.2%, the strongest since 2007. 
 
The weak ruble was seen as a contributing factor to the spike in demand, despite that it has increased in value of late compared to currencies in other developed nations. 
 
The JLL report noted a weak ruble as benefitting Moscow’s luxury segment in particular, “capturing mainly international travelers who upgraded from lower level hotels, taking advantage of the weak ruble and thus dropping rates in hard currency denomination.”
 
Cushman & Wakefield’s Marina Smirnova pointed to the other end of the chain as being the prime beneficiary: 
 
“In Moscow’s economy segment in August it was occupied 82.6% of the rooms, while in the luxury this figure was lower (66.2%),” said the company’s head of the hotel business and tourism department. 
 
The spikes in summer season performance belie flat growth in Moscow year to date. Through August, the capital posted no gain in occupancy to 58.2%, a 0.4% decrease in average daily rate to 5,398.54 Russian rubles ($84.50) and a 0.4% decrease in revenue per available room to 3,142.45 rubles ($49.19), according to STR Global, sister company of Hotel News Now.
 
Saint Petersburg has fared better, with occupancy up 11.1% to 64% through August. Meanwhile, ADR was up 10.6% to 4,933.14 rubles ($77.22), while RevPAR was up 22.9% to 3,156.93 rubles ($49.41), according to STR Global.
 
Another factor contributing to growth: decreased capacity, according to Stanislav Ivashkevich, associate director and head of hospitality development, strategic consulting and valuation for CBRE.
 
He pointed to VTB’s acquisition of Moscow’s Hotel Company, which was created in 2009 and owned, at one point, 20 hotels. VTB has since closed a handful of them (counting thousands of rooms) for reconstruction and renovation, he said. 
 
Low inventory won’t always be the norm, noted David Jenkins, VP of business development in Russia and CIS for the Carlson Rezidor Hotel Group.
 
“As a market (Moscow) is by far the most robust, and we see no reason to doubt that we can continue to develop new hotels and brands in this great capital city. It is a massive city with a still under-diversified hotel market, so we see ample opportunities all across Moscow,” he said.
 
Hoteliers encouraged
Regardless of segment or city, hoteliers throughout the country generally were encouraged by the most recent increases in performance and see them as good tidings for the road ahead. 
 
“Our chain this summer achieved record-breaking results, and in August we saw the peak occupancy growth,” said Lada Samodumskaya, director of sales and marketing for Kempinski Hotels’ CIS region. “For example, in hotel Baltschug Kempinski Moscow the average occupancy during the summer increased by 1.5 times compared to 2014.” 
 
AccorHotels noted record performance not only in Moscow but in Sochi as well, said Alexis Delaroff, COO, Accor Russia and CIS.
 
“But the occupancy is not the only indicator by which we judge the success of the hotels. The ADR is also important, and the average price in Moscow and Saint Petersburg has not broken records,” Delaroff added. 
 
In general, analysts believe Russia’s hotel industry, at least in urban markets Moscow and Saint Petersburg, will manage to keep the good indicators of operational activity in coming months. 
 
The JLL report noted that the upcoming business travel season will further lift occupancies and rates.
 
“The usual question of mitigating the seasonality in demand for the owners and operators of Saint Petersburg hoteliers remains. There is still a large fork of 35% to 40% in occupancy of Saint Petersburg hotels between the best and the worst months of the year,” explained JLL’s Tatiana Veller, Head of JLL Hotels & Hospitality Group, Russia & CIS. 
 
“The hope is that the current initiatives of promoting the city as a MICE destination will help. The further boost to the city’s income from tourism infrastructure could be delivered by adopting a special ‘weekend visa-free’ regime, similar to what’s currently offered to the tourists arriving by cruise boats,” she added. 
 

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