As Occupancy Drops, More Hotels Opening

For years, the city's hotel sector was defined by shortage, especially after the closure and demolition of several Soviet-era giants drastically reduced the number of medium-priced rooms in the city center.

Now with a spate of new hotel openings boosting the number of beds, the global economic crisis threatens to tip supply and demand in the opposite direction.

This year has seen a number of significant openings, and more are scheduled for 2009.

At the top end of the market, the Leningradskaya Hotel reopened in May after an expensive 2 1/2-year makeover. Now rebranded as the five-star Hilton Leningradskaya, it has increased the city's room supply with 273 rooms.

In June, the Aerostar Hotel reopened after a four-year break for remodeling, adding another 271 rooms to the city's stock.

Also in the first half of 2008, Park Inn, a brand under Carlson Hotels Worldwide, opened its first hotel in the city, the four-star Hotel Park Inn Sadu with 117 rooms.

St. Petersburg has also had its share of openings this year: Five new hotels were opened in the first half of 2008, bringing another 826 rooms to the northern capital. More rooms were opened in the first half of 2008 than in 2006 and 2007 combined in St. Petersburg, Knight Frank reported. The firm also noted that a trend has begun toward building hotels in the city's suburbs and that the number of mixed-use complexes is growing.

Knight Frank predicted that no more than 1,000 rooms would be added to Moscow's hotel room stock in 2008, but he foresees a "rapid increase in the hotel supply" in 2009, when the Grand Hyatt in the Federation Tower, the Moskva Hotel and the Ukraina Hotel are to open.

Raffles Hotels & Resorts has announced plans to open a second hotel in Moscow as part of the Chizhevskoye Podvorye mixed-use complex planned near Red Square. The hotel is to add another 130 rooms to the capital when the project is completed in 2011.

It has also been announced that the InterContinental Moscow Tverskaya, on the site of the former Minsk Hotel, is to bring a further 205 five-star rooms to the center of the city. Some major transactions were also among other significant developments in the capital's hotel sector this year. Coalco bought Magma Investment's 250-room hotel project near Komsomolskaya Ploshchad for $25 million to $30 million, while J&T Group bought a 75 percent stake in the Hotel Baltschug Kempinski. Over the course of the year to September, occupancy increased by 0.2 percent in Moscow compared to last year, according to STR Global, a leading hospitality industry research firm. However, STR reported that the major trend globally has been declining occupancy and growing room rates.

"The worldwide economic slowdown has started to take its toll on the hospitality industry," said Jonathan Worsley, the director of STR, in a report. "Recent events in the financial markets, declining consumer confidence and fears of a global recession will put even more pressure on the hoteliers in the coming months."

Over the course of the year to September, occupancy levels dropped 4 percent in Budapest, 3 percent in Berlin, 0.1 percent in London and 5 percent in Prague. Occupancy levels across all of Europe dropped 2 percent, according to research by STR Global.

Currently, there are 142 hotels operating in Moscow, Knight Frank said in a report. It said InterContinental leads the pack of hotel operators in the city, operating about 1,900 rooms. Marriott International follows closely with 1,800 rooms. Far behind is Accor Group, operating some 700 rooms in the city, followed closely by Starwood Hotels and Resorts and Rezidor Hotel Group, each with slightly more than 500 rooms. Hilton Hotels Corporation, Kempinski Hotels and Hyatt International all operate between 200 and 300 rooms in the city as of the first half of 2008.