Turnover of the hotel market will grow due to domestic tourism

By the end of 2023, the volume of the Russian hotel market may reach 785 billion rubles, which is 10% more year-on-year. A number of experts predict growth by 25% due to the development of domestic tourism due to the reduced opportunities for Russians to relax abroad and the expected influx of tourists from China and Iran. However, the market participants themselves consider the possible growth of the segment in terms of money “formal” due to a serious increase in costs and the inability to significantly increase the cost of their services. Excluding inflation, market turnover cannot yet recover to 2019 levels, they say.

A possible increase in the volume of the Russian hotel market by 10% year-on-year, up to 785 billion rubles, according to the results of 2023, is stated in the forecast of the Yandex Travel service. Analysts do not exclude that by 2027 the figure will reach 1-1.1 trillion rubles. Marina Goncharenko, executive director of Bronevik.com, believes that the expected market growth of 10% this year is associated with an increase in the average price of accommodation in collective accommodation facilities (CFR) by the same amount. Yandex Travel estimates the current cost at an average of 2.48 thousand rubles. per night, up 6% year-on-year. At the same time, according to analysts, the average annual load of the CSR in the whole country is 32% with a possible increase of about 10% per year.

At the beginning of this year, domestic tourism grew actively, but then the dynamics slowed down significantly, recalls Sergey Romashkin, vice president of the Association of Tour Operators of Russia. Thus, according to Rosstat, in the first quarter, the income of the CSR increased by 32% year-on-year, to 136.9 billion rubles.

Mr. Romashkin expects that this year, under an optimistic scenario, the number of tourist trips within the country will grow by 10% year-on-year, and under a pessimistic scenario, by 7-8%. “In any case, this is higher than the standard 4–5% that was observed in quieter years,” the expert notes. He does not rule out that if the optimistic scenario for the growth of the domestic tourist flow is implemented, and taking into account the increase in accommodation prices by 10–15%, the volume of the hotel market may grow by 20–25%.

However, major hoteliers are reserved in their forecasts. Azimut Hotels notes a slight growth in the first half of the year, which is still 7-15% behind the level of pre-pandemic 2019. President of Cosmos Hotel Group Alexander Biba expects an increase in the average occupancy and tariffs of the chain’s hotels this year, without naming specific figures. Deputy Chairman of the Union of Tourism and Hospitality Roman Yeremyan calls the growth in income of collective accommodation facilities largely formal: “After deducting inflation, they are now actually lower than in 2019.” He also draws attention to the extremely uneven growth of the market: in 2022, 23% of the income of the entire hotel market came from the Krasnodar Territory, in 2019 – 17%. According to Sergey Romashkin, the Krasnodar Territory provides 15-17 million tourist trips per year, Crimea, Moscow and St. Petersburg – 4-6 million each.

Mr. Romashkin calls the general geopolitical tension and state support of the industry an important factor in the growth of the domestic tourism market as a whole. Ostrovok.ru Managing Director Daria Kochetkova believes that further growth in exchange rates and logistical difficulties will contribute to this. But, Mr. Romashkin makes a reservation, in some regions the development of tourism is constrained by poor transport accessibility, low profitability of the hotel business. Working conditions for hoteliers are now deteriorating, as due to a shortage of staff since 2019, they have raised the salaries of employees by 30% with an increase in profitability per room by 19%, emphasizes Roman Yeremyan. It is difficult to increase the cost of living more noticeably due to limited solvent demand, he adds.

Another possible factor in the growth of the hotel market in Yandex Travel is the return of tourists from China and Iran, which previously especially supported the markets of Moscow and St. Petersburg. But Roman Yeremyan recalls that for Russia, foreign tourists have never been key: before the pandemic, they accounted for only 15% of the total number accommodated in the CSR, while in France – 70%.

Alexandra Mertsalova