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St Petersburg is in northwest Russia, nestled on the Neva River at the head of the Gulf of Finland on the Baltic Sea. Having a population of around 5.5 million in its metropolitan area in 2023, it is Russia’s second most populous city, after Moscow. In normal times, the city is mostly a leisure destination with high demand from May to September (with occupancies above 75.0%), particularly during the ‘white nights’ of June, and a low season during the winter months (with occupancy between 40.0% and 50.0% from November to March). St Petersburg is one of the main hubs for large, government-driven international events.

In 2018, as a host city for several World Cup games, St Petersburg also benefitted from the boom in tourism from the tournament, albeit not to the same extent as Moscow. Hotels in the city appeared to have prioritised a rate strategy during the World Cup, translating to average rate growth of more than 20.0% (in rubles) in 2018 compared to 2017. Visitors, however, were more price-sensitive in St Petersburg than they appear to have been in Moscow. The usual leisure demand for the ‘white nights’ was discouraged by the high rates and how busy the city would be. Consequently, this did not translate into additional room nights; occupancy was down in both June and July, with the city finishing 2018 down almost two percentage points in occupancy compared to 2017. The event and its publicity appeared to have had a lasting impact, with the city achieving an increase in occupancy of more than 10.0% and a relatively minor correction in average rate, resulting in positive RevPAR growth in both rubles and euro, an impressive achievement for a year following the hosting of a World Cup.

During 2020, although the impact of the pandemic was in line with other European cities, the RevPAR decrease was more pronounced in St Petersburg than in Russia as a whole. When taking into account the devaluation of the ruble, the RevPAR decrease was closer to 75% in euro terms.

In 2021, St Petersburg saw an exemplary recovery, with occupancy above 40.0%, one of the best of the major European cities. The annual performance was bolstered by the International Economic Forum (SPIEF) which was one of the first major face-to-face events to take place since the onset of the pandemic. The event was attended by more than 13,500 participants from 141 countries over four days in June. Both occupancy and average rates were nearly double 2020 levels in that month and while occupancy and RevPAR were still below 2019 levels, it is worth noting that the average rate was significantly above that of June 2019. The start of the war between Russia and the Ukraine in February 2022 and the international sanctions that resulted from it have heavily impacted the hospitality industry in St Petersburg due to the decrease in international visitation to the city. Volume increased in 2023 were offset by a decrease in average rates, leading to a broadly flat RevPAR for the year.

Currently, there are 238 hotels in the market, totalling some 23,300 rooms. The market’s pipeline comprises some 7,000 rooms over 13 projects, with half of these projects having more than 400 rooms, led by the proposed Aparthotel Pro.Molodost and its 2,000 rooms.However, the ongoing war with Ukraine has resulted in a number of these currently being on hold. Nine hotels, for a total of 5,900 rooms, have been deferred in the last year. The remaining four projects, for a total of approximately 1000 rooms, are expected to open over the course of the next couple years, and whilst at the moment they mostly seem to remain attached to international brands, this might change depending on how the ongoing war unfolds.

In March 2023 a transaction involving Russian investment firm Cosmos Hotel Group saw it complete the acquisition of a number of Russian companies that owned ten hotels with 4,078 rooms across four Russian cities, for €200 million (€49,000 per room). This reflects the special circumstances surrounding the few occurring sales, which would not be a fair reflection of a fully functioning investment environment. The 840-room Hotel Pulkovskaya, located on Victory Square, transacted in August 2023, but the price was not disclosed.

Overall, hotel values are estimated to have plummeted by 24% year-on-year, and currently stand at 45% of the 2019 levels. However, the lack of investment makes it particularly challenging to assess current hotel values in Russia.

ADR, Demand, Occupancy, RevPAR, and Supply Projections:

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Change In Value For Market: (€Euro)

St Petersburg RevPAR Change (€Euro)

St Petersburg RevPAR (€Euro)

For more information, please contact:

	Sophie Perret, MRICS, MBA Managing Director [email protected] +44 0 2078787722 (w) +44 0 7725781037 (m)
	Julia Dzerkach Associate [email protected] +44 0 2078787742 (w) +44 0 7912240964 (m)
	Clemence Sennavoine Associate [email protected] ++44 0 7736273439 (m)