Petersburg has overtaken Moscow in terms of attractiveness for opening new hotels

The Moscow hotel market is much more overstocked and competitive than St. Petersburg, says Cushman & Wakefield partner Marina Usenko. And precisely because of this, the leader has changed in the new rating. “Petersburg still has room to grow, especially with an eye to the expected growth in tourist flow from abroad after the end of the pandemic and the introduction of the e-visa regime,” Usenko explains. It was planned to introduce electronic visas for the entry of foreigners into Russia from January 1, 2021, but due to the pandemic, this was postponed indefinitely.

Elena Alyushina, Deputy General Director of Ales Capital (acts as a consultant for hotels in the Nikolskiye Ryady complex and the Four Seasons Lion Palace hotel in St. Petersburg), on the contrary, is sure that the St. Petersburg market is already saturated and competitive in all segments – from hostels to luxury. “Plus the rising cost of funding and the rising cost of building materials will not create a strong economy for new projects,” she says. Because of this, according to her, now is not the best time for new investments in opening hotels in the city, although there are many buildings in St. Petersburg that can be adapted to hotels of various formats. To increase the attractiveness of the construction of new hotels can participate in program Rostourism, according to which loans for hotel projects are planned to be issued at 3-5% per annum.

The general director of the Azimut hotel chain Maxim Brodovsky calls St. Petersburg a promising direction for development. He expects the pre-crisis level of business tourism in the city to recover in the next two to three years.

At the same time, it is difficult to invest in new hotels in Moscow due to the lack of land for construction within the Third Ring Road, says Brodovsky. “Real estate prices have reached an almost alarming level. But if the business model of a hotel chain, like that of Azimut, involves, among other things, taking objects under management, then in Moscow there will be more space for negotiations,” he adds.

Alexis Delaroff, General Director of Accor for Russia, Ukraine, Georgia and the CIS, does not agree with the results of the rating. According to him, Moscow is still the most promising city for Accor. “Petersburg, of course, is also of interest to us, but against the background of the pandemic, the city’s hotel market has shown a high level of dependence on international tourist groups, which are unlikely to return to the Northern capital in the same volume before 2025,” he warns.

Last year, the occupancy recovery in St. Petersburg was slower than in Moscow, especially in hotels where large areas are set aside for conferences and business events, says Maria Znova, senior director of business development at Radisson Hotel Group. At the group’s hotels in Moscow, occupancy in 2021 was 10% lower compared to pre-pandemic 2019, and in St. Petersburg — by 20%. “The pandemic has shown that domestic tourist and business flows are able to support the hotel industry of small cities, which cannot be said about large cities that are heavily dependent on international tourism and federal and global city events,” Znova adds.

The Moscow market remains “predictable and dynamic” and shows the best results of business recovery in times of crisis, Usenko agrees. This can be seen in the indicators of the tourist flow and the occupancy of hotels in general in cities. Last year, according to preliminary data, Petersburg visited about 6 million tourists. This is 43% less than before the coronavirus pandemic: in 2019, 10.5 million people came to the city. Moscow has not yet summed up the results of the year, but for the nine months of 2021 the capital visited 15 million tourists, 23% less than in the same period of 2019, when 19.5 million people visited the Russian capital. In general, in St. Petersburg, hotel occupancy, according to JLL, in 2021 amounted to 44%, in Moscow – 61%. In 2019, these figures in cities were 66% and 79%, respectively.

Kazan and Rostov-on-Don also entered the top five of the Cushman & Wakefield rating this year, displacing Yekaterinburg and Vladivostok. Krasnodar, which rose by three lines, Novosibirsk and Perm, were in the top ten in terms of attractiveness.

Omsk lost the most positions in the ranking, it dropped by six lines and took 13th place. But this does not mean that the city is not of interest to hotel operators in itself, analysts at Cushman & Wakefield say. One of the reasons may be market saturation: the required number of projects already exists and the need for a large amount of additional numbers may not yet be visible, the study says.

Accor is interested in development in the Far Eastern Federal District and million-plus cities, says Delaroff. Among the most attractive cities for opening new hotels, apart from Moscow and St. Petersburg, he names Sochi, Kaliningrad, Kazan, Yekaterinburg, Rostov-on-Don and Irkutsk. Znova among the directions where the tourist flow is growing, but so far international networks are poorly represented, indicates Altai, Baikal, Kemerovo, Karelia and the Far East. Brodovsky notes that infrastructure improvements help the development of tourism in the regions. “For example, in 2021 in Tobolsk appeared airport – we can assume that in 2022-2023 new points of attraction will appear here, including hotels,” he explains.