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Moscow Hotel Market Update. Q3 2014 Results

November 12, 2014, 17:34 (PX Newswire)

Moscow, 29 October, 2014 – JLL Hotels & Hospitality Group announces the Q3 2014 Moscow hotel market results.

“As we head into the business end of the year we are starting to see a more profound impact of the sanctions, weakening economy and flagging ruble upon the hotel business in Moscow. Spiraling operating costs are impacting GOP levels and as much as a weaker ruble makes hotels cheaper for tourists – the surrounding politics have meant that fewer tourists wish to come.” - David Jenkins, Head of JLL Hotels & Hospitality Group, Russia & CIS, said.

Moscow is down 10% in RevPAR year to date (January to September). “The trend since June has been one of results widening to last year, prior to June the year have been down 5% RevPAR – so this difference has doubled. For the summer months, Moscow was down more than 15% in RevPAR.” – David Jenkins noted.

The past months have seen some activity in Moscow in terms of new or re-flagged product. Starwood have brought their premium St. Regis brand to the Nikolskaya Hotel and the Four Seasons (180 rooms) has opened this month. Hilton launched their first Doubletree Hotel (270 rooms) in the city in September and Rezidor have opened their 379-key Radisson at Sheremetyevo airport. We still expect the Marriott New Arbat to open before the end of the year.

“It is very high activity for new hotels at a time when the market is highly sensitive so we are very cautious about performance between now and the end of the year. We expect the final quarter to continue the negative trend.” – David Jenkins mentioned.

Moscow Hotel Market in details

2013 saw the ADR in the luxury segment hit levels last seen in 2009. There has been a minor 2% drop in ADR this year so far, but a 6% drop in year to date occupancy. The year began strongly for the luxury segment, and by the end of June it was down only 2.5% RevPAR – all in rate. The summer months have seen a deeper gap to last year, with RevPAR down 15% year on year. This leaves the segment down almost 8% in RevPAR year to date but with a worsening trend.

“The concern now for the final quarter is to somehow arrest the trend to avoid ending the year more than 10% down in RevPAR. Of course the summer was poor as higher-end tourists stayed away, and with both Four Seasons and St. Regis playing in the same segment for the last few months, it is hard to predict how the year will now end.” – David Jenkins commented.

Upper Upscale
The RevPAR drop year to date is pretty much the same as in the luxury segment at just over 7%. There has though been a 3% growth in rate (close now to RUB 10,000) but a significant 10% drop in occupancy.

“The summer saw an occupancy drop of 17% compared to 2013, again an indication that tourist stayed away in large numbers.” – David Jenkins mentioned. – “It is hoped that business guests who have been less impacted by the politics will continue to visit the city, especially in the final quarter when deals are typically closed and new budgets made.”

The upscale segment, perhaps unsurprisingly, has been impacted the hardest of all in this current difficult year. With almost 25% of available branded rooms it the most competitive segment and so far sits at 14% down in RevPAR for the year, 9% of which is occupancy.

According to David Jenkins, it’s the worst year since 2010. We have now seen RevPAR in the upscale segment slip below that of the upper midscale segment for the first time. Summer was hit badly as for all hotels, but with a huge drop in RevPAR of almost 20%.

Upper Midscale
Hotels in this segment have manage to maintain occupancy of 70% year to date but at a slip in ADR of 4%, clearly taking business from the upscale competitive set. These are the best performing hotels in the city this year so far.

A minor slip of 2.5% in occupancy sees this segment also sit at just below 70% for the year – a good performance demonstrating that there is demand in Moscow but at a price. This has led to a 4% drop in ADR, but overall better than the city average. With 27% of available ‘quality rooms’ this segment remains solid in performance.

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 fee revenue of $4.0 billion and gross revenue of $4.5 billion, JLL has more than 200 corporate offices, operates in 75 countries and has a global workforce of approximately 53,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3.0 billion square feet, or 280.0 million square meters, and completed $99.0 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $50.0 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.

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 , 2013 and 2014 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

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