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Upmarket hotels weather industry downturn

The Moscow hotel market has been one of the fast growing markets in the world. A huge deficit of rooms and rising demand has allowed existing hotels to monopolize but the crisis may have had some positive effects.

Moscow – a city which has been transformed into a Mecca of luxury and opulence in recent years – at least in the hotel business, where 4 and 5 star hotels rule the roost.

With a whopping 25% growth year-on-year, it was, until the crisis, Europe’s fastest growing hotel market – with a constant need for quality accommodation.

Suddenly all star segments on the Moscow hotel market were struggling; currency fluctuations and falling consumer confidence, sent occupancy rates into a spiral according to Aleksandr Arutyunov, President of Intourist group.

“The crisis really did affect the Moscow hotel market, especially in the first 2 quarters of the year, and there was a big drop in hotel occupancy and the average price of a room.”

Analysts say occupancy rates dropped by about 25% on average. Many hoteliers were left wondering how to fill their rooms. Hotels responded by dropping their prices, which led to a price war – something the market had not seen since 2004.

Arutyunov points out that top hotels suffered least – as they could “afford” to lower their prices.

“The margin for lowering prices in 4 and 5 star hotels was much larger – this segment contains the most branded hotels, many from international chains – which could attract tourists at very comfortable prices."

Indeed, the Moscow hotel market has taken a hit during the crisis, but 5 star hotels seem to have been the least affected by this; this is because hoteliers such as Oliver Eller, General Manager, Ritz Carlton Moscow claim they are offering a unique experience – not just a place to stay

“It’s quite a healthy approach to see that an on-going and confirmed quality is paying back; you have loyal customers – we, for example, did not lose any occupancy points at the Ritz Carlton, but we were able to keep out customers – have we been affected in food and beverage outlets, in the banquet facilities, for parties and events, sure, but we were able to be a little bit more flexible, because again, we are not selling a hotel room or food and beverage – we are selling an experience.”

The crisis seems to have given many industries, especially the Moscow hotel industry, the chance to hit the reset button and refocus on quality-driven services at a fair price. And while Moscow city government wants to focus on developing budget accommodation, with a shortage of 2 and 3 star hotels – it seems that the top end will remain the more profitable.