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News Release


Moscow Hotel Market Update. Q1-Q3 2013 Results

Moscow, 10 October 2013 — Jones Lang LaSalle’ Hotels & Hospitality Group announces the summer and Q1-Q3 2013 Moscow hotel market results.

David Jenkins, Head of Jones Lang LaSalle’ Hotels & Hospitality Group, Russia & CIS, said: “The summer period was strong for most Moscow hotels, and August was certainly helped by the World Athletic Championships. The month of August showed a RevPAR increase (compared to August 2012) of 20% across the city hotels – in every segment – a very impressive result.”

For the three months of June to August, the hotels posted increases of RevPAR compared to the same summer period in 2012 of 6% to 13% depending on the segment. The increases per segment were:
• Luxury + 13%
• Upper Upscale +7%
• Upscale +10%
• Upper Midscale +8%
• Midscale +6%

“All in all this has helped the year to date results following a very slow start. Still, despite the very strong summer, every segment other than the luxury segment is behind 2012 for the first 9 months – a consequence of a very poor first 4 months,” – David Jenkins commented.

Moscow Hotel Market results by segment
Occupancy for the last 4 years at this stage of the year has remained totally flat with no growth at all. Over the same time period, the compound growth in ADR has been only 7% - so in essence this market is static. It will be interesting to see the impact the 4 Seasons will have when it enters the market in 2014.
Moscow Luxury Segment Q1-Q3 2013 (year on year)
Moscow Luxury Segment Q1-Q3 2013_11102013.png
Source: STR Global, Jones Lang LaSalle
Upper Upscale

This has been a more volatile segment, with a dip in 2011 following the opening of several new hotels and a period of time afterwards to rebuild the occupancy within the segment. It remains almost 5% down on 2012 following a 6% drop in ADR and only a minimal increase in occupancy.
Moscow Upper Upscale Segment Q1-Q3 2013 (year on year)
Moscow Upper Upscale Segment Q1-Q3 2013_11102013.png
Source: STR Global, Jones Lang LaSalle
The graph (see below) clearly shows the dip in occupancy through 2006 to 2008 whilst there is a growth in ADR. We do not see such levels of ADR for this segment returning. “The real growth has been in occupancy, where we now have a year to date occupancy of above 71% - the same as 2012, which is positive, but at the same time ADR is slightly down on 2012 by 1%. The occupancy is coming without any rate increase – even below inflation”, - David Jenkins added.
Moscow Upscale Segment Q1-Q3 2013 (year on year)
Moscow Upscale Segment Q1-Q3 2013_11102013.png
Source: STR Global, Jones Lang LaSalle
Upper Midscale

Average rate for this segment has remained unchanged since 2010 – with occupancy dropping back down to 2010 levels following a slight period of growth. “Occupancy certainly seems to have peaked yet there is an inability to increase rates, and if we consider inflation then in fact rates are dropping, - David Jenkins predicted. - With significant new supply coming in this segment over the next 3 years we do expect to see rates declining.”
Moscow Upper Midscale Segment Q1-Q3 2013 (year on year)
Moscow Upper Midscale Segment Q1-Q3 2013_11102013.png
Source: STR Global, Jones Lang LaSalle
Occupancy seems to have peaked here also and rates are very much guided by the segment above. Any shift in rates from above will of course put pressure on rates in this segment.

Moscow Midscale Segment Q1-Q3 2013 (year on year)
Moscow Midscale Segment Q1-Q3 2013_11102013.png
Source: STR Global, Jones Lang LaSalle
David Jenkins concluded: “With only 3 months to go we believe that the luxury segment will certainly post a good annual result, with other segments all coming in 1% to 4% below last year (RevPAR). With average rates dropping – yet costs rising with inflation or above – the pressure on hotel profitability is clear and such a dynamic is not positive for GOP growth (gross operating profit). This in itself can negatively impact hotel cash flows. On the upside for hotel owners in Moscow, we are seeing strong interest in acquisitions of hotels in the city from potential investors, aligned to a lack of hotels for sale – this helps to drive down cap rates and drive up asset values”.
“With a development pipeline in Moscow of app. 4,500 rooms for the next 3 years, we expect to see the significant branded room-count grow. This will clearly have an impact on market performance. As such, we would like to be seeing growth in ADR this year and the first half of next year in advance of the new comers – this though is not evident so far,” – David Jenkins added.
About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 242 million square meters and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management.
In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg and Kiev . Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg.
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About Hotels & Hospitality Group
Jones Lang LaSalle’s Hotels & Hospitality Group serves as the hospitality industry’s global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centres; mixed-use developments and other hospitality properties. The firm’s more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totalling nearly US$25 billion, while also completing approximately 4,000 advisory, valuation and asset management assignments. The group’s hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.
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