Russia's World Cup expectations may be dim, but its hotel business should score.
Moscow, the host city for the 2018 FIFA World Cup, is expected to see revenue-per-available-room growth of between 20 percent and 30 percent during the month-long event, excellent rate growth, though still less than the two previous host cities.
The city has in recent years been best with new hotel supply with international brands entering en masse in recent years. Hopes for the World Cup did rest on visitors other than football fans filling the beds.
STR said that occupancy was likely to grow between 8 percent and 10 percent just under 80 percent during the World Cup months, with average daily rate up between 15 percent and 20 percent. Through the first four months of 2018, Moscow saw occupancy grow 6.7 percent year-on-year to 65.8 percent.
In contrast, in Rio de Janeiro, in 2014, occupancy rose by 12.6 percent on the year to 81.6 percent in June and by 18.3 percent to 80 percent in July. At the same time, ADR increased 72.8 percent and 64.4 percent during the two months, respectively, driving RevPAR increases of 94.5 percent.
In Johannesburg, in 2010, occupancy rose by 27.7 percent in the previous June to 78.5 percent and grew to a lesser degree—7.4 percent—in July to 63.7 percent. ADR increased 56.3 percent and 44.5 percent during the two months, respectively, driving RevPAR increases of 99.6 percent and 55.1 percent.
"When a market’s hotel inventory expands in anticipation of a major event, it can take time for demand to catch up to increased supply," said Thomas Emanuel, director of business development at STR. "One of the main incentives for cities to host these events is the obvious visibility they gain in generating tourism interest.
“In the case of Moscow, the city has seen year-end RevPAR growth since 2015, and occupancy was up 6.7 percent for the first four months of 2018, so demand and rates have been growing consistently. In comparison with other recent World Cup host markets, Moscow does have a substantially higher room count than Rio and Johannesburg, so we may see less dramatic performance shifts following this year’s tournament."
Moscow has seen a boom in interest from the brands in recent years, welcoming 5,500 new rooms since 2014, according to JLL.
"Russia was ready for more hotel rooms," said Tatiana Veller, head of hotels and hospitality group, JLL Russia & CIS. "Even before Russia won the bid to host FIFA 2018, there was a well-developed hotel supply. Unless you have zero hotels in a city, then you’re not building solely for the event."
According to EY’s annual market research on the presence of international hotel brands in Russia, there were 179 hotels under international management operating in the region in October 2017 with a total room stock of 38,705 keys.
More than half of the existing room supply was concentrated in Moscow and St. Petersburg (52 percent), followed by Sochi (11 percent), the Moscow Region (6 percent), Ekaterinburg (3 percent), and other locations. Eighty percent of current market share was divided between five chains: AccorHotels, Hilton, Marriott International, Carlson Rezidor Hotel Group and InterContinental Hotels Group. The leader, with 25 percent, was Carlson Rezidor.
EY forecasts that by 2022 the number of hotels under international management would increase by 102 new properties (20,249 rooms).
Helping to drive demand of late has been the weak ruble, which has drawn in visitors from overseas in addition to encouraging domestic tourism. According to Russia’s Federal Agency for Tourism, domestic tourism traffic was estimated to have grown by 3 percent in 2017, when more than 56.4 million trips were made, up 34 percent on 2014 and 75 percent against 2013.
Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.