Just weeks after Holiday Inn opened its latest Moscow hotel, Hilton has said it will join the booming Russian hospitality sector. It has chosen one of Moscow's seven Stalin skyscrapers for its first ever hotel in the country.
It will be adding a star to the three-star Leningradskaya hotel, which currently occupies the building. The new hotel will be a Hilton franchise but with minimal involvement from the company. Operating the new project is Interstate, which already owns three Marriott franchises in Moscow. “In emerging markets, it is typical for business hotels to build up faster than tourist hotels along with the economy,” says Gerald Gaige of Ernst & Young. “It is the case in Russia because the hotel market starts almost from zero. There was an influx of international-standard hotels in the early 90's and they have created a base.” From that base, Moscow has grown into a major magnet for business travellers and demand's showing no sign of slacking off. Industry specialists say that Moscow is a business destination rather than a tourist destination. St. Petersburg has more of a tourist appeal for geographical, administrative and cultural reasons. Based on Moscow’s business focus, Hilton’s entrance is not surprising. The hotel industry has been growing significantly both in terms of room prices and occupancy rates. At more than 200 dollars per night, they are out of reach for many travellers. Hotel rates in Russia are 2 – 2.5 times higher than for comparable hotels in other European countries such as the UK, France and Germany.Those high rates, along with strict visa regulations and costly airfares to Moscow are preventing it from becoming a popular tourist destination. Nonetheless, specialists suggest hotels have reached a price ceiling based on data from last year. In addition, the trend to video conferencing and teleconferences may suppress occupancy rates and prices in the long-term.