Hotels Waiting for World Cup

In 2017, the St. Petersburg hotel market finally overcame the consequences of the crisis and showed growth in key indicators: quality room supply increased by 3.5%, occupancy rate by 2%, and revenue per available room (RevPAR) by 10%.

Experts predict an increase in hotel prices by 12–15% in 2018 because of the FIFA World Cup.

Moscow Left Behind

The last year, despite skeptic forecasts, was quite good for hoteliers in St. Petersburg. According to Hotel Advisors, in 2017 the average occupancy rate in the city hotels was 67–69%, which is higher than in 2016. “In some months, we saw a lower occupancy rate as the hotels rose their prices, but this was negligible and did not influence the bottom-line figure,” says Sergey Danilchenko, co-founder and partner at Hotel Advisors.
“In 2017, seven million tourists visited St. Petersburg. In truth, the total number of guests decreased in the beginning of the high season. But the matches of the FIFA Confederations Cup held in our city attracted about 300 thousand guests and somewhat balanced the figures,” say experts from IPG.Estate.
The demand for hotel rooms was particularly high during winter holidays and even exceeded market expectations. “The average occupancy rate was 65% (usual New Year holiday figure is 45–55%), while prices grew by 8%,” says Sergey Danilchenko.
For many hoteliers, though, the occupancy rate was of secondary importance: they focused more on its quality by increasing the prices. As a result, in some segments the average room price almost equaled that in Moscow. In the luxury segment the average price—for the first time in history—exceeded the Moscow indicator.
“While in St. Petersburg in 2017 the average price of luxury rooms reached 18.5 thousand rubles, in Moscow it was only 18.2 thousand rubles,” says Tatiana Veller, Head of Hotels & Hospitality at JLL.
According to JLL, the highest growth (the same as in 2016) was observed in the mid-segment (three- and four-star hotels). “The average price has grown by 16% against the last year and amounted to almost 3.5 thousand rubles. As a result, the segment demonstrated the highest RevPAR growth, by 11.7%,” states Tatiana Veller.
Hotel Advisors report that in 2017 the price per room across the city increased by 9% (up to 3.67 thousand rubles), while the RevPAR indicator (average hotel one-day revenue per room) increased by 11% (up to 2.5 thousand rubles).

New Rooms

Steady demand for hotel rooms and growing hotel business efficiency are attracting new market players. Following the results of 2017, the total quality room supply in St. Petersburg reached 17.3 thousand rooms (according to IPG.Estate).
In March 2017, hotel Hilton Saint Petersburg ExpoForum opened, offering 169 rooms to its guests. In July, two more hotels obtained permits to operate: Kostas on 2, Professora Ivashentsova street (137 rooms) and Lotte on Antonenko lane (154 rooms).
“Over the last year, the quality room supply in the city increased by 3.5%,” reports Evgenia Tuchkova, Associate Director of Business Development at Consulting Department of Colliers International in St. Petersburg.
In addition to branded international hotels, budget local chains contributed to room supply growth. These are Friends (Friends on Fontanka) and Station (Station Hotel S13 and Station Premier S10), as well as proprietary hotels such as Dashkova Residence, Shouyuan, Akyan, Gamma designer hotel and Wynwood loft-hotel in the historical center of St. Petersburg.
According to Maris, the total number of new rooms in 2017 exceeded 800. “Four-star hotels provided 52.1% of the new rooms, while three-star and five-star hotels provided 30.9% and 17% respectively,” report experts at IPG.Estate.
According to forecasts, in 2018 (before the World Cup), between 800 and 1000 new quality rooms will be marketed. Particularly, Intercontinental Hotels Group with its 244-room Holiday Inn Express Sadovaya (the first branded economy class hotel in the city) and new to the market MEININGER Hotels with a 158-room hostel at Nikolskye Ryady will expand the international hotel supply.
“This proves that the market is robust,” states Evgenia Tuchkova.

World Cup Factor

The World Cup 2018 will be the primary driver of the market growth. “We predict an increase in the tourist influx up to 8 million guests during the World Cup. This will be an all-time city record,” say experts at IPG.Estate.
No need to say that hoteliers are expecting to profit from the event. “Judging by the current booking figures for 2018, the average room price across the city has increased by 23%, demand for rooms by 37%, and the revenue per room by 52%,” says Ksenia Bezborodova from Expedia.
“Following the results of the year, the average room price will either remain at the level of the very profitable 2017, or grow higher. The quality hotel occupancy during the championship may get close to 100%, though average figures of the first two summer months are usually about 84%, which is a high rate, too,” says Tatiana Veller from JLL.
“We predict that in 2018 room prices will grow by 10–15% across St. Petersburg hotels. Not only will the World Cup have an impact on the market, but also the International Economic Forum, the Gas Forum and the Scarlet Sails festival that this year takes place after the match Brazil vs. Costa-Rica,” says Anastasia Zabolotnaya from the Apart-Hotel Department of NAI Becar.
“The World Cup is a one-time profit opportunity. The promotional effect from this huge-scale event is more promising. We will observe it later,” believes Igor Kokorev, Head of Consulting Department at Knight Frank St Petersburg.
However, the surveyed hoteliers expressed concerns relating to demand for rooms from Match Accommodation (the official organization in charge of accommodation for delegations, fans and sportsmen during the World Cup). Alas, it is not high. “March is the last month to cancel official booking for the period of the World Cup. After this, we ourselves will sell rooms for the period,” say representatives of Grand Hotel Europe.
“As for my hotel, Match Accommodation has already canceled fifty percent of their reservations. If the situation in other hotels is the same, we can expect price drop due to availability of a big number of rooms right before the World Cup. The worst scenario is 30–40% decrease against the plan. This, of course, may spoil the party for hoteliers,” shares his concerns Yunis Teimurkhanly, owner of Helvetia.

Floating Hotels

The World Cup has stimulated city authorities to consider a new format of hospitality services, floating hotels. In the future, a few such objects may be built in the city. Particularly, developer Gorod Na Vode (City on Water) expressed the intention to build three floating hotels (three and four stars) in the water area of the Neva and the Bolshaya Nevka. The total number of rooms is expected to be 320.
Market experts agree that the idea of floating hotels sounds interesting. But its implementation requires thorough planning.
“Big hotels of such format in the city center are a threat to the ‘postcard’ sights. While in the remote city districts they may be lossmaking. Also, the embankments of the city are poorly suited to receive high tourist traffic from the river. There is no parking space for tourist buses and taxis. On the plus side, you can easily relocate a floating hotel when necessary,” adds Igor Kokorev from Knight Frank St Petersburg.
“There are some operators specializing in floating hotels around the world, but none in Russia. And so far, they have not shown any interest in our country,” concludes Tatiana Veller from JLL.