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| Hotel Astoria St. Petersburg |
Russian hotel market in the past year saw a number of changes: a complete switch to ruble cash flows (both for income and expenses), demand shift to high-volume price-sensitive markets, a significantly increased number of guests from Russian regions – including businessmen and tourists, shift of foreign demand sources from West to East, robust occupancy growth and challenges growing dollar-denominated rates market-wide.
Quality hotels in Moscow and St. Petersburg across all segments have accommodated many more guests in 2015 than the previous year. The average market occupancy in Moscow grew by 4.2% (or 2.7 pp. in absolute terms), reaching 67.5%, while in St. Petersburg it grew by impressive 12.8% (7.3 pp. in absolute terms), reaching a solid 64.3% year-round. Revenue per available room (RevPAR) increased greatly in ruble terms on both markets, with St. Petersburg beating RevPAR records with a 26.3% growth, compared to 2014 (Moscow recorded a more modest gain of 7%).
The two markets witnessed an average daily rate growth (ADR) in rubles: in Moscow cross-segment ADR grew by 2% - to RUB 8,000, and in St. Petersburg by almost 9% - to RUB 6,200, with the key driver of growth being the higher level segments (luxury, upper upscale, upscale). Year-round ADR in St. Petersburg luxury segment was sitting at RUB 13,000, Moscow finished 2015 with and approximately RUB 15,000 rate. Both cities displayed double-digit growth compared to 2014 – by 14% in Moscow, by 19% in St. Petersburg. The lower segments created volume, meaning were driving the occupancy.
JLL’ Hotels & Hospitality Group do not expect a lot of new supply in luxury segment to enter either of the two markets (only Jumeirah hotel with 76 keys is scheduled to open in St. Petersburg by the end of 2016), which will allow the existing market players to benefit from demand growth and gradually strengthen their rates.
Out of 5,200 rooms scheduled for opening on Russian market in 2015, only 3,700 were actually introduced to the market. The reasons are mainly economic: debt money is either expensive or unavailable; outlook even for the nearest future is unclear. In such conditions many developers feel uncertain regarding the return on invested funds, and aren’t ready to take a risk of pursuing new projects. Furthermore, many players consider that bringing additional room stock to the market is not the wisest thing to do in such turbulent conditions.
In 2015 Moscow welcomed 757 new branded hotel rooms: Ibis Dynamo, Hampton by Hilton Strogino, Marriott New Arbat. St. Petersburg did not have any new branded openings. 2016 outlook in terms of new supply looks better: about 2,600 branded rooms are in the pipeline for Moscow and St. Petersburg, with a prevailing majority – about 2,200 – expected in Moscow. Half of the announced projects are in the Midscale segment. This, partially, can be attributed to preparation for the 2018 World Cup and attempts to accommodate the new demand patterns which are shifting towards mass market.
Some notable projects that are expected this year are: a triple-brand by Accor and Patero Development (Novotel, Ibis, Adagio) near Kievskiy railway station (701 rooms), a first internationally managed hotel near Vnukovo airport – Four Points by Sheraton, Russia’s first Jumeirah in St. Petersburg, the first hotel to bring accommodation facilities to ExpoForum in St. Petersburg – Hampton by Hilton, as well as Russia’s first Wyndham hotel in St. Petersburg.
