Top-End Hotels Continue to Dominate
As of the beginning of this year, there were 121 hotels operating in the city (this figure does not include mini-hotels, government-sponsored hotels and those located in the suburbs) containing a total of 18,200 rooms, according to Colliers International data. Seven of the hotels opened in 2011, increasing the number of rooms by 1,045, according to Maris, part of the CBRE Affiliate Network overview. Among the biggest hotels opened last year were the five-star W from new international operator Starwood Hotels & Resorts, and the four-star Crowne Plaza Ligovsky and Crowne Plaza Airport from InterContinental Hotels Group.
During the same period, one three-star hotel closed. As a result of market re-positioning, the 256-room Karelia Hotel was turned into an apartment building.
“Developers are continuing to build hotels in the upper price range,” said Natalya Kireyeva, senior analyst in the consulting and evaluation department at Maris. “Toward the end of 2011, the share of four- and five-star hotel rooms already amounted to 58 percent. Meanwhile, as was previously the case, there was a shortage of three-star hotels located near the city center.”
“A comparatively small number of hotels are being built,” said Igor Kokorev, project manager of the strategic consulting department at Knight Frank St. Petersburg.
“During the crisis, many projects were frozen. The time it takes for hotel projects to be realized is among the longest in all real estate sectors. This time is used not only to construct the building, but also to draw up a design of the premises, equip the rooms, restaurants and conference rooms, and find and train staff,” he said.
“The payback period for hotels is longer than that of any other market sector, and competition is high. That’s why very few investors are interested in this sector,” he added.
This year will bring hotel chains including Domina Hotels and Resorts, Four Seasons Hotels and Resorts and Fairmont Raffles Hotels International to the city’s market. Lotte Hotels & Resorts and Hilton have also shown interest in the city, according to Maris experts.
In comparison with 2010-2011, there has been more than a 50-percent decrease in the number of hotel projects put into operation in 2012. Jones Lang LaSalle experts said that eight hotels are planned to open between 2012 and 2014.
“The number of projects under construction is not high,” said Marina Smirnova, senior vice president of Jones Lang LaSalle Hotels. “By the end of 2015, the market will have increased by 1,389 rooms, with 70 percent belonging to the mid-market and economy categories.”
The most anticipated event of this year on the city’s hotel market is the opening of Four Seasons Hotel Lion Palace at 1 Voznesensky Prospekt.
“It will be the first deluxe-class hotel in St. Petersburg, where prices will be 25 to 30 percent higher than the average price of rooms in five-star hotels,” said Nikolai Kazansky, general director of Colliers International St. Petersburg.
There is a wide variety of international hotel operators on the St. Petersburg market that in most cases simply manage the hotel, while the owners themselves are the investors.
“Hotels under the management of a large international brand are a more understandable product for the investor, with fewer risks and, as a result, better liquidity,” said Kokorev.
According to the city’s Committee for Investments and Strategic Projects, about 5.5 million travelers visited St. Petersburg in 2011 — seven to eight percent more than in 2010. The increase in visitors is partly associated with the increase in popularity of cruise tourism.
“The proportion of Russian and foreign visitors has not changed significantly during the last five years,” said Kireyeva. “Domestic demand, as before, is greater than that of foreign guests. About 52 to 55 percent of the inbound flow is from Russian visitors 45 to 48 percent is from foreigners,”
The number of foreign tourists in St. Petersburg increased by 13 percent in 2011, totaling 2.6 million people, according to Colliers International data.
The St. Petersburg hotel market varies drastically from season to season. Maximum hotel occupancy is in June, during the White Nights, while minimum occupancy is seen during the winter season. This is because in St. Petersburg, unlike in Moscow, tourists rather than business travelers comprise the bulk of the market.
According to data from December 2011, the average citywide level of hotel occupancy rose to between 63 and 65 percent last year, with the lowest average annual level present in five-star hotels (53 percent) and the highest in three-star hotels (62 percent), according to a Colliers International review.
Experts, however, believe that demand will soon return to the more expensive hotel sector.
Last year, demand on the hotel market returned to pre-crisis levels. As a result, hotels could have stricter price policies, Jones Lang LaSalle specialists believe. Hotels have started reducing accommodation discounts, which will lead to increases in average prices.
According to Maris’ overview, the average daily rate in 2011 was five percent higher than in 2010, totaling 2,500 rubles ($84) for a room in a three-star hotel, 4,600 rubles ($155) in a four-star hotel and 8,500 ($285) in five-star hotels. Colliers International experts however, put five-star hotel prices even higher — at between 10,000 and 18,000 rubles ($335-$605), depending on the season.