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.

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 of course the city (and other World Cup host cities) are expected to see performance levels drop back from those recorded in 2018, the World Cup was largely cited as a resounding success for the country and is expected to help Moscow hold on to at least some of positive gains achieved in 2018. At the close of the tournament, the BBC’s Steve Rosenburg reported, ‘The stunning new stadiums, free train travel to venues and the absence of crowd violence has impressed visiting supporters. Russia has come across as friendly and hospitable: a stark contrast with the country's authoritarian image. All the foreign fans I have spoken to are pleasantly surprised,’ while FIFA president Gianni Infantino stated, ‘Everyone discovered a beautiful country, a welcoming country, that is keen to show the world that everything that has been said before might not be true. A lot of preconceived ideas have been changed because people have seen the true nature of Russia.’ This positive sentiment of those that experienced the tournament is hoped by local hoteliers to help encourage international visitation, although it remains to be seen to what extent this will happen.

Due to the volatility of the ruble, the implications of the exchange rate fluctuations in 2018 must also be considered. Fortunately, the impact of the World Cup was so strong (average rate increased by around 35% in rubles) that the 11% drop in the value of the ruble from 2017 to 2018 was easily absorbed, with average rates in terms of euro still growing by over 20%.

There were a number of notable hotel openings in 2017 and early 2018 in the lead-up to the World Cup, with developers and brands racing to be up and running prior to the event. 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 is still a relatively large pipeline to come with around 4,700 rooms at various stages of construction (and potentially a further 2,700 rooms if the projects on hold or cancelled are revived).

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. In 2018, the Courtyard by Marriott transacted for a rumoured RUB1.9 billion (€25.4 million) and the Holiday Inn Vinogradovo for a rumoured RUB500 million (€6.6 million). The 480-room Hotel Tourist and the 548-room Orekhovo Hotel also transacted, but at undisclosed amounts. More recently, in January 2019 the Hotel Peking was sold. The sales price is unconfirmed, but the previous owner was reportedly seeking RUB6 billion (€75.6 million) from the deal.

Overall, the excellent year and hopes that some of the gains can be held onto going forward resulted in a value increase of 8.2% in euro (21.8% in local currency) compared to 2017 levels.

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
[email protected]
  • +44 20 7878 7722 (w)
Magali Castells
[email protected]
  • +44 20 7878-7710 (w)
  • +44 7 850205149 (m)