Waiting for the Businessmen

Amtel Properties

At the Holiday Inn Seligerskaya, for the first time in Moscow, has started an "open lobby" for visitors.

Moscow hotels receive travelers from Asia and hope for corporate guests.

A hotel room is a perishable product. If it's not sold today, it's not going to sell, says Tatiana Veller, head of the hospitality industry at the JLL company. The summer sales being held by Moscow hotels allowed them to attract tour groups and increase occupancy in the traditional quiet season on the capital's market. That market is more focused on the business tourism.

For example, Carlson Rezidor's Summer Dream Deals helped guests to save up to 40 percent on the standard rate, and the IHG bonus loyalty program saved guests up to 30 percent while receiving free additional service. In addition to reduced rates, hotels offered guests new services. For example, at the Holiday Inn Seligerskaya, for the first time in Moscow, has started an "open lobby" for visitors, where they can have breakfast, meet associates, spend time, organize business lunches and so on. It is a new special project.

All hoteliers surveyed by REQ say there is growth in demand from tour groups, especially from Asian countries and the Middle and Far East. Several IHG hotels (the group operates in Moscow as Crowne Plaza, Intercontinental and Holiday Inn) have even been certified as China-friendly, which helped them attract more tourists from that country, says Aron Libinson, IHG vice president of operations and business development in Russia and the CIS. Similarly, Antoine Moubarak, Area Director of Revenue, Eastern Europe Carlson Rezidor Hotel Group, said demand for hotel rooms increased by 15 percent this year in Moscow, mainly due to visitors from China and the Russian regions. The recently opened Holiday Inn Seligerskaya in Moscow had an occupancy rate of 50 percent in June, and tour groups from Asia accounted for 60 percent of that, said hotel manager Oxana Evsyukova. She admits, however, that "we are glad to receive tour groups in the summer, but we are looking forward to a growing number of business travelers at the beginning of the business season."

Maxim Stulov / Vedomosti

In the luxury hotel segment, the RevPAR for the first half of the year was 26 percent. The flow of guests who can afford a higher level of service and comfort with the weaker ruble is increasing.

Asians are not hoteliers' favorite customers, say brokers. "They are pretty stingy. They will bargain for a room, and then go and spend a fortune shopping," said Marina Smirnova, head of hospitality and tourism at Cushman & Wakefield. The weak ruble allows foreign tourists to expect better service and better accommodations for the same money. "In other words, the Chinese have moved downtown from Izmailovo," said Stanislav Ivashkevich, CBRE deputy general director of hospitality industry development. "Currency wallets" helped increase occupancy at luxury hotels by an average of 65 percent for the first half of 2016 (up 6 percent over the same period in 2015, according to JLL data). The average occupancy of all quality rooms available reached 68 percent in that period.

In addition to increasing the flow of Middle Eastern and Asian visitors, the Moscow hoteliers observed a resumption in the flow of tourists from several European countries. In particular, the Azimut Hotel Olympic Moscow has seen more visitors from Spain, France and Italy, said the hotel's general director Alexei Akindinov. He expects that this trend will continue not only through the end of this year, but all through the next. The low but stable exchange rate and none too large supply of high-quality hotel rooms in Moscow contribute to this.

As Vedomosti wrote in 2015, only 3700 new rooms were created in Russia (JLL data) of the 5200 planned, while Moscow's hotel offerings increased by 972 rooms (up 6.3 percent) (Cushman & Wakefield data). Competition is becoming fiercer between branded and non-brand sites. The latter cannot enter into global agreements with global booking systems and therefore their ability to increase occupancy is rather limited, he said.

Growth in demand has been observed in Moscow for the second year in all segments except economy class, Smirnova said. This is true not only of tourist groups, but also individual travelers, said Veller. The Russian capital continues to attract both local and foreign business tourists, Libinson explained. "And as soon as the economic situation stabilizes, demand from corporate guests will recover as well," he hopes.

However, not all hotels are located in equally favorable positions. Larger, older hotels and outlying hotels can attract customers primarily with their low price. "The flow of tourists hardly goes beyond the Ring Road. In centrally located hotels, 70 percent of the visitors are foreigners, but in locations remote from the center, 80 percent of guests come from Russia and the CIS countries," said Tatiana Loginova, general manager of Hampton by Hilton Strogino. Occupancy in her hotel from January to June amounted to 55 percent. (The hotel opened in November 2015.) She believes that these hotels have to seek out their guests and work for them. Strogino guests are participants in sporting events (being located next to Yantar stadium, as well as the national squash center), as well as those who go to exhibitions at Crocus.

Yevgeny Razumny / Vedomosti

One hotelier, on condition of anonymity, said couples prefer to rendez-vous in rooms in the quality hotels on the outskirts of the capital — they now cost less than the hourly rate for apartment suites.

In the current difficult economic situation, not everyone's nerves can stand it, and some hotels are beginning to use extreme methods to improve occupancy, said Ivashkevich. But open dumping leads not only to a full hotel, but also to a reduction in its financial indicators, revenue per available room (RevPAR), in particular. "Perhaps some operators panic," Veller conceded, "but ruble prices for rooms in Moscow, in general, are coming close to the record fat years of 2006-2007."

The smallest increase in RevPAR was seen in this half of the year by the middle hotel segment, say JLL analysts — up 3 percent, compared, for example, to luxury, where the rate increased by 26 percent. At IHG, the best financial results in 2016 were seen in the hotels of the Crowne Plaza brand (the highest price segment), said Libinson. In the medium-price hotel segment, especially outside Moscow, the average price decreased in the first quarter, but rose by 1 percent in the second quarter of 2016, said Loginova. This summer, a room in Hampton by Hilton Strogino could be had on Sundays from 4500 rubles ($69.50). On weekdays, they start at 6000 rubles.

Hoteliers were looking forward to the start of the autumn business season. In September, the standard price at Strogino was 11,500 rubles per night. "Some places just broke even in the summer," Ivashkevich continued. "It is logical that the price should go up in the fall."