Over the last two decades, since the crumbling of the Berlin Wall, Russia has embarked on a massive upgrading of its hotel stock from Soviet-style Intourist hotels to modern facilities that meet international standards. Up until the present day, this evolution has mainly impacted the upscale hotel offering in the country’s two principal cities, Moscow and St Petersburg. Meanwhile, major secondary cities, with populations of 500,000 to over a million, remain woefully under-supplied. Throughout Russia, the most severe shortages exist in quality budget and midscale capacity, which is virtually non-existent across most of the country.

Key findings

The Russian hotel market is largely dominated by domestic guests, who account for 87% of arrivals and overnights. However, foreigners are a significant factor in upscale properties in Moscow and St Petersburg. Business travellers constitute the principal client base for Russian hotels.

Less than 10% of Russia’s 5,000-odd hotels are managed by professional operators and only around 30 hotels in the whole country are branded by an international hotel chain. Of these, just five are outside Moscow and St Petersburg.

Rezidor, with its Radisson and Park Inn brands, is the leading hotel chain in Russia, followed by InterContinental Hotels Group (IHG) and Marriott.

Small but growing Russian chains such as Amaks, Azimut and Heliopark have gained a foothold in secondary and tertiary cities and are targeting the domestic business traveller market.

Moscow and St Petersburg alone account for around 30% of the country’s hotel capacity.

There is a severe lack of quality midscale accommodation, due in part to the closure of many Soviet-era properties, which are being renovated to be reopened as upscale hotels.

The high profit margins enjoyed by Russian hotels, particularly in Moscow and St Petersburg, are likely to be reduced in the future due to rapidly rising wages and increasing supply.

Russian hotels are often part of mixed-use developments, which can include retail, office space and apartments, since hotels have generally been considered to be less profitable than other forms of real estate.

Resort development is just getting underway and is concentrated along the Black Sea coast (Sochi) and in golf complexes, some of which are located near major cities.