Ekaterinburg Hotel Market in Russia

The hotel market in Ekaterinburg is gradually crawling its way out of the black hole of the financial crisis. In the past five years, the size of the market has almost doubled. There are now 92 hotels in town, capable of hosting a total of 7,300 guests. But half of those rooms were empty for most of 2009. This forced the hotels to truly compete with each other and focus on every potential customer.The growing number of visitors has prompted the development of the hotel market. 

The business outlook for the hotels began to deteriorate in the shadow of the global economic crisis. According to the Migration Service's data, in 2009, Ekaterinburg received only one seventh of its previous number of tourists from abroad. In addition, six new hotels opened in the city, adding 800 beds. These were built as part of the preparations for the Shanghai Cooperation Organization summit, which took place in Ekaterinburg in June of 2009. There were no problems putting up the government delegations from twenty countries, but when the delegations left, the hotels were deserted. The occupancy rate fell by 45% last year, from its peak of almost 70% in 2008.

Today there are five international hotel chains operating in Ekaterinburg: the Hyatt Regency Ekaterinburg, Novotel Yekaterinburg Centre, Park Inn Ekaterinburg, Angelo Airport Hotel Ekaterinburg, and Ramada Yekaterinburg. One-third of the local hotels are rated under the Russian hotel classification system. And although the price of hotel accommodation (regardless of the hotel's number of stars) varied widely in 2007 and 2008, one night in a double room today costs an average of 3,000-5,000 rubles.

Players in the market say that this tendency for the prices to average out is connected with the fact that during an economic downtrend and period of uncertainty, both the five-star hotels and the tiny hotels intuitively seek the level of demand. Since we are battling fiercely for each customer, the customer's budget is a deciding factor when they are deciding about cooperation. And as a result, the price of a room is about the same, whether it's in a three- or five-star hotel. In Ekaterinburg right now, the price of a night in a five-star hotel starts at $100.

According to Ekaterinburg's city administration, the total hotel occupancy rate in 2010 will be at least 56%, an increase of 10-11%. These promising forecasts are based on some international events that have been planned, in particular, the Russian-German summit held in Ekaterinburg in July and several major international exhibits, which led to many hotels being fully booked. The preliminary data on passenger traffic also supports this prediction. According to the figures from Ekaterinburg's Koltsovo airport, their number of passengers increased by 29.5% in the first half of 2010, in comparison to the same period from last year.

One of the main trends this year will be an insignificant increase in occupancy along with a decrease in prices, so the financially the hotels will be at about the same position they were in 2009.

Investors were encouraged by this wave of cautious optimism about the market, and talk of building yet more hotels resumed - four new ones may appear in Ekaterinburg by the end of 2011.