A hotel room with a view of the customer

04.08.2010 — Analysis

The growing number of visitors has prompted the development of the hotel market. "In 2005, the Federal Migration Service for the Sverdlovsk region registered 56,400 foreign visitors to Ekaterinburg and more than 139,000 in 2008," Marina Cheskidova, the head specialist on the Committee on Foreign Relations for the Ekaterinburg city administration, told RusBusinessNews. Ten percent of these visitors were tourists, but the lion's share were guest workers from the republics of the former Soviet Union and China. And so it's not surprising that only 15% of the city's foreign guests were registered in hotels - the others rented apartments or stayed with friends or acquaintances.

The business outlook for the hotels began to deteriorate in the shadow of the global economic crisis. According to the Migration Service's data, in 2009, Ekaterinburg received only one seventh of its previous number of tourists from abroad. In addition, six new hotels opened in the city, adding 800 beds. These were built as part of the preparations for the Shanghai Cooperation Organization summit, which took place in Ekaterinburg in June of 2009. There were no problems putting up the government delegations from twenty countries, but when the delegations left, the hotels were deserted. The occupancy rate fell by 45% last year, from its peak of almost 70% in 2008.

Today there are five international hotel chains operating in Ekaterinburg: the Hyatt Regency Ekaterinburg, Novotel Yekaterinburg Centre, Park Inn Ekaterinburg, Angelo Airport Hotel Ekaterinburg, and Ramada Yekaterinburg. One-third of the local hotels are rated under the Russian hotel classification system. And although the price of hotel accommodation (regardless of the hotel's number of stars) varied widely in 2007 and 2008, one night in a double room today costs an average of 3,000-5,000 rubles.

Players in the market say that this tendency for the prices to average out is connected with the fact that during an economic downtrend and period of uncertainty, both the five-star hotels and the tiny hotels intuitively seek the level of demand. "Since we are battling fiercely for each customer, the customer's budget is a deciding factor when they are deciding about cooperation. And as a result, the price of a room is about the same, whether it's in a three- or five-star hotel. In Ekaterinburg right now, the price of a night in a five-star hotel starts at $100," Sergei Danilik, the general director of the USTA management company, told RusBusinessNews.

Another way of retaining market position during this economic crisis is to improve a hotel's technology and services. Almost all hotels now take reservations over the Internet. In addition, they have begun to work closely with companies that arrange exhibits and tourist services. Together they can create packages of services that include not only accommodations, but a diversified cultural program that helps encourage visitors to extend their stay in Ekaterinburg.

According to Ekaterinburg's city administration, the total hotel occupancy rate in 2010 will be at least 56%, an increase of 10-11%. These promising forecasts are based on some international events that have been planned, in particular, the Russian-German summit held in Ekaterinburg in July and several major international exhibits, which led to many hotels being fully booked. The preliminary data on passenger traffic also supports this prediction. According to the figures from Ekaterinburg's Koltsovo airport, their number of passengers increased by 29.5% in the first half of 2010, in comparison to the same period from last year.

"In 2010, business activity and demand for hotel accommodations remained at 2009 levels, but availability grew by hundreds of rooms. So, in comparison to last year, we did not predict a significant increase in sales or increase in occupancy. I think that in general, the situation has stabilized, and now the market can be characterized as ‘difficult but stable," S.Danilik said. One of the main trends this year will be an insignificant increase in occupancy along with a decrease in prices, so the financially the hotels will be at about the same position they were in 2009. For now, our expectations of only a 5% increase in occupancy and preservation of revenue at last year's levels have been borne out."

Investors were encouraged by this wave of cautious optimism about the market, and talk of building yet more hotels resumed - four new ones may appear in Ekaterinburg by the end of 2011.

Evgeniya Eremina