How the aggravation of the international situation will affect the hotel market in the Russian Federation

Most of all, the international situation affected the segment of bookings and flights. Currently, Russian hotels cannot authorize payments when booking through the leader In this regard, so far it is necessary to work on non-guaranteed booking. Obviously, in 2022, the share of Ostrovok and Yandex.Travel services will increase significantly, and maybe, analogues from Asia will become popular.

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As for flights, their prices will increase significantly. Boeing и Airbus suspend cooperation with the Russian Federation, and successes in import substitution among domestic aircraft manufacturers are not too high. Industrial cooperation with China may help, but so far, not only the number of flights will be reduced, but also the fleet of operational aircraft. Therefore, remote regions may feel a reduction in tourist flow.

The increase in the cost of building materials and services in the construction industry will increase the  construction cost of new facilities by at least 25-30%. Lack of long Western money and the growth in lending cost will increase the time to reach the break-even point for greenfield-built objects. Therefore, we predict an increase in demand for reconstruction of already constructed structures.

Among the negative trends there are inflation, disruption of international supply chains, suspension of activity of several foreign companies and their abolition of corporate activities.

Inflation will affect primarily the cost of dishes in restaurants. Significantly increase was felt in the purchase cost of alcohol, manufacturers are trying to compensate for the loss of imported revenue in the domestic market. The cost of alcohol of foreign production has already increased from 20% to 40% for all items.

The demand structure in the MICE segment has also changed. Russian companies retained reservations volume from Russian companies not only for the spring, but also for the summer period. “Government” order increased, in particular from the Ministry of Defense of the Russian Federation. Nevertheless, it is not possible to replace the drop in volume of orders from foreign companies, and the volume of MICE will be reduced by at least 10-15% in 2022.

Panic moods reach some Russians, raising the overall level of anxiety in society. As a result, people have a growing need to break out of the usual environment and distract for at least a few days. Market participants record increased demand for weekend tours, especially around major cities. In the second half of February, the number of individual tours increased compared to similar periods of last year by 30-50%, according to various estimates. At the same time, hotel owners note an increase in solvency. The average check grew and exceeded the indicators of the New Year period. Also, guests began to purchase more additional services.

After the stabilization of the situation in Ukraine, fluctuations in the economy and the labor market, we will see concentration of Russian tourists in the domestic market. Demand for domestic tourism will be stable and have growth for years to come as the economy recovers. Sanctions are easy to introduce, but hard to cancel, and the situation may remain for a long time. Tourist regions popular in the USSR will be revived. Investors and owners of facilities should think about the starting to modernize infrastructure, which withered for decades after the collapse of the USSR.

By Alexey Khomenok CEO, G5 Architects

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