Market Report Russia

St. Petersburg Hotel Industry 2013 Results and 2014 Forecast

Jones Lang LaSalle’ Hotels & Hospitality Group announces 2013 St. Petersburg hotel market results.

Jones Lang LaSalle “2013 was a positive year for the hotels in Russia’s second city. We saw RevPAR increases of 15% and upwards in each category – from economy up to luxury. Following several difficult years for the city hotels it was a welcome boost and enables hoteliers and owners to feel positive heading into 2014 and beyond.” – David Jenkins, Head of Jones Lang LaSalle’ Hotels & Hospitality Group, Russia & CIS, commented.

2013 results in brief:
• Luxury segment saw the highest ADR growth last year (+14%), rate exceeded RUB 11,300;
• The gulf in achievable rate between the Upper Upscale and Luxury segments in St. Petersburg – a difference of 50%;
• Occupancy in Midscale reached 60%;
• Occupancy in Upper Midscale reached 67%, the only real further growth has to come in ADR;
• Midscale saw ADR increase by 14% to RUB 2,700.

“There was an exceptional summer season for the city and an additional boost in September as the city hosted the G20 meeting. RevPAR in September was almost double than usual for many hotels – evidence that as a host city for major events, St. Petersburg has adequate quantity and quality of accommodation at each level.” – David Jenkins noted.

Luxury
“The luxury segment grew RevPAR by 16%, coming mostly from a 14% increase in ADR and a minor 2% occupancy growth. With the Four Seasons hitting the market fully in 2014 it is likely to challenge overall occupancy in the segment but could help boost overall ADR.” – David Jenkins said. – “With occupancy of 52%, the segment sits 25% behind that of Moscow (65%), and 16% lower in ADR.”

St. Petersburg Luxury Segment Full Year 2013 (year on year)
Graph - St. Petersburg Luxury Segment Full Year 2013 (year on year)_10022014.png
Source: STR Global, Jones Lang LaSalle

Upper Upscale
The upper upscale segment managed to grow RevPAR at more or less the same pace as the luxury segment but this came for a 50/50 mix in occupancy and ADR growth. It demonstrates the gulf in achievable rate between the upper upscale and luxury segments – a difference of 50%. The gap between the two segments in Moscow is 30%.

St. Petersburg Upper Upscale Segment Full Year 2013 (year on year)
Graph - St. Petersburg Upper Upscale Segment Full Year 2013 (year on year)_10022014.png
Source: STR Global, Jones Lang LaSalle

Upscale
Closing at above 60% occupancy for the year, the upscale segment grew by 17.5% in terms of RevPAR over 2012 results – coming from a 13% growth in ADR and 4.5% in occupancy.

St. Petersburg Upscale Segment Full Year 2013 (year on year)

Graph - St. Petersburg Upscale Segment Full Year 2013 (year on year)_10022014.png
Source: STR Global, Jones Lang LaSalle

Upper Midscale
“There is only RUB 1,000 difference in ADR between this segment and the one above (upscale). Closing the year at occupancy of 67%, the only real further growth has to come in rate – but cannot really happen unless the segment above can also boost ADR, this is the challenge for this segment. Otherwise a RevPAR growth of 19% in 2013 was very impressive, coming half and half from rate and occupancy.” – David Jenkins said.

St. Petersburg Upper Midscale Segment Full Year 2013 (year on year)
Graph - St. Petersburg Upper Midscale Segment Full Year 2013 (year on year)_10022014.png
Source: STR Global, Jones Lang LaSalle

Midscale
A boost in ADR of 14% in this segment has raised the lower level of the branded hotel set to RUB 2,700. This led to a 3% increase in occupancy as surely certain guests were squeezed into lower segments. Still, as an overall growth in RevPAR of 17% it was another great performance.

St. Petersburg Midscale Segment Full Year 2013 (year on year)Graph - St. Petersburg Midscale Segment Full Year 2013 (year on year)_10022014.png
Source: STR Global, Jones Lang LaSalle

David Jenkins commented: “We have seen over the years that a sudden boost to the supply (ie. when many new hotels open at once) can dramatically influence the market in terms of hotel performance. 2013 saw the opening of the Four Seasons hotel – the first one in Russia and it will be interesting to see the impact it will have on the luxury segment – can it drive up ADR and at whose expense? We also noted that the famous Grand Hotel Europe closed the restaurant wing that hosted both the Chinese and Italian restaurants and they are being fully renovated and will be re-launched in 2014 as a brand new concept.”

What to expect in 2014

Three branded hotels to open in 2014 in St. Petersburg:
• Indigo boutique hotel by IHG – the first one in Russia;
• Hampton by Hilton ExpoForum (Hilton also expected though may move into 2015);
• Park Inn Pulkovo Airport.

“Both the Hampton and Park Inn are based outside the city and will operate in quite a specific market so we do not see too much of a negative influence on downtown hotels.” – David Jenkins said. – “One key change in the city centre will be the refurbishment of the Azimut Hotel – with new lobby and meeting facilities to be opened in May 2014. This, along with a number of new guest rooms that were already launched in 2013, will somewhat ‘awaken’ this sleeping giant and it should make some impact in the MICE segment as well as compete more effectively than before.” “Without the G20 it is difficult to predict a significant increase in performance in 2014 over 2013 numbers, but we see positive signs in the market and would expect a further, but more moderate, growth in RevPAR across the segments.” – David Jenkins concluded.

About Jones Lang LaSalle
ones Lang LaSalle (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, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 279 million square meters. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management.

In Russia and CIS Jones Lang LaSalle have offices in Moscow, St. Petersburg and Kiev. Jones Lang LaSalle, Russia was voted Consultant of the Year in 2004, 2006, 2007, 2008, 2009, 2010, 2011, 2012 and 2013 at the Commercial Real Estate Awards, Moscow and Consultant of the Year at the Commercial Real Estate Awards 2009, St. Petersburg. For further information, please visit www.jll.ru.



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