JLL expects Moscow hotel market to double in five years

All eyes will be on Russia this winter as the Olympics kick off in Sochi—but hoteliers will be looking to Moscow, where the hotel market is poised to double over the next five years.

Following a poor first quarter, according to HospitalityNet, all segments have caught up over the year to end mostly flat compared to 2012, with only the luxury segment showing any real growth at 4 percent (all in rate, not occupancy). According to the story, there was no occupancy (in other words, demand) growth at all across all segments in 2013 compared to the previous one. ADR is also mostly level to last year.

“With several new hotels entering the branded segments, (including Sheraton Sheremetyevo, Kempinski Nikolskaya & Novotel Moscow City) we saw an increase in supply of 7 percent and a similar increase of occupied rooms – bringing the market itself to a similar level to 2012 – but given the increase in supply there was the same increase in demand,” said David Jenkins, Head of Jones Lang LaSalle’ Hotels & Hospitality Group, Russia & CIS. (The first multibranded hotel complex (Mercure / ibis / Adagio Bakhrushina with 433 rooms in total) opened in December in Moscow, but it has had no influence on the hotel market yet.)

Since 2008, the number of available rooms within the five ‘branded’ segments has increased by 60 percent, by almost 4,000 rooms, while the demand (occupied rooms) has increased by 50 percent. “Essentially, supply and demand are keeping pace with one another – but at the expense of average rate – which has dropped by 20 percent from 2008,” Jenkins commented. “This allows us to forecast going forward further rate compression, as supply will increase dramatically in the coming five years.” 

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Jones Lang LaSalle estimates that 13,000 new hotel rooms could be delivered to the Moscow market up to 2018, many of which are in the branded economy and mid-market segments. This, Jenkins acknowledges, will essentially drain business from the local hotels--”but such a huge volume of new rooms will certainly impact the achievable occupancies and rates in the city going forward.”

What to expect in 2014

Moscow's hotel pipeline includes:
*    Four Seasons ‘Hotel Moskva’ – 180 room luxury hotel;
*    Marriott New Arbat – 234 room upper upscale hotel;
*    Radisson Sheremetyevo – 379 rooms upscale airport hotel (with extensive meeting facilities).

Other hotels throughout the Russian regions include:
*    St. Petersburg – Park Inn Pulkovo Airport, 200 room midscale airport hotel, and Hilton & Hampton by Hilton ExpoForum St. Petersburg, Upscale and economy hotels – app. 400 rooms.
*    Rostov-On-Don – Sheraton, 307 room upscale hotel, and Hyatt Regency, 189 room upper upscale hotel.
*    Hilton Garden Inn, Volgograd (with Interstate), app. 150 rooms.
*    4 Points by Sheraton Kaluga, 172 room upper midscale hotel.
*    Holiday Inn Express in Samara and Voronezh, app. 150 rooms each.
*    Park Inn Volgograd, 150 room midscale hotel.
*    Mercure Lipetsk, 184 room upper midscale hotel.
*    Radisson Chelyabinsk, 211 room upscale hotel.
*    Radisson Gelendzhik, 274 room upscale resort hotel.
*    Hyatt Regency Vladivostok, 253 room upper upscale hotel.
It is worth noticing that in Sochi, most major brands (Hyatt, Accor, Swissotel, Radisson, Interstate, Marriott, Capella, etc) have hotels opening in the coming weeks prior to the Games.

But not all of the hotel development is receiving positive reactions: Last week, the Moscow Times reported that about a dozen people were arrested after a standoff with police over the construction of a hotel in the Novokosino district of eastern Moscow. Protesters the district needs social infrastructure like schools rather than hotels. 

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