Alexandra Mertsalova on the dissonance of hoteliers

“We treat one thing, we cripple another,” they say in Russia about unjustified medical manipulations. But at times such a paradox can be found in the sphere of government regulation. A recent example is the hotel market. Vladimir Putin recently spoke about the existing risks of rising prices in hotels during the New Year holidays at a meeting with government members, linking the problem with a shortage of rooms. “What is the government planning to do?” – asked the president. The main thing is to increase the number of rooms, answered the head of the Ministry of Economy, Maxim Reshetnikov.

The authorities’ concern is not surprising: on the eve of a new electoral cycle, any price increase is painful. And in terms of domestic tourism, prices often become a loud topic for the media, which, when comparing the cost of a vacation, come to the conclusion that Russian resorts, in the words of the Moments publication, “are breaking all records.”

Since the beginning of 2023, prices in hotels of the two-three star level have increased by 8-11%, four-five – by 14%, Maxim Reshetnikov said at a meeting with the President. Taking into account the inflation forecast by the Central Bank of 7–7.5% and the rising costs of hoteliers, such dynamics are understandable. It is also difficult to talk about the widespread shortage of accommodation. In October, Deputy Minister of Economy Dmitry Vakhrukov admitted that hotels in the country operate with an average annual occupancy of 39%, with the minimum level required for profitability above 50%.

However, it would be foolish to deny the rise in prices that is causing indignation among authorities and tourists. With the only assumption that it has an extremely seasonal nature: on peak dates, accommodation facilities often increase rates by 30–50% or more. For example, the other day on the website of the Yalta Intourist hotel, a superior double room for December 5–6 could still be booked for 5–7 thousand rubles. As of December 30–31, a similar option already cost 11–20 thousand rubles. The secret is rush demand. Vice-President of the Association of Tour Operators of Russia Sergei Romashkin estimated that 4% of the population travels around the country during the New Year holidays – that’s 5.9 million people, and there are only 1.1 million hotel rooms in Russia.

The high season is a good help for hoteliers, but such moments are few in a year and their fate is in question. It is worth recalling the issue regularly raised by the FAS about setting price limits for hotel accommodation during major business events. The discussion about the possibility of such government regulation traditionally evokes strong emotions among hoteliers – and it is difficult not to listen to them.

If, on the one hand, we advocate for the involvement of business in hotel construction, and on the other hand, we seriously discuss measures to reduce margins that are already not too high, investors will at least experience cognitive dissonance, which does not at all contribute to the growth of the number of rooms.