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JLL presents Summer 2017 results of the quality hotel market results in Russia resorts – Sochi and Moscow region

This summer compared to 2016, Moscow Region hotels lost 3 ppt of Occupancy (down to 58%) vs. 2016. In the southern resort on the Black Sea, the overall trend continued from earlier this year – the mountain cluster was growing occupancy healthily, by 4 ppt. (up to 64%).

“Unlucky weather this summer and opportunity to visit hot all-inclusive shores of Turkey again, have taken their toll on the operational indices of both the Moscow Region quality resorts, and the southern destinationsTatiana Veller, Head of JLL Hotels & Hospitality Group, Russia & CIS, comments. “This could also be an inevitable consequence of the aggressive pricing strategies these hotels have been using to grow ADR for three consecutive years in a row. They finally reached a point of relative price comparability to overseas vacations, so cost vs. value is no longer in the domestic resorts’ favor in consumers’ minds.”

Summer in Moscow Region started relatively strong, with a 3 ppt gain in Occupancy in June 2017 vs. 2016, and a slight increase in monthly RevPAR on the back of a stable ADR. In July fewer rooms were sold at higher rates as the vacations season kicked in, encouraging hoteliers to raise prices (+ 9% to ADR compared to summer 2016). As a result, RevPAR suffered a 3% drop. Due to equal declines in both ADR and Occupancy (by 8% each), August experienced a record-breaking RevPAR loss – by 16% YTD.

All in all, this summer compared to 2016, Moscow Region hotels lost 3 ppt of Occupancy (down to 58%) vs. 2016, as well as 1% (to RUB 5,550) in ADR which resulted in a 6% (or, almost RUB 200, down to RUB 3,200) RevPAR loss. Good news is, this is still considerably higher than 2015, and overall YTD numbers are at the level of 2016.

In the southern resort on the Black Sea, the overall trend continued from earlier this year – the mountain cluster was growing occupancy healthily, by 4 ppt. (up to 64%) at cost of a slight drop in rates (-0,6%, to RUB 2,800), as a result gaining in RevPAR (+5%, to RUB 1,800). This was mainly driven by strong June, with growth both in Occupancy (by 6 ppt, to 52%) and ADR (by 20%, to RUB 2,800), respectively, and reflected in a whopping 36% hike in RevPAR (up to RUB 1,500) vs. last year. In August market has dropped significantly in all indices, although occupancy continued to be strong for the mountain cluster – 72%.

“At the same time, hotels by the Sea suffered from bad weather effect and overseas competition, and lost 11 ppt vs. 2016 in occupancy (down to 57%) in 3 summer months, while slightly gaining on ADR (probably, not counting on extra demand from lowering prices) – by 3%, to RUB 12,300. As a result, RevPAR dropped significantly – by 14%, to RUB 7,000). The only bright spot here was a healthy 11% increase in ADR in June, on the backdrop of quite modest summer performance in occupancy and revenues” Tatiana Veller notes.

“Curiously, this has been the first summer in our history of observation of the Russian all-season resort that there were more rooms sold in the mountains than by the sea. Summer has been the reflection of this year to date results so far. We are only left to hope that the active autumn will bring more tourists to the sea cluster of Sochi, which recently got noticed as a MICE destination, and allow to recoup the loss of the first part of the year” Tatiana Veller says.

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