International Hotel Chains in Russia - 2017 - EY · PDF fileInternational hotel chains in...

International Hotel Chains inRussia - 2017

International hotel chains in Russia

According to EY’s annual market research on the presenceof international hotel brands in Russia, in October 2016there were 169 hotels under international managementoperating in the region with a total room stock of 37,635keys.

Moreover, nine new branded hotels (1,661 rooms)were opened in January - October 2016, comparedwith 13 hotels with a total room stock of 2,271keys commissioned in Russia in 2015.

More than half of the existing room supply isconcentrated in Moscow and St. Petersburg (52%),followed by Sochi (11%), the Moscow Region (6%),Ekaterinburg (3%), and other locations.

It is planned that by 2021 the number of hotels underinternational management will increase by 109 newproperties (22,335 rooms). Thus, if by 2021 allannounced hotels open, the number of hotels underinternational management in Russia will reach 278(59,970 rooms), located in 55 cities.

In this case, by 2021 the share of Moscow andSt. Petersburg will decrease by 3% (to 49%), while theshare of Sochi will decline to 8%, due to the growth ofbranded hotel supply in the Moscow Region (7%) andNizhny Novgorod (3%).

Moreover, openings of the first ever branded hotelsare planned in 16 new locations: Arkhangelsk,Kemerovo, Khabarovsk, Mineralnye Vody,Novorossiysk, Orenburg, Pereslavl-Zalessky, Ryazan,Saransk, Stavropol, Tolyatti, Tomsk, Vladimir,Vladivostok, Zelenogradsk, and Zheleznovodsk.

Source: hotel operators’ data, EY analysis

© 2016 Ernst & Young (CIS) B.V.

New hotels opened under international brands, per year(October 2016)

International Hotel Chains in Russia | 1

Hotels under international brands are currentlylocated in 39 cities of Russia. By 2021 their presenceis planned to grow to 55 cities.

International-scale events are often a key driver ofthe expanding footprint of international hoteloperators. The biggest upcoming event is the 2018FIFA World Cup, which will be held in Russia in 11cities:

► Ekaterinburg► Kaliningrad► Kazan► Moscow► Nizhny Novgorod► Rostov-on-Don► Samara► Saransk► Sochi► St. Petersburg► Volgograd

As at October 2016 10 of the 11 host cities alreadyhad 113 hotels under international brands (27,272rooms). By 2018, 44 new properties are planned toopen (10,035 rooms).

The graph below shows the presence of internationalhotel chains in Russia as of October 2016:



Share of existing room supply by cities in Russia(October 2016)


Share of future room supply by cities in Russia(including existing room supply)



Existing room supply under international management by city of Russia(October 2016)


The total branded room stock available in Russia as ofOctober 2016 (i.e. 169 hotels with 37,635 keys in 39locations) is operated or franchised by 23international hotel chains currently present in theregion.

The largest market share (64%) is divided betweenthe Carlson Rezidor Hotel Group, Accor Hotels,InterContinental Hotels Group and MarriottInternational (excluding Starwood Hotels & Resorts:information about mergers & acquisitions can befound on page 10).

The graphs below show the actual and projectedfootprint of hotel operators in Russia as of October2016.

International hotel operators’ footprint in Russia by 2021

Share of hotel operators – distribution of futureroom supply

(including existing rooms)



Source: hotel operator’s data, EY analysis

Share of hotel operators – distribution of existingroom supply (October 2016)


Share of hotel operators – distribution of futureroom supply

including existing rooms

Russian hotel brands

Meanwhile, Russian hotel operators are increasingtheir presence in both Russia and abroad. Nationalbrands as a rule account for a significantly smallerproportion of hotels in the markets of most countries(except the U.S.) compared with hotels underinternational management. This is also true for theRussian market: currently, the share of hotels underinternational brands (169 hotels) is almost 2.5 timeshigher than the share of hotels under nationalmanagement (72).

In October 2015 there were 152 hotels underinternational management in Russia vs. 73 hotelsoperated by Russian chains. Thus, in the past yearthe difference has grown by 18 hotels in favor ofinternational chains.

Nevertheless, Russian operators continue to growand are opening new hotels both on the domesticmarket and abroad. Major Russian hotel chains arelisted in the table below:

Hotel chain Number of hotels inRussia / abroad Cities of presence in Russia Countries of

presence

Azimut Hotels 18 / 8

Moscow, St. Petersburg, Sochi,Vladivostok, Astrakhan, Voronezh,Kostroma, Nizhny Novgorod,Novosibirsk, Ufa, Murmansk

Germany, Austria

Amaks Hotels & Resorts 20 / 4

Vladimir, Belgorod, Rostov-on-Don,Ryazan, Azov, Omsk, Veliky Novgorod,Voronezh, Tambov, Novy Urengoy,Perm, Kazan, Krasnoyarsk, Ufa,Izhevsk, Tolyatti, Yoshkar-Ola, Kurgan,Valday, Staraya Russa

Belarus

Heliopark Hotels &Resorts 6/ 1 Moscow, Moscow Region, Nebug,

Penza, Suzdal, Nizhnekamsk Germany

Intourist Hotel Group 5 / 3 Moscow, Moscow Region,Petrozavodsk, Gorno-Altaysk

Czech Republic,Italy, Namibia

Cronwell Hotels & Resorts 11 / 3 St. Petersburg, Khanty-Mansiysk AO –Yugra, Kaluga Region, Astrakhan Greece

Korston Hotels 3 / - Moscow, Kazan, Serpukhov -

Alliance HotelManagement 4 / - Obninsk, Saransk, Abakan, Tuapse -

Soyuz Marins Group 5 / - Nizhny Novgorod, Sochi, Yalta,Ekaterinburg, Novosibirsk -

Total: 72 / 19



Russian hotel operators in the domestic and international markets(October 2016)


New hotels: 2016 – 2017

During the first ten months of 2016 the Russian hotelmarket saw nine new hotels opened underinternational brands.

According to information that EY has compiled fromhotel operators and open sources, nine more hotelsare due to open by the end of 2016. We believe,however, that the opening of some of them may bepostponed until 2017.

Operator Hotel Number ofrooms City

Accor HotelsIbis Krasnodar Center 220 Krasnodar

Ibis Stupino 129 Stupino,Moscow Region

Best Western Best Western Plus Centre Hotel,St. Petersburg 107 St. Petersburg

Carlson Rezidor Hotel Group Radisson Residences, Zavidovo 200 Zavidovo

Domina Hotels Domina Novosibirsk 218 Novosibirsk

Hilton Worldwide

Hampton by Hilton Nizhny Novgorod 184 NizhnyNovgorod

Hampton by Hilton St. PetersburgExpoforum 207 St. Petersburg

DoubleTree by Hilton Tyumen 195 Tyumen

InterContinental Hotels Group Holiday Inn 201 Moscow

Total: 9 hotels 1,661

Hotels opened under international management in Russiain January – October 2016




Operator Hotel Number ofrooms City

Accor Hotels

Adagio Moscow Kievskaya 150

MoscowIbis Moscow Kievskaya 300

Novotel Moscow Kievskaya 250

Marriott InternationalMarriott Krasnodar 262 Krasnodar

Courtyard by Marriott NizhnyNovgorod 150 Nizhny Novgorod

Wyndham Hotel Group

Ramada H&S Moscow GreenwoodPark 376 Moscow

Days Hotel Zolotoe Koltso 150Pereslavl-Zalessky

Ramada Resort Zolotoe Koltso 200

Ramada H&S Rostov-on-Don 92 Rostov-on-Don

Total: 9 hotels 1,930


Hotels under international management due to open in Russia by theend of 2016 (October 2016)



OperatorExisting Future Total quantity by 2021

(existing + future)

Hotels Rooms Hotels Rooms Hotels Rooms

Carlson Rezidor Hotel Group 35 9,687 2 540 37 10,227

Accor Hotels 33 6,128 35 6,440 68 12,568

InterContinental Hotels Group 18 4,558 12 3,816 30 8,374

Marriott International 16 3,844 10 2,036 26 5,880

Hilton Worldwide 21 3,617 25 4,638 46 8,255

Best Western 6 1,451 1 125 7 1,576

Starwood Hotels & Resorts 7 1,434 7 1,474 14 2,908

Sokos Hotels 3 927 - - 3 927

Kempinski Hotels 3 803 - - 3 803

Hyatt Hotels Corporation 3 700 5 1,213 8 1,913

Louvre Hotels Group 3 634 - - 3 634

Rixos 2 536 - - 2 536

Wyndham Hotel Group 4 656 6 1,155 10 1,811

Corinthia Hotels 1 388 - - 1 388

Rocco Forte Hotels 2 367 - - 2 367

Four Seasons Hotels andResorts

2 357 - - 2 357

Vienna House 2 348 - - 2 348

Domina Hotels 2 327 4 668 6 995

Lotte Hotels & Resorts 1 304 1 154 2 458

Belmond 1 265 - - 1 265

Capella Hotel Group 3 220 - - 3 220

Mamaison Hotels & Residences 1 84 - - 1 84

Jumeirah Group - - 1 76 1 76

Total: 169 37,635 109 22,335 278 59,970

Key figures for international hotel operators in Russia(October 2016)






Distribution of international operators by room supply



Distribution of international operators by number of hotels

Major mergers & acquisitions in 2016

Below material is based on the information of news agencies and other open sources.

Accor Hotels and FRHI Hotels and Resorts

Accor Hotels bought the FRHI Hotels and Resorts chain, which owned the Swissotel, Fairmont and Raffles brands.The transaction size is estimated at around $ 2.9b. The FRHI hotel chain has 171 hotels throughout the world, 27 ofwhich are under construction. In Russia there are two Swissotel hotels currently (in Moscow and Sochi).

Louvre Hotels Group and Nordic Hotels

Louvre Hotels Group acquired Nordic Hotels chain, which is present in 11 cities of Germany. The exact deal size hasnot been disclosed. The existing Nordic hotels (more than 20) have been rebranded as Golden Tulip, Tulip Inn andPremière Classe. All Nordic hotels are located in Germany with around 1,800 rooms in total.

Marriott International and Starwood Hotels and Resorts

Marriott International bought Starwood Hotels and Resorts, which owns 11 brands of various categories. Thetransaction size is $ 12.2b. The Starwood hotel chain owned nearly 1,800 hotels in more than 100 countries.Marriott International is currently integrating all Starwood brands into its portfolio. In Russia this includes sevenexisting hotels and a similar number of planned ones.

Carlson Rezidor Hotel Group and Prizeotel

Carlson Rezidor Hotel Group has announced its entry into the economy hotel segment by acquiring 49% of Prizeotelfor € 14.7m, with the right to buy the rest of the shares four years later. Prizeotel had three existing hotels inGermany with 555 rooms in total.

Intourist and Regional Hotel Chain

Sistema Hotel Management company (Intourist), which is part of JSFC Sistema, acquired Regional Hotel Chain (RHC)from Venture Investment and Yield Management. The deal size was RUB 6.6b, including RUB 4b of debt. RHC has ninehotels in Russia (1,379 rooms) under a franchise agreement with international hotel operators including CarlsonRezidor Hotel Group, InterContinental Hotels Groups, and Marriot International.



Hotel chain affiliations – key benefits

It is a prevailing opinion among hotel developers and owners – both domestic and international – that a global chainaffiliation is an indispensable component of a hotel’s success. Without advocating either option and given the focusof this publication, below we share our thoughts on the key benefits that an owner may expect to gain fromaffiliation with a global hotel chain.

Benefit Comment

Recognition Recognizable hotel brand is perceived as a quality guarantee

Status of the property International brand raises the status of the property

Safety Foreign tourists prefer to stay in hotels with well-known international brands in“unsafe” countries

Global booking system Opportunity to book via various electronic channels, simplicity of search,booking without intermediaries

Integrated marketingIntegrated marketing allows brand promotion costs to be reduced due to thehotel’s presence on the operator’s website, in booking systems, catalogs, andbrochures

Loyalty programs Guests who join hotel chain loyalty programs are motivated to choose hotels inthis chain due to various benefits and discounts for regular guests

Level of service Common service standards, management systems and staff training in hotelchains result in a higher level of service than in independent hotels

Stability in times of crisis

Hotel chains are more resilient in times of crisis for a number of reasons: morestable demand from loyal guests, efficient occupancy management due topresence in several global reservation systems, the availability of highly skilledprofessionals with experience of working in unstable economic conditions

Lower costsHotel chains guarantee lower costs on consumables, maintenance and repairs,advertising and marketing due to large purchase volumes and cost distributionamong all hotels in the chain

Lower risk to investors International brand lowers risks and provides a great advantage when selling aproperty or obtaining a bank loan

Source: EY analysis

Major benefits of affiliation with a global hotel chain



Dmitry TetiouchevLeader of Hospitality Group in theCISTel: +7 495 755 [email protected]

Olga ArkhangelskayaReal Estate Advisory ServicesLeader in the CISTel: +7 495 755 [email protected]

Anna LevinaManager, Hospitality & LeisureAdvisory ServicesTel: +7 495 662 [email protected]

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