Regional Aggression

Operators prefer deluxe
As reported by NAI Becar, Moscow had 242 hotels with aggregate accommodation stock in excess of 36,800 rooms, as of October 1, 2010. According to Knight Frank, from January to September of 2010 Moscow’s hospitality stock increased by 1,730 rooms, which means the rate of accrual more than doubles year-on-year. The dynamics of new lodging space delivery almost reached the pre-crisis level, as informed by NAI Becar. The commissioned accommodation space in 2010 reaches 96% of hotel areas brought out to the market in 2007. If all the announced projects hit the market in 2011 the hospitality market will further swell at least by 1,600 rooms and suites. A large number of projects frozen in times of crisis opened in the outgoing year. These are mainly hotels operated by major international chains. Experts assume that next year international hoteliers will continue their aggressive march both to Moscow and to regional markets. The opening of new lodging facilities will toughen competition and force hotel operators to maintain their prices at a competitive level. Most projects put into operation belong to the upscale segment while the medium price segment is still short of adequate supply. “Because of relatively long time needed to construct any new hotel in Moscow, we’ll see very few hotel projects in the medium price range delivered to the market this year, – says David Horn, head of Hotel Department, DTZ-IMS. – In 2011 a lot more hotels will be opened in the upscale segment.” Such hotels as Courtyard Marriott at Paveletsky Train Station to open in early 2011 will be a viable alternative to new five-star options.
Nevertheless analysts of NAI Becar point to a higher activity in the mid price segment. The best evidence is a program of student hostels proposed by the Municipal Committee for Tourism.

“In 2010 we saw burgeoning demand for hospitality services on the market in general, which pushed the load up to 55-64% in different segments; next year the growth will go on,” says Alexander Gendelsman, Director of AZIMUT Hotel.
It should be noted that now RevPAR growth occurs due to higher load, whereas accommodation prices remained stable throughout the year. In a three-star hotel ADR is 3,800 rubles and in a five-star hotel – 18,800 rubles.

Brand-oriented approach
Only the laziest of international operators might not announce their plans of expansion to the Russian market in 2010. Thus Hilton Worldwide is going to open eight hotels in Russia until 2014. “We are still interested in the development and implementation of our growth strategy in Europe, and Russia is a strategically important market for Hilton Worldwide, – comments Vladimir Ilyichev, Director of Hilton Worldwide Development in Russia and CIS. – At the present moment we have 11 hotels in Russia; some of them are functional already while others are only preparing to host guests.” In the third or fourth year after the hotels are marketed the operator hopes to reach a 60% load. As Mr. Ilyichev told CRE, Hilton is actively working on the conclusion of new management and franchising agreements in Russia. “We see great potential for our entire portfolio of brands – from luxury Waldorf Astoria Hotels & Resorts to the economy class Hampton by Hilton in the key destinations, such as Moscow and Saint Petersburg, – Mr. Ilyichev emphasized. – Yet we see the highest potential for expansion to second and third echelon cities in low and mid price segments with our rapidly developing Hampton by Hilton (more than 1,799 hotels) and Hilton Garden Inn (more than 500) brands.”

Accor also announced continued expansion to the Russian market. For 18 years on the Russian market the company has opened eight hotels with total accommodation stock of 1,841 rooms – four hotels under the Novotel brand (in Moscow, St. Petersburg and Yekaterinburg) and four Ibis hotels (in Moscow, Saint Petersburg, Kazan and Omsk). During the next four years the operator plans to double the number of hotels. Already next year the number of Accor hotels will reach 12. A 115-room Mercure Moscow hotel will open in the capital. Three hotels under the Ibis brand will appear in Nizhny Novgorod (210 rooms), Samara (207 rooms) and Yaroslavl (175 rooms) each. Five hotels with the total of 1,347 rooms are planned for inauguration in 2012-2014.
AZIMUT Hotels Company, whose total accommodation stock exceeds 5,000 rooms, is going to double the number of rooms under its management in the nearest five years.