The HVS "2013 Russia, CIS and Georgia Hotel Trends & Opportunities" Report

The 2nd edition of HVS Trends & Opportunities report - Russia, CIS and Georgia shows operating results of the main hotel markets, highlights opportunities for owners, operators and investors in the region, and presents a review of payroll trends.

Occupancy Sees Growth in 10 of the 12 Regional Markets
Hotel Payroll Trends
Hotel Supply Rises 10% Over 2011

HVS’s Moscow office has just released the 2013 Russia, CIS and Georgia Hotel Trends & Opportunities Report, and according to this research, hotels in 10 out of 12 reviewed markets exhibited positive occupancy growth.

In 2012, hotel markets across Russia, the CIS (Commonwealth of Independent States) and Georgia continued their recovery in occupancy, however at a slower pace than in 2011. Yekaterinburg, Tbilisi and Kazan observed a double-digit increase in occupancy levels, though the rest of the covered locations reported less aggressive growth. Among those were Baku and Kiev, where occupancy levels dropped due to the large increase in supply in 2012. At the same time Average Rates have been under pressure, resulting in negative growth in 10 out of 12 markets in local currency terms.

RevPAR reflected in the local currencies exhibited growth in 5 markets: 18,3% in Kazan, 10% in Tbilisi, 10% in Yerevan, 5,5% in Yekaterinburg and 0,3% in Rostov-on-Don. According to the report, supply has increased by 9% for the past year, with 65% of the new hotel rooms in the region opened in Kiev, Baku and Sochi. In terms of pipeline, Moscow continues to dominate in the region. According to HVS Moscow Senior Consultant and Report co-author Alexey Korobkin, “Despite certain setbacks in hotel development, many markets are again are becoming attractive to investors, which is reflected in the increase of the hotel pipeline on the Russian, CIS and Georgian markets.”

“However, the recovery is still in process and as follows from the operational indicators, demand is being very price sensitive at the moment, not allowing ADR to grow.”

The past 18 months have also witnessed high profile hotel transactions, albeit all in the upscale and luxury segments. As hotel markets mature and more hotels become operational, opportunities to purchase functioning assets will become more common. At the same time mid-scale and budget segments retain the highest potential for development in the region.

This Report, for the first time, not only reviews compensation trends but also analyzes the relationship between payroll and revenue:

Not surprisingly, Moscow exhibits the lowest percentage of payroll to total revenue ratio at 23.2%. “As hotel revenues in Moscow are significantly higher than the country average, the hoteliers here are able to enjoy the better profitability then average,” explains Tatiana Veller, co-author and HVS Moscow managing Director.

Comparison of the compensation trends, held on the level of the international vs. local brands showed that annual payroll per employee in international hotels is almost 50% higher than in the local ones. Additionally, the number of employees per room is higher in the properties managed by international brands. “Such dynamics might be explained by looking at the segments in which the hotels managed by local brands are operating.”

For a copy of the 2013 Russia, CIS and Georgia Hotel Trends & Opportunities Report, visit http://www.hvs.com/article/6290/the-hvs-2013-russia-cis-and-georgia-hotel-trends/?campaign=email

Tatiana Veller
Managing Director, HVS Moscow

Alexey Korobkin
Senior Associate, HVS Moscow