Picture the Moscow hotel market as an upside-down pyramid, with a throng of five-star luxury hotels at the top and the city's lone budget hotel, the Ibis Moscow Paveletskaya, at the bottom. The pyramid is now righting itself, as mid-market hotels continue to open and budget hotels start to be built.
That's the picture David Jenkins, head of hospitality at consulting firm ООО «Кушман энд Вэйкфилд», drew in this reporter's notebook at a recent Moscow hotel conference. Eventually, Moscow's price categories will look like those of other major cities, with a large number of budget options, a medium amount of mid-market offerings and a smaller amount of luxury hotels, he said.
"Over the next seven years the pyramid will reverse," Jenkins said, predicting 20 new internationally branded budget hotels in Moscow within the next half-decade.
"An Ibis isn't sexy, but it makes money," he added, noting that the Ibis Moscow Paveletskaya is one of the most profitable hotels in the city given its high revenue per available room and low construction cost.
Regional cities are also expecting a wave of mid-market and budget hotels, with international players eyeing not only the millionniki — the cities beyond Moscow and St. Petersburg with million-plus populations — but also much smaller cities. Most of the franchise and management companies in these segments are international brands, with the Russian company Azimut forming a notable exception.
Although no universal definitions of each segment exist, three- and four-star hotels are often considered mid-market, and budget hotels often correspond to one- or two-star ratings.
Recent construction deals confirm the trend toward nonluxury hotels. Last month, Hilton Worldwide announced deals for four new hotels in Russia, including a mid-market and a budget hotel in Volgograd. The latter of these will be built as part of a multisite agreement with a Russian developer that includes the future construction of 11 other hotels, most of them in the budget category, in cities such as Novosibirsk, Rostov-on-Don and Ufa. The deals made Russia the biggest growth market for Hilton Worldwide.
"I think the volume's going to be in the focused-service [brands with limited options for food and meeting space], Hilton Garden Inn in the mid-market and Hampton by Hilton in economy," said Mike Collini, Hilton vice president of development for Turkey, Russia and Eastern Europe, about his company's plans for expansion in Russia. "They provide a stronger return on investment and are right for the regions of Russia and the outskirts of Moscow and the suburban markets."
Outside of Moscow, however, brands are wary of repeating the mistake of Yekaterinburg — a regional city oversaturated with a sudden glut of rooms.
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