"2013 saw very little movement in the Moscow hotel market. Occupancies seem to be at a peak, with little reason to forecast a rise in 2014. As is stands we see 2014 for the Moscow hotel market as very much a copy of 2013 in terms of occupancy, but we may see slight ADR drops across the market." – David Jenkins, Head of Jones Lang LaSalle' Hotels & Hospitality Group, commented.

2013 results in brief:

  • Luxury segment saw the highest ADR growth last year (+4%), rate exceeded RUB 13,100;
  • Upper Upscale saw the biggest ADR drop (-2%);
  • Only 1% ADR growth in Upscale;
  • ADR in Upper Midscale has grown by just 200 rubles since 2009;
  • Occupancy and ADR in Midscale segment are the same as in 2012.

Luxury

The chart below clearly demonstrates the lack of movement of any significance in this segment. "Of course there are rare openings in the luxury segment so the shifts in supply and demand are less dramatic, but all the same it is an indication that as much as the segment needs to grow rate and occupancy – the market restricts them. Occupancy here has been the same year on year and really only a political shift in the visa system can help grow occupancy in this segment. In terms of rate, it again is aligned to the lack of FIT segment travel in the city and the dependence on corporate business". – David Jenkins said. – "With the Four Seasons opening in mid-2014 it is interesting to see if they are able to drive ADR upwards – and if other can benefit from this. We also expect to see the impact of the new ownership of the Metropol Hotel in 2014. It will though be hard to see any upwards movement in ADR or in occupancy this year."

Moscow Luxury Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalleMoscow Luxury Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalle
Moscow Luxury Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalle

Upper Upscale

A tiny increase in occupancy was balanced out by a similarly small reduction in ADR. With the Marriott on the New Arbat planned to open in 2014, there could be a dip in results this year.

Moscow Upper Upscale Segment Full Year 2013 (year on year)— Source: STR Global, Jones Lang LaSalleMoscow Upper Upscale Segment Full Year 2013 (year on year)— Source: STR Global, Jones Lang LaSalle
Moscow Upper Upscale Segment Full Year 2013 (year on year)— Source: STR Global, Jones Lang LaSalle

Upscale

"ADR has grown in the upscale segment for the third straight year, but following increases of 4% in 2011 and the same in 2012, there was only a minor 1% growth this year. Given that rates are in rubles and local inflation is sitting at above 6%, these small ADR increases are inconsequential. The segment has never been able to recover rates since dropping 30% in ADR over 2009 and 2010. More worthy has been the steady growth in occupancy, coming from 62% in 2009 to 71% in 2012. Occupancy closed exactly the same in 2013. We see this as being more or less the peak achievable occupancy at this rate. The challenge here is how to grow in either occupancy and/or rate". – David Jenkins noted.

Moscow Upscale Segment Full Year 2013 (year on year)— Source: Source: STR Global, Jones Lang LaSalleMoscow Upscale Segment Full Year 2013 (year on year)— Source: Source: STR Global, Jones Lang LaSalle
Moscow Upscale Segment Full Year 2013 (year on year)— Source: Source: STR Global, Jones Lang LaSalle

Upper Midscale

ADR in this segment has grown by just 200 rubles since 2009, it has been quite predictable and again demonstrates the inability of the market to grow rates as both supply and demand expand. Occupancy as a % has grown by only 2% since 2008. Within this small rise in occupancy it is important to note that total supply in the segment grew by over 80% in the same time period, and total demand grew by 82%.

Moscow Upper Midscale Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalleMoscow Upper Midscale Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalle
Moscow Upper Midscale Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalle

Midscale

There has been a 60% growth in available rooms in this segment since 2008, and only since 2009 have there been enough rooms to make 'a sample'. Over this time, demand has grown by 50%. Occupancy in 2013 of 72% is the same as in 2012 and is pretty much the peak achievable as a segment. There are some that can do more, and of course those that achieve less. With ADR also the same as in 2012, there was no movement at all in this segment and little to suggest it will do so in 2014.

Moscow Midscale Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalleMoscow Midscale Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalle
Moscow Midscale Segment Full Year 2013 (year on year) — Source: STR Global, Jones Lang LaSalle

David Jenkins commented: "Available rooms in these 5 segments has grown by an amazing 60% since 2008 (the supply) and occupied rooms has grown by 50% over the same time period (the demand). This has though come at a cost to achievable average rates – those have dropped by 20% over the same 5 year period. 2014 will see the Four Seasons opening close to Red Square, as well as important openings for Marriott on the New Arbat and Radisson at Sheremetyevo. We anticipate more than 13,000 new rooms to open in the city in the next 5 years. We can expect to an extent that occupancy may cope in some segments but again the challenge will be at what cost to the average rate – unless some new dynamic is introduced into the market. There needs to be stimulation of the high-end leisure trade into Moscow to boost upscale to luxury hotel occupancies – though we see no evidence of this."

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