Over the past decade, Russia’s two main cities of Moscow and St Petersburg have been the chief target of the international chains that have entered these markets mainly with their luxury and upscale brands. Now Russia’s hotel development is becoming more broad-based as midscale and budget brands make their appearance and the tide of expansion is spreading to secondary cities and resort locations. This report looks at the present situation for hotels and development in Russia. Hotel performance in the country is still largely lagging behind pre-financial-crisis highs, and while occupancies have bounced back, rates remain under pressure.

In general, the greatest development potential is for budget and midscale hotels in the major cities. In Sochi, Russia’s premier resort destination, there is a lack of five-star and luxury accommodation. Although Moscow is by far the country’s leading hotel market, it should continue to be the single most important region for hotel development; meanwhile, little new capacity is currently planned for St Petersburg. Otherwise, the aforementioned Sochi, the site of the 2014 Winter Olympics, is set for a massive increase in capacity. Of Russia’s major cities, St Petersburg is the only one to attract significant leisure tourism – virtually all provincial cities, with the exception of Sochi, are essentially business-traveller destinations.