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News Release

​Moscow

Moscow Hotel Market Update. Q1 2014 Results


​Moscow, 9 April 2014 – JLL’s Hotels & Hospitality group announces the Q1 2014 Moscow hotel market results.

“The first quarter is a vital period for hotels and tends to set the pace for the rest of the year. With January performing somewhere between 40% and 50% occupancy in Moscow due to the annual New Year holidays, the year only really kick-starts in February. - David Jenkins, Head of Jones Lang LaSalle’ Hotels & Hospitality Group, Russia & CIS, said. - We had projected that 2014 would be a year of minor growth given the scale of new openings expected in the city. Hotels are always liable to be impacted by political turbulence – international corporate and leisure guests are quick to react to any perceived risk or poor impression. This slowdown in hotel bookings has not been felt so much in Q1 – just towards the final weeks of March.”

“The key issue facing the hotel market is the slowdown in pipeline bookings, in cancellations of leisure and corporate groups and the general sentiment of the international traveler and of the key travel agents. The Four Seasons is set to open this year and will do so in a much more difficult market than the same time last year. Hotels are now looking beyond the European and US markets as they try to pick up the pace of future bookings.” – David Jenkins commented.

The main drop in Q1 2014 was in rate not occupancy. For example, Luxury segment saw 6% drop in ADR, Midscale saw 8% drop in ADR. JLL’ Hotels & Hospitality experts predict that Moscow hotels will become rate flexible to avoid drops in occupancy.

Moscow Hotel Market in details

Luxury

Luxury segment saw a drop in RevPAR by 6% - mostly because of decrease in rate. The top two performing hotels in the city in terms of ADR are the Ararat Park Hyatt and the Ritz Carlton. The average rate of the segment is lowered by the inclusion of other luxury hotels that are unable to perform at the same rate levels.

“It is likely that the Luxury segment will be impacted directly by any slowdown in business and the second half of the year looks particularly difficult for the segment as it welcomes the Four Seasons into the fold.” – David Jenkins mentioned. – “As a segment it performs far below more mature and established luxury markets such as London (ADR at GBP650 = circa USD1,077 ) and New York (ADR at USD930).”

​Moscow Luxury Segment Q1 2014 (year on year)


Source: STR Global, JLL


Upper Upscale

RevPAR in Upper Upscale dropped by the same 6% but mostly in occupancy. February saw a drop in occupancy in this segment of 10% that was mirrored by a similar increase in occupancy in the Luxury segment in the same month. “This is always a fragile segment as guests can move towards the upscale segment in times of hardship. We may well see average rates slip in this segment in order to maintain occupancy levels.” – David Jenkins commented.

Moscow Upper Upscale Segment Q1 2014 (year on year)


Source: STR Global, JLL


Upscale

RevPAR in this segment fell by 10% - half by rate and half by occupancy. The Upscale segment has been down each month this year on the year before and we have seen a big increase in the Upper Midscale segment. The 10% drop in RevPAR is mirrored by a similar increase in the segment below.

Moscow Upscale Segment Q1 2014 (year on year)


Source: STR Global, JLL


Upper Midscale

There has been good growth here so far this year, with a 10% RevPAR increase coming from a 15% raise in occupancy (at the expense of the upscale segment). ADR though has though dropped by 5%.

Moscow Upper Midscale Segment Q1 2014 (year on year)


Source: STR Global, JLL


Midscale

Occupancy has managed to remain flat to last year but with a drop in ADR of almost 8%. The second Ibis that opened in December 2013 is generating price competitiveness in this segment.

​Moscow Midscale Segment Q1 2014 (year on year)


Source: STR Global, JLL

There has been nothing of note opening in Moscow in Q1 2014 year so far but we would like to pay attention to the opening in very late December 2013 of the tripled branded Accor hotel on Bakhrushina street (Mercure, Ibis & Adagio) and the official rebranding of the ex-Renaissance Olympic Hotel into the Azimut Olympic Hotel – also in late December 2013. We expect soon to see the Marriott Arbat and Four Seasons open in Moscow - both possibly in Q2.

David Jenkins noted: “We had last year predicted that Moscow would face a year of more or less similar operational performance to 2013 mostly on the back of the increase in supply. This we believed was a positive sign and not a negative one – an indication that the supply and demand are in line with one another. The challenges now facing the market are driven by politics and very much beyond the control of the ‘market’. Unfortunately hotels will always feel pressure when tourists and business travelers feel uneasy about a destination though hotel managers remain positive that they can look to new markets to drive new business.”

“We do not expect the corporate business to be impacted for too long but certainly sentiment plays an important part in driving leisure business and this already fragile segment may take some time to recover.” – David Jenkins concluded.


About JLL 

JLL (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 $4.0 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 279 million square meters and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management.

In Russia and CIS JLL has offices in Moscow, St. Petersburg and Kiev. JLL, Russia & CIS was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 at the Commercial Real Estate Awards, Moscow; Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg and The Best Real Estate Consultancy in Ukraine at the Ukrainian Property Awards in 2013. For further information, visit www.jll.ru