MOSCOW—Having already established itself as a solid business market, Moscow’s emerging hotel industry is receiving renewed attention from investors looking to tap into a burgeoning leisure class.
Not surprisingly, branded assets are leading this new wave of development. Rising from the center of Moscow Centre, for example, is the InterContinental Moscow Tverskaya, which is set to open its doors in November.
“Emerging markets are important, and there’s a need for more branded hotels in significant growth markets like Russia,” said Oliver Horn, GM of the InterContinental Moscow. “The Russian capital is extremely important, both for inbound and outbound travel. Russians have started to travel a lot over the last few years, and they like to use brands they’re familiar with. So if they become familiar with and get to like the InterContinental Moscow Tverskaya, they are more likely to want to stay in an InterContinental hotel while abroad.”
While Hilton Worldwide, Raffles and Ritz-Carlton already sit in top markets in Russia, the country's hotel development race has been heating up since early 2010. As the InterContinental Moscow readies to open its doors in Moscow, leading lenders are spending significant dollars on future development projects.
Rossiyskiy Kredit Bank, a Russian investment bank, is the owner of the InterContinental Moscow and has spent the past decade investing in various hotel projects in Russia. The hotel, which is part of a multi-million dollar, multi-functional complex the investment bank is developing on Tverskaya, will include an office center and a retail area next to the hotel.
Russia hotel performance
All three major Russian cities (Moscow, St. Petersburg and Yekaterinburg) have seen strong growth since the start of 2011, reporting year-on-year growth in occupancy, according to STR Global, sister company of HotelNewsNow.com.
Moscow hotels recorded a 5.6% rise in occupancy since the beginning of the year, while St. Petersburg climbed to nearly 13% growth, and Yekaterinburg weighed in at an impressive 44.1% increase in occupancy from January to May 2011. The 44.1% increase for Yekaterinburg, however, reflects a very low base year for comparison, according to STR Global. Still, the increases give a strong signal to financiers who are investing on the promise of hospitality growth for the next few years.
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A rendering image of the hotel's lobby lounge. |
In addition to their increased occupancy rates, Moscow and Yekaterinburg also recorded increases in average daily rate. STR Global analysts attributed this to increases in supply from five new, higher-end hotels that opened in 2010, which created an additional 1,500 guestrooms in the cities.
“We believe the ADR increase will be in line with inflation in Russia (currently around 7%) or slightly above that given the volatility of the Moscow market, its seasonality as well as the new additions that are getting ready to enter the market in the 5-star sector,” Horn said.
As for the future of hotel growth: “Forecasting for the next five to 10 years is a challenge in the situation that we’re currently in. If the market normalizes, we are confident that we’ll have a revenue increase that stays slightly ahead of inflation.”
The 2014 Olympic Winter Games are planned in Sochi, the resort city approximately 900 miles from Moscow. While Sochi isn't one of the more popular tourist destinations for international travel in Russia, Horn believes the attention in the region will cause investors to pay more attention to bigger cities, despite the historical reluctance to invest following a general trend of centralization in Russia.
InterContinental Moscow profile
The InterContinental Moscow will open this November with 203 rooms, including eight junior suites, eight executive suites, two diplomatic suites and one presidential suite. The diplomatic and presidential suites are located on the top floor of the hotel and offer views of the city, while the rest of the rooms in the hotel are split between deluxe and superior rooms.
The hotel will serve traditional Russian cuisine in its restaurant, Checkhonte, and plans to invite chefs from other InterContinental hotels around the world to introduce new concepts to the Russian kitchen. Up first: Thomas Kammeier from InterContinental’s Michelin star restaurant Hugos in Berlin and Roger Rassin from the Amstel’s La Rive Restaurant in Amsterdam. In 2012, the InterContinental Moscow will open an I-Spa.
“We searched for a long time during which we were offered a number of projects and finally found the one which fits our requirements perfectly. It’s a beautiful project, just the right size and in a perfect location,” Horn said.
Average rates start at US$400 during the opening period and go up to approximately US$4,600 for the presidential suite.