Moscow has experienced the first signs of the economic downturn, with a five-point drop in chain hotel Occupancy Rate (OR) for 2008, reaching 70 percent. Average Daily Rate (ADR) ended the year at approximately $320.27, only a 5 percent increase compared to 2007, whilst Revenue per Available Room (RevPAR) decreased slightly to $223.30.
This drop in OR was also fueled by many new hotel openings in 2008, which increased competition. According to MKG Hospitality, the economy should slowly recover in 2010-onwards, and when it does, the country will see many major hotel developments.
Hilton is one of many hotel brands that have identified Russia as a key market, with major plans for the future. “Russia represents one of the greatest potential for hotel growth in the world today, and we are certainly entering at a pivotal time in its economic development. Over the next ten years, we anticipate that we could see more than 70 Hilton Family hotels across key Russian cities and regional centers,” says Mike Collini, vice president development for northern Europe, Hilton. According to Collini, Hilton will achieve this growth target by working with local developers and hotel owners, through a combination of management and franchise agreements.
Accor is another group with high hopes for the Russian market. “We will have one or two hotels in each city with more than one million inhabitants,” said Alexis Delaroff, director of operations for Russia and CIS, Accor. “We are also looking at niche cities, where industrial and/or touristic potential is promising. We have over 30 signed contracts all over Russia—from Kaliningrad to Irkutsk, and from Murmansk to Sochi.”
Opportunities seem to be greater in key cities such as Moscow and St. Petersburg, as well as up-and-coming leisure destinations such as Sochi and the Black Sea coast. Then there is potential in over 30 key regional cities, such as Kazan, Ekaterinburg, Ufa and Perm— particularly for midscale hotel products.
“It is in the economically vibrant industrialized cities where the best potential lies, which is also the basis of our selection criteria for deciding where to go,” said Arild Hovland, senior vice president business development for Rezidor—currently the largest hotel operator in Russia with 3,786 rooms in operation.
Improved accessibility from key feeder markets, such as Western Europe and the U.S., combined with increased wealth and mobility of domestic travelers are all key factors for the growth in Russia’s tourism and hotel industry in recent years. The country’s economic growth over the last decade is also fuelling major infrastructure projects for foreign investors, while opening new doors for MICE business.