Hotel values in Russia, other Commonwealth of Independent States members and Georgia are expected to increase 7% by the end of 2011, nearly double the forecasted growth rate of hotels in Europe, according to the annual Hotel Valuation Index of the region by the HVS offices in London and Moscow.
Upscale hotels in Moscow, which command some of the highest average hotel rates in Europe, are expected to achieve a value per room of €391,000 (US$536,000) up from €353,000 (US$484,500) in 2010, with the average value of a hotel room in the region overall reaching €163,000 (US$223,700).
The report says values in the region are likely to continue climbing to 2016, fuelled by the relatively poor standard of existing hotel accommodation, the hosting of large sporting events and an increasing share of international travellers.
However, the report warns that investors are still being deterred by risks such as the possibility of oversupply in some markets, excessive bureaucracy and long development lead times.
The report advises hotel investors to give consideration to hotel branding and affiliation, which will become more important as the Russian market becomes more competitive and guests more discerning. Operating as a branded hotel, or being part of a hotel affiliation, will help increase market share and subsequently profits and valuations.
The report shows that 2010 proved to be a year of contrasts for the region – some markets exhibited signs of recovery from previous decreases, owing mostly to renewed business activity leading to more room nights and a slightly improved investor sentiment. But many markets continued to register decreasing values, as performances in those markets had not yet leveled out. Overall, values decreased by 4% in the region, lagging markedly behind the European average, which grew by approximately 7%.
“For 2011 a brighter picture can be expected as most markets return to value growth,” said Saurabh Chawla, director of the HVS London office. “The top eight performers are set to achieve a growth rate of 10% and above following depressed trading levels or due to some special events. Overall, values in the region are expected to increase by around 7% in 2011, with the average European growth forecast only slightly over half this figure.”
To download a copy of “Russia, The CIS and Georgia – Hotel Valuation Index” click here for English or here for Russian.
