This year clearly sees the business activity returning to Moscow. Impact of sanctions has so far led to the Western European and US demand fleeing from Moscow hotels. On the other hand, it brought in other types of tourists – domestic businessmen and wealthy Russian leisure travelers, Chinese tour groups.
Russia & CIS Hotel Investment Conference (27-28 October) started in Moscow yesterday, and JLL Hotels & Hospitality Group presents the Q3 2015 Moscow hotel market results.
This year clearly sees the business activity returning to Moscow. Impact of sanctions has so far been a double-edged sword. On one hand, it led to the Western European and US demand fleeing from Moscow hotels. On the other hand, it brought in other types of tourists – domestic businessmen and wealthy Russian leisure travelers, Chinese tour groups. Market-wide occupancy grew by 4 p.p. (to 68.8%) YTD vs. 2014.
“Some of this new demand is on the cheaper side, causing pressure on rates. Across segments the first three quarters of the year witnessed a marginal drop (by 0.1%, or RUB 4) in rates” Tatiana Veller, Head of JLL Hotels & Hospitality Group, Russia & CIS, said. “The hoteliers, having spent almost a year in the weak ruble zone, learnt once again, remembering the 2008-2009 experience, to manage costs better. Many of them localized their purchasing; almost everyone with debt leverage renegotiated their loans into ruble terms. Considering the new reality, where operations are fully ruble-based, the performance of hotels in Moscow has been relatively strong, especially in RevPAR terms. Average RevPAR in Moscow hotels increased by 8.2%, or almost RUB 400.”
Not a lot of new supply came into the market this year, with Marriott Novy Arbat (234 Rooms) and StandArt Hotel (by Design Hotels) with 105 Rooms added to the higher category, and Ibis Dynamo (317 Rooms) and Hampton by Hilton Strogino with 214 Rooms (promised before year end) bringing additional stock into the Midscale segment.
“Moscow is pushing hard to prepare for the 2018 FIFA World Cup. The city has been working on many improvements (transport infrastructure and parking, pedestrian shopping/dining areas, making the city more bike-friendly). This, alongside with the Russian capital now being ‘a steal’ for hard currency paying tourist, while offering an endless array of excellent dining, cultural and entertainment options, will help it continue being a solid choice for travelers” Tatiana Veller commented.
Luxury segment. The positive trends that the summer set this year with Occupancy and ADR gains seem to be here to stay. September has registered the highest Occupancy since 2007 (85%); Q3 overall number (73%) has been only beaten in 2013 (by a meager 4p.p.), and a 64% Occupancy YTD is also very respectable in historic perspective. “ADR of RUB 14,732 in this segment YTD has been at record high since 2008. This allowed for a very solid RevPAR gain of 18% compared to YTD number last year. It’s quite apparent that this trend started as a ‘splurge on luxury while it’s at a discount’ by the hard currency paying travelers, but got supported by robust business demand in the new season and the higher proportion of wealthy regional Russian leisure clientele travelling domestically” Tatiana Veller noted.
“We foresee that if the ruble stays relatively cheap, the luxury segment will continue to benefit from travelers upgrading to higher quality hotels. The business season continues, and typically October and November are still strong in both Occupancy and ADR before the pre-holiday drop” Tatiana Veller said. “No new supply in this segment is expected before year end, so demand for the existing properties should not be diluted.”
Petersburg has been named a top European travel destination by the World Travel Awards for a reason. This year to date the city, having hosted several large international events during the first part of the year, riding the tail of the currency wave, with the help of the boost to local tourism delivered by changing geopolitical climate and economic environment, and increased attention of international travelers from high volume markets, combined with the warm (and late) Fall, is seeing unprecedented results across all segments.
“Occupancy market-wide YTD rose by 20% compared to last year, resulting in 7 out of 10 rooms being sold every night of the year so far. All segments except luxury attracted the unseen number of guests, registering occupancies of over 80% (and in some cases over 90% – in the Upscale segment). Boosted by an 8% ADR gain in the same period (albeit mainly driven by the Luxury segment), across segments hotels were able to register a very solid increase in RevPAR of 28%, or RUB 900” Tatiana Veller, said.
The only slight (1%) drop in ADR was registered in midscale hotels; otherwise all segments by the end of third quarter showed positive results for all indexes. Noteworthy is the fact that in every one of the top3 segments (Luxury, Upper Upscale and Upscale) Occupancy rose by more than 20%, which drove RevPAR growth of over 24% in YTD numbers (reaching a whopping 47% in Luxury).
“The additional demand that the city attracted this year seem to have been on the more upscale side. The lower the segment, the lesser share of the additional traffic hotels have been able to capture” Tatiana Veller noted. “St. Petersburg has set a high standard of financial performance in the first 9 months of 2015. The key will now be to manage expectations along with expenses and not rest on laurels. Hard work begins when the snow falls. Being a highly seasonal destination, mainly driven by leisure tourism during the warm months, the city will need to do some work to capitalize on the volumes it saw this year, making sure some of those tourists come back, and that business demand also catches up. No new supply is expected to come on the market in the immediate future, so the existing properties should have time to digest the newly captured volumes.”
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
