Europe -  Moscow, Russia

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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.

After several turbulent years stemming from a range of economic issues related to the devaluation of the ruble, falling oil prices and Western sanctions, the FIFA World Cup (which took place between June and July 2018) helped the Moscow hotel market achieve an incredibly strong performance in 2018 with RevPAR growth of nearly 30% in terms of euro and over 40% in local currency. During June and July alone, the city saw RevPAR triple from 2017 levels. While performance levels naturally dropped from the 2018 World Cup peak, Moscow maintained impressive occupancy and ADR throughout 2019, with the positive experience international guests had in 2018 carrying over.

Unfortunately, the turbulence continued with the onset of the COVID-19 pandemic. While GDP declined by only 3.1%, significant but relatively modest compared to many European countries, the hospitality industry was hit hard. Demand was half of 2019 levels and average rates dropped by more than 15% (local currency). The resulting RevPAR drop of more than 60% may look shocking at first glance, but it is important to note that this was one of the smallest declines amongst major European cities. Even when factoring in the large decline in the value of the ruble against the euro from 72.5 to 82.3, the RevPAR decline in euro was in the mid-60%s, still notably better than the majority of European capitals.

While the top line performance may sound encouraging (at least compared to elsewhere in Europe), the bad news and reason for the significant value declines is the lack of support available to hoteliers. The availability of government subsidies, furlough schemes and other support was far more limited than most other markets, meaning hoteliers took the brunt of the COVID-19 impact. Overall, hotel values in local currency declined by a relatively modest 10.6%, but by 21.2% in euro due to the change in exchange rate.      

Looking at changes in supply, there was only one significant opening that we are aware of in 2020, which was the 154-room Moevenpick Moscow Taganskaya. The World Cup put pressure on many projects under construction to open by 2018, while the pandemic has delayed a number of openings that were originally due in 2020. Looking forward, there are some 4,000 rooms in the pipeline under construction or in planning, the majority of which are in the upscale and upper-upscale categories.

There have been relatively few transactions in the past few years, and the prices of most of those properties that have transacted tend to either be undisclosed or rumoured. The only notable disclosed transaction of 2020 was the 150-room Hotel Peking, which traded for approximately €61.4 million.

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%

For more information, please contact:

Sophie Perret, MRICS, MBA
[email protected]
  • +44 20 7878 7722 (w)
Nikola Miljković
[email protected]
  • +44 20 7878-7721 (w)
  • +44 7 593572865 (m)