Russia after 2018 World Cup

The FIFA World Cup held in the summer of 2018 had different effects on the hotel markets of Moscow and St Petersburg.

In this review, JLL summarizes the results of June and July for branded market players compared to the base year 2016 and to 2017, which was marked by the Confederations Cup.

The most significant impact of the FIFA World Cup was on rates with the average room price in Moscow (ADR) over the months of the championship standing at RUB 22,600, which is three times higher than in 2017 (RUB 7,400). St Petersburg also took advantage of the peak in demand with hoteliers raising prices by 30 pct compared with 2017, to RUB 13,500.

“July largely continued the trends that had been set in June. Apparently, with Moscow being the central hub of the championship, accommodation was more in demand, but after the championship the demand wound down, and there was no prolonged effect observed: the fans didn’t stay in the city as tourists to see the sights. This can clearly be seen from analysing the occupancy figures: 89 pct of the rooms were sold in June in Moscow and only 84 pct in July. In St Petersburg, the percentage of occupied rooms was roughly split between the two months: 69.1 pct in June and 69.6 pct in July,” says Tatiana Veller the head of JLL Hotels & Hospitality Group for Russia & the CIS. “The ADR also followed this trend: in Moscow, the average room price for all segments was RUB 20,800 in June and RUB 20,600 in July. The difference was more pronounced in St Petersburg: RUB 14,600 in June and RUB 12,400 in July.”

Over the tournament the largest rise in occupancy in Moscow was seen in the Luxury segment (+12 ppt on the previous year to 86 pct); The highest occupancy levels were recorded in the Upper Midscale segment (91 pct); The highest rise in ADR was in the Luxury segment (up fourfold to RUB 71,200) and the highest rise in RevPAR was also in the Luxury segment (up 366 pct to RUB 60,900).

In St Petersburg occupancy rates fell across all segments but the lowest loss was seem in the Upscale segment, which decreased by 5 ppt in comparison with the same period of the previous year to 84 pct. This was also the highest occupancy rate of all the segments. The highest rise in ADR was the Midscale segment, which was up by 41 pct to RUB 7,200, while the highest rise in RevPAR was seen in the upscale segment (up by 22 pct to RUB 10,200).

“In general, it is worth noting that the World Cup Championship didn’t bring the hoteliers of St Petersburg the expected results. Judging by the indices of certain market segments, the event generated demand that was mainly price sensitive while dampening the demand from the city’s more usual tourists. No doubt, Moscow benefitted and fully met the forecasts both for price increases and for the rise in occupancy. We can say with full confidence, that this summer’s records in ADR and occupancy rates in Moscow hotels are unlikely to be repeated anytime soon,” notes Tatiana Veller.

Despite very different results, both markets managed to increase the profitability of rooms in the first two months of this summer, however, at varying levels: in Moscow, RevPAR rose by 224 pct, to RUB 19,100, while in St. Petersburg, it grew only by 9 pct, to RUB 9,300.

“We should take into account that over the four years prior to the Championship – while the hotel markets in the two cities were most actively preparing for the event – 5,400 branded rooms were introduced in Moscow, and over 1,100 rooms appeared in St Petersburg. Considering this supply growth, we can say the operating results over the World Cup period were quite satisfactory, because it was a tight fight for a very ‘dear’ visitor (in all meanings of the word) amidst growing competition and high supply on the market,” concludes Tatiana Veller.