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Key Hotel Groups Plan Massive Russia Expansion

INTERCONTINENTAL MOSCOW - TVERSKAYA
INTERCONTINENTAL MOSCOW - TVERSKAYA (IHG)

According to Ernst & Young's (EY) latest industry report (PDF) the largest hotel operators in the world plan on expanding operations in Russia from 38 cities, to 54 by the year 2020. The report, "International hotel chains in Russia - 2016", discusses industry growth in Russia with the run up to the 2018 Russia World Cup as a central focus. 

Tverskaya
IHG's fabulous Tverskaya in the center or Moscow
Currently in Russia, some 23 international hotel operators control 152 hotels in 38 cities. The EY report framed the 66% of the overall market controlled by legendary hotel brands; Carlson Rezidor Hotel Group, Accor Hotels, InterContinental Hotels Group and Marriott International, that have been focused solely on the Moscow, St. Petersburg (54%), Sochi (12%), Moscow region (6%), and Yekaterinburg (3%) rooms. The report cites not only hotel operator information, but also open source materials for the first nine months of 2015. The real estate advisory lead for this report, Olga Arkhangelskaya had this to add: 

"According to hotel operators, as well as information from open sources, before the end of 2015 announced to open 11 more hotels, however, in our view, the opening of a number of objects may be postponed until the beginning of 2016."

Radisson Blu Paradise Resort & Spa, Sochi
Radisson Blu Paradise Resort & Spa, Sochi (Carlson Rezidor)

Ernst & Young's report goes on to tell of hotels under international management increasing by 118 properties (23,450 rooms) by 2020. The World Cup, which is to be held across 11 Russian cities, has added massive stimulus to growth, according to the expert. Furthermore, the paper concludes that a total of 270 properties with almost 100,000 rooms will decorate the market in those 54 cities come 2020. 

Additionally, EY says there are plans to open international hotels in 16 cities, where there were previously no outside companies present. Those cities include; Arkhangelsk, Vladivostok, Vladimir, Zelenogradsk, Kemerovo, Naberezhnye Chelny, Russia, Pereslavl-Zalessky, Saransk, Saratov, Stavropol, Surgut, Tver, Tolyatti, Ulyanovsk, Khabarovsk. Some key takeaways from the report for international brands are: 

  • Brand recognition - A Recognizable hotel brand is perceived as a quality guarantee

  • Status - A property's status is a sign of security and safety. Foreign tourists prefer known brands

  • Loyalty carryover - Guests who are in loyalty programs are motivated when traveling abroad

  • Investing - Big brands reduce overseas investment risks

  • Marketing costs - Big brands have overall lower marketing and other costs

Tigre de Cristal
The Tigre de Cristal already had a soft opening, the Full Monte is slated for November 11

Finally, the EY report brings to light the weaknesses and benefits of independent hotel operations. Specialized hotel franchising entities are more and more drawing independent hotels to their banners. As we've seen in other markets, the independent's in Russia can glean operational advantages from chain affiliation. As the report puts it;"Existing hotel owners who admit that they “have squeezed the maximum” from their properties as independent hotels and are now looking for global chains to assist in boosting performance even further." An example of developments already ramping up, Carlson will complete the Carlson Rezidor announces the Radisson Blu Olympiysky Hotel, Moscow in 2017. This month in Vladivastok, the much anticipated Lawrence Ho casino resort, the Tigre de Cristal is scheduled to open on the 11th on the Murav’inaya Harbor near Cherepaha Cape.  According to the reports, that resort is already 100% booked through the new year. 

 

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