The share of hotels managed by international chains in Russia decreased to 60%

The share of international hotel operators in the Russian market by June since the start of military operations of the Russian Federation in Ukraine has decreased by almost one and a half times, to 60%. Some of them, including Hyatt, InterContinental, Marriott, fearing sanctions pressure, left Russia. A number of hotel owners operating under Western brands preferred to manage their facilities themselves. The break with partners deprived them of access to a common booking system, but, according to experts, doing business on their own allows them to save on operator commissions.

Across Russia, the share of hotel rooms managed by international operators in June 2023 amounted to 60% against 86% before the start of the Russian military special operation in Ukraine, according to a study by IBC Real Estate. Since last spring, Hyatt, InterContinental, Marriott, CPI Hotels, Belmond, Sokos, Four Seasons, BWH and Wyndham left the Russian market. Now, according to CMWP, 28.7 thousand numbers in the Russian Federation are managed by foreign networks, 27.2 thousand by Russian operators, another 19.2 thousand have passed from international companies to local management.

Many hotels, where international operators left, are now managed by the owners themselves, says Vladislav Nikolaev, director of strategic consulting at Nikoliers, citing the Ararat Park Hotel near the Bolshoi Theater and the former Courtyard by Marriott Moscow on the Arbat in the center of Moscow. But they no longer have access to a common booking system and standards, explains the interlocutor of Kommersant from among the operators. It is difficult for hotel owners not to lose quality standards without the participation of the operator, warns Cosmos Hotel Group President Alexander Biba.

Now all demand is concentrated on domestic tourism, the flow of foreign tourists is still scanty, so the lack of a brand does not interfere with the owners, says CMWP partner Marina Usenko. In addition, she notes, they managed to save on the operator’s commission.

About 1,000 more rooms in six hotels previously managed by foreign players have been transferred to the portfolio of local chains, says Mikael Ghazaryan, Head of the Capital Markets and Investments Department at IBC Real Estate. According to him, local operators received “a unique opportunity to build up a portfolio of high-quality objects.” Thus, Sokos sold its business in Russia to the owners of the Awara IT group, Alexander Ermakov and Yuri Shumakov, who develop hotels under the Wone brand. This decision increases the recognition of Russian brands both within the country and in the near abroad, says Maxim Brodovsky, CEO of Azimut Hotels.

At the same time, some Western players, despite the sanctions risks, continue to work in Russia. According to IBC Real Estate, 11 such operators remain in the country, including Accor, Hilton, Lotte, Soluxe, Corinthia, Domina, Kempinski, Rosewood and Rocco Forte.

Some of the remaining chains are owned by shareholders from friendly countries: for example, Radisson and Louvre HG are owned by China’s Jin Jiang International, says Marcel Izmailov, managing partner at IFK Hotel Management.

These players are striving to maintain their market share in existing hotels, as the refusal to operate in Russia is quite a painful step for them, Vladislav Nikolaev believes. Other operators could remain for economic reasons, for example, due to the nature of the contract with the owner or the threat of serious financial losses, Dmitry Parinos, deputy director of the CORE.XP hospitality industry division, believes.

Kommersant’s source from among the operators does not exclude that the departed brands will want to return to the country after some time. But by this time the situation may be different: local and Asian brands will strengthen on the Russian market, Mr. Parinos predicts. For example, in July of this year, Dusit International from Thailand signed an agreement on the management of hotels in the Novy Sheregesh resort under construction in Siberia.

Daria Andrianova