Recently we wrote about the fact that new international hotel chain comes to Russia with a budget select-service proposal. Is it a single case or a trend? The cultural and political magazine “E-Vesti” addressed this issue to Armin Eberhard, the head of Renaissance Moscow Monarch Centre and the Chairman of the Committee of Hotel & Tourism of the Association of European Business (AEB).
Mr. Eberhard repeated the following: “In my opinion it is just the time to expand in that segment of three stars and I give you some bullet point facts to this:
Since the start of the crisis and the following isolation of the Russian market from Western Europe and the US we saw a sharp decline in especially the leisure individual and tour business from these feeder markets, US, Italy, France, Germany and UK.
This created a volume vacuum especially in the summer. After 2015 however we can see occupancy grow in Moscow for example and also St. Pete’s.
Reason is that this missing volume was replaced by new markets, Russian internal demand increased, China, India and Iran particularly.
Russian internal demand Frommheit regions etc. has volume but is rate sensitive due to the drop of the Ruble. China and India were always big volume sources but at low rate, especially in t&t.
So we can see a steady increase in occupancy since 2015, but rate first declined and currently is flat to LY.
This shows that the current demand can offer a lot of travelers but they are price sensitive to the extreme at points, this means 5 star down to three star are competing at times for the same volume business and of course the three star segment has a much better, leaner cost base to meet the demand and compete on lower rates than 5 stars.
If you look at current international chain expansion, the majority of those new signings they have is select service, Courtyard, Holiday Inn Express, Ibis, Hyatt Place and Park Inn. This shows that the big chains see the same trend and encourage those brands to develop”.