Following years of consistent growth, the hospitality markets in Moscow and St. Petersburg are expected to face stagnation in 2025 with investment activity nearing its lowest ebb.
Domestic tourism, which has remained a backbone for the industry during years of isolation, is also weakening.
During the first half of 2025, Moscow saw a 3.2% drop in occupancy in branded hotels, the first such decline since 2019, according to real-estate business advisory Nikoliers.
Analysts attributed the decline to a high base effect, a hike in tariffs and a drop in domestic corporate travel amid a broader cooling in the national economy.
In St. Petersburg, average occupancy showed a marginal 0.5% increase compared with the previous year, Nikoliers said.
The growth trend is weak, despite a steady rise in tourist flow to the capital of the Russian North.
The St. Petersburg Tourism Committee said the number of its visitors increased 12% to 5 million during the first half of 2025. It attributed the paradox of rising visitors yet lackluster occupancy growth to a massive shift by Russian visitors to renting apartments, a trend that gained momentum last year amid a steady rise in tariffs at branded hotels.
Moscow hoteliers said occupancy inched down from its 2024 peak but remained at what they see as a “comfortable level.”
Valery Maximov, general manager of the Vega Izmailovo Hotel & Convention Center, Moscow, said his hotel’s occupancy declined to 77% during the first nine months of 2025, compared to 84.3% across all of 2024.
Maximov said he believes the situation is due to the turbulence seen globally in the hotel industry, not just a worsening scenario in Moscow and Russia.
“Each year since 2019 has been unique in terms of global events that have had a significant impact on fluctuations in tourist flow, including in Moscow — a lull during the pandemic followed by a boom in domestic tourism,” he said.
In St. Petersburg’s Neozoom Hotel, which opened in 2021, the best year to date in occupancy was in 2023, said its general manager, Alexander Zaitsev.
“During the last two years, the profitability level has dropped significantly, and costs have surged,” Zaitsev said.
He said between October and April, months considered the low season in St. Petersburg, his hotel is operating at close to zero profitability.
He added he agreed with the St. Petersburg Tourism Committee that the reason for this is not a drop in tourist flow but a surge in the number of apartments offered for rent and the number of those wishing to rent them.
Domestic tourism across Russia shows clear signs of stagnation, according to the Russian Association of Tourist Operators, or ATORUS, which in a white paper suggested 2026 will be another tough year for the Russian hotel industry.
Elena Makhrova, vice president of hotel and travel firm Cosmos Hotel Group, said during the first nine months of 2025, the popularity of domestic tourism declined by 5.8%.
She said the battle for customers is in full swing.
"Hotels will have to compete seriously both with aggregators offering alternative accommodation options and with each other,” Makhrova said.
In early 2025, St. Petersburg regulators said they planned to crack down on apartments that they claimed were operating in a “gray zone,” especially those operating in residential buildings.
Mass inspections earmarked for Sept. 1, 2025, however, did not materialize.
That lack of action coupled with general economic stagnancy has compounded hoteliers’ challenges, said Christina Goodym, an analyst with Finam, a Moscow-based financial advisory firm.
“The slowdown in hotel occupancy growth in Moscow and St. Petersburg this year is largely due to the overall slowdown in economic activity, and declining consumer demand, as well as a high comparison base after a period of active industry recovery,” she said.
Slowing activity
The overall economic situation in Russia is taking a toll on the hotel and hospitality industry.
During the first half of 2025, not a single new hotel was launched in St. Petersburg, a mark that has rarely happened.
Hoteliers primarily blame the interest rate, which for the first half of 2025 was at a historic high of 21%.
According to Goodym, a hike in the key interest rate is only one piece of the puzzle.
She added investors remain extremely cautious about development plans due to general macroeconomic uncertainty, longer payback periods, and rising construction and operating costs.
Goodym added the industry does still offers opportunities for targeted development in specific segments.
Some development plans in Moscow and St. Petersburg have recently been postponed or frozen for an indefinite period, said Tatyana Morozova, marketing department manager at CORE.XP, a Moscow-based real-estate consultancy.
“The high key rate is, of course, a restraining factor, as it is for all other sectors of the economy. Preferential financing for the hotel industry, also tied to the key rate, remains attractive to investors, but the cost of borrowing remains quite high,” Morozova said.
Given the surge in costs, hoteliers prefer to keep close their capital.
Morozova agreed with Goodym that the Russian hotel industry still has potential, although she added investment activity primarily has cooled in segments where excessive growth was recorded during the last several years.
“The forecast for 2026 is neutral. In an economy with declining purchasing power, a company’s success will depend on the professionalism of management,” Maximov said.