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St Petersburg is in northwest Russia, situated on the Neva River at the head of the Gulf of Finland on the Baltic Sea. With a population of more than 5 million in its metropolitan area, it is Russia’s second most important city, after Moscow. The city is mostly a leisure destination with high demand from May to September (with occupancies above 75%) in a normal year, particularly during the ‘white nights’ in June, and a low season during the winter months (with occupancy between 40% and 50% from November to March). St Petersburg is one of the 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. Curiously, this did not translate into additional room nights, and occupancy was down in both June and July, with the city finishing 2018 down almost two percentage points in occupancy compared to 2017. World Cup visitors were more rate-sensitive in St Petersburg than they appear to have been in Moscow, and the usual leisure demand that travels to the city for its ‘white nights’ were put off by the high rates and worries over how busy the city would be. Fortunately, the high rates achieved during the World Cup helped the city to achieve average rate growth of more than 20% (in rubles) in 2018 compared to 2017. The publicity during 2018 appears to have had a lasting impact, with the city achieving more than a 10% increase in occupancy and a relatively minor correction in rate, resulting in positive RevPAR growth in both rubles and euro, an impressive achievement for a year following the hosting of a World Cup.

While GDP declined by only 3.1% in 2020 as a result of the pandemic, hotel demand declined to less than half of 2019 levels and average rates dropped by more than 25% (local currency), resulting in a RevPAR drop of more than 70%, significantly worse than Russia overall but more or less in line with the European average. It should also be noted that the decline in the value of the ruble in 2020 compounded the negative impact and, when viewed in terms of euro, the decline in RevPAR was closer to 75%.

In 2021, St Petersburg saw an exemplary recovery, with occupancy above 40%, 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. 2021 average rates finished the year around 50% above 2020, both in local currency and euro. The start of the war in February 2022 and the international sanctions put in place resulted in a decline in international visitation to the city for the year 2022. Volume remained in line with that of 2021 and at about two thirds of pre-pandemic levels, although further rate growth resulted in a RevPAR recovery to around 90% of the 2019 RevPAR.

Currently, there are 238 hotels in the market, totalling 23,325 rooms, and more than 5,820 rooms in the pipeline. However, these rooms are spread across just ten properties. Half have more than 400 rooms, and the proposed Aparthotel Pro.Molodost alone will have more than 2,000 rooms. Transactions were limited in 2022: SOK sold its three-hotel portfolio for an undisclosed price in June 2022, and 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. Overall, hotel values in St Petersburg decreased by 22% in 2022 in euro terms, and 43% in ruble terms.

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)