Europe -  Moscow, Russia

Moscow is the largest city in Russia (and on the European continent) and, as such, has one of the largest economies in Europe, generating over 20% of Russia’s GDP. It is the seat of power of the government and a major economic, cultural and scientific hub, all of which drive the city’s hotel demand. The city’s hotel market is primarily domestic and business-oriented, although leisure demand is increasing.

The past few years have been turbulent for Russia with a range of economic issues stemming from the devaluation of the ruble, falling oil prices and Western sanctions. However, Moscow’s hotel market has proven resilient, albeit not untouchable. The very factors that contributed to the onset of Russia’s recession have also proven to be safeguards for the Moscow hotel market: the weak economy and exchange rate have led to an increase in ‘staycations’ amongst Russians, as holidaying in domestic destinations (including Moscow) becomes more attractive and affordable than travelling abroad. Similarly, the sharp devaluation of the ruble suddenly made Russia much more affordable to foreigners. While this trend has somewhat slowed due to recent improvements in the exchange rate, it has not disappeared entirely.

Assessing the city’s hotel performance depends largely on what currency is used. On the back of stabilising oil prices and a partial recovery in the value of the ruble, average rates in local currency saw a marginal decline. However, in euro and other major international currencies, average rates saw substantial growth in 2017. Combined with strong occupancy growth of around 5%, the city experienced excellent RevPAR improvements.

As would be expected in a market with an improving economy and a major international event on the horizon, there have been a number of notable hotel openings in the past year with plenty more in the pipeline. Some of the most notable hotel openings in 2017 were the AccorHotels cluster near Kievskaya station, a triple-branded hotel complex that includes a Novotel, an ibis and an Adagio, and the Hyatt Regency Petrovsky Park on the Third Ring Road.

There have been relatively few transactions in the past few years. The notable exception in 2016 was the Courtyard by Marriott Paveletskaya, which was part of the nine-property Regional Hotel Chain portfolio sold by VIY Management to Sistema Hotel Management, a subsidiary of AFK Sistema. 2017 was somewhat more active with five transactions, the most significant of which being the Sovietsky Hotel near the Dynamo Stadium. Despite the limited transaction evidence, the improving economy and exchange rate, stabilising oil prices and strong hotel performances have led to strong improvements in values (in euro).

Change In Value For Market: (€Euro)

Legend
Significant Value Increase: Greater than +10%
Moderate Value Increase: Between +3% and +10%
Stable Values: Between -3% and +3%
Moderate Value Decline: Between -3% and -10%
Significant Value Decline: Less than -10%

Moscow RevPAR Change (€Euro)

Moscow RevPAR (€Euro)

For more information, please contact:

Sophie Perret, MRICS, MBA
sperret@hvs.com
  • +44 20 7878 7722 (w)
Simon Hulten
shulten@hvs.com
  • +44 020 7878-7775 (w)