2011 HOTEL REAL ESTATE MARKET - Knight Frank...2011 HOTEL REAL ESTATE MARKET Moscow EXECUTIVE...
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2011 HOTEL REAL ESTATE MARKET Moscow EXECUTIVE SUMMARY • In 2011, six hotels with a total of 1,150 rooms were opened in Moscow. • As of the beginning of 2012 total supply of rooms in the city’s 3-5 hotels was 31 thousand rooms of which approximately one third (10 thousand rooms) are in hotels managed by international operators. • According to preliminary data Moscow saw about 4.15 mln foreign visitors in 2011, which is a 4% increase on the 2010 figure. • Comparable growth in supply and inbound tourism to the city in 2011 resulted in average market occupancy remaining at 2010 level across the Moscow hotel segment. • After a period of stable prices in 2010, throughout the past year average room rates (ARR) in Moscow were going up across all hotel categories. • Based on the 2011 results, the Moscow hotel industry retained its number five position among European capital cities across all key commercial performance indicators. OVERVIEW
Transcript of 2011 HOTEL REAL ESTATE MARKET - Knight Frank...2011 HOTEL REAL ESTATE MARKET Moscow EXECUTIVE...
2011HOTEL REAL ESTATE MARKET Moscow
EXECUTIVE SUMMARY• In2011,sixhotelswithatotalof1,150roomswereopenedinMoscow.
• Asofthebeginningof2012totalsupplyofroomsinthecity’s3-5hotelswas31thousandroomsofwhichapproximatelyonethird(10thousandrooms)areinhotelsmanagedbyinternationaloperators.
• AccordingtopreliminarydataMoscowsawabout4.15mlnforeignvisitorsin2011,whichisa4%increaseonthe2010figure.
• Comparablegrowthinsupplyandinboundtourismtothecityin2011resultedinaveragemarketoccupancyremainingat2010levelacrosstheMoscowhotelsegment.
• Afteraperiodofstablepricesin2010,throughoutthepastyearaverageroomrates(ARR)inMoscowweregoingupacrossallhotelcategories.
• Basedonthe2011results,theMoscowhotelindustryretaineditsnumberfivepositionamongEuropeancapitalcitiesacrossallkeycommercialperformanceindicators.
OVERVIEW
2011HOTEL REAL ESTATE MARKETMoscow
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Positivebusinessenvironmentinearly2011,inparticular,highenergyprices,providedanimpetusforeconomicgrowthinRussia.ArecoveryinkeymacroeconomicindicatorsforRussiacontributedtogrowthoftheMoscowhotelpropertymarket.Ontheotherhand,increaseduncertaintyinglobalfinancialmarketsanddebtproblemsintheEuropeanUnioncausedsomedeclineinbusinessactivitytowardstheendoftheyear,whichmaypotentiallyleadtoafuturedeclineinbusinesstravel.
HOTEL REAL ESTATE MARKET
Basic performance indicators 3-5hotels, Moscow Change
Operatinghotels,total 160
Numberofroomsinoperatinghotels,total 31,000
Significanthotelprojectscompletedin2011(numberofhotels/numberofrooms)
6/1,150
Significanthotelprojectsscheduledforcompletionin2012(numberofhotels/numberofrooms)
7/1,675
Averageroomrate(ARR),5hotels $310
Averageroomrate(ARR),4hotels $197
Averageroomrate(ARR),3hotels $118
Averageoccupancyrate,5hotels 57%
Averageoccupancyrate,4hotels 65%
Averageoccupancyrate,3hotels 61%
Source:KnightFrankResearch,2012
Anton Melnikov AssociateDirector,Professionalconsultingservices,KnightFrank
"2011 saw increased investment
in the city’s hospitality segment which
resulted in an all-time high number of
investment deals closed during the year
and start of new and restart of stalled
hotel development projects. We have to
emphasize the role played by the Moscow
Government in achieving this result.
As part of a non-core assets
privatizationprogram, several city’s
landmark hotels were sold, including
Moskva and National. In addition, a
number of bills were initiated to promote
the development of the city’s
hospitality sector."
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Main events
• In2011,severalinvestmentdealsweresignedinhotelpropertysegment:
∙ InFebruarytheacquisitionbyRadissonRoyalofSoyuzhotelwasannounced(3,115rooms,UniversitetskyAve,12)withaviewtorenovation.
∙ InMarch,Gals-Development(theformernameSystem-Gals)announcedtheclosureofitsacquisitionofPekingHotel(3,135rooms,BolshayaSadovayaSt.,5/1).Thehotelbuildingistobeconvertedintoa5propertyundertheFairmontHotels&Resortsbrand.
∙ InApril,VernyKapitalacquiredfromCapitalPartnersaRitz-Carltonhotel(5,334rooms,TverskayaSt.,3).Financialdetailsofthedealhavenotbeendisclosed,butexpertsestimatethecontractpricetobearound$650million.
∙ InearlyJuly,MikaelShishkhanov,PresidentofBinbank,purchaseda49%interestinDekmos(thecompanycarryingoutMoskvahotelrenovationproject)previouslyownedbyGostinichnayaKompaniya.
∙ InlateJuly,aspartofaportfoliorestructuringandnon-coreassetsdisposalprogram,RosatomsolditsBaikalhotel(thesumis426.5millionrubles).
∙ InOctober,anauctionwasheldforNational,oneofMoscow’soldesthotels(5,201rooms,TverskayaSt.,1).ThenewowneristheGutserievs’familythatboughtitfromtheMoscowGovernmentforRUR4.6billion.
• InMay,theTourismCommitteeofMoscowchangednametotheCommitteeforTourismandHospitalityBusiness.Fromnowon,inadditiontotourismdevelopmentpolicyimplementationandregulatoryfunctions,thecommittee’stermsofreferencewillincludecoordinatingthecity’shotelsegment.
• InSeptemberitbecameknownthatthecity’sArchitectureCommitteewasgoingtocomeupwitharevisedlocationplanforhotelsinMoscow.Undertheplan,afixednumberofhotelprojectsistobebuiltineachadministrativedistrict.
• InOctober,theRecreationandTourism
IndustryDevelopmentProgramfor2012-2016wasadoptedwithaviewtorealizethecity’stourismpotential.BudgetallocatedbythemunicipalGovernmenttotheprogramis125billionrubles.
Supply
In2011,sixnewhotelswithatotalof1,150roomswereopenedinMoscow,whichisinlinewiththemarketaverageyear-onyear-supplygrowthrateinMoscow(around4%).
The most significant hotels commissioned in 2011
Project Address Category Number of rooms
Q1
CrownePlazaClub KrasnopresnenskayaEmb.,12 5 149
RamadaMoscowDomodedovo*
5kmfromDomodedovoairport 4 134
Q2
RadissonBluBelorusskayaHotel
3rdYamskogoPolyaSt.,26 4 264
Amin’evskaya Amin’evskoeHwy,5 3 223
Q3
Nolargescaleprojectswerecompleted
Q4
IntercontinentalMoscowTverskaya
TverskayaSt.,22 5 203
CourtyardPaveletskaya
KozhevnicheskayaSt.,8/4 4 170
*RamadaMoscowDomodedovo,thoughlocatedinMoscowRegion,fallsintotheMoscowcity’shotelmarket,asitmostlycaterstoguestsarrivinginMoscow
Source:KnightFrankResearch,2012
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IntercontinentalHotelsGroupopenedtwohotelsunderitsbrandsin2011:inMarch,thedeluxewingofCrownePlazahotelwasopened(5,149rooms),anddeluxehotelIntercontinentalMoscowTverskaya(5,203rooms)formingpartofmixed-usedevelopmentSummitwelcomeditsfirstguestsinDecember.RezidorGroupopeneditsfifthhotelprojectinMoscowRadissonBluBelorusskaya(4,264rooms),andCourtyardMoscowPaveletskaya(4,170rooms)becametheseventhMarriottInternationalhoteltobeopenedinthecity.Alsoin2011,WyndhamHotelsopenedRamadaMoscowDomodedovo,thefirsthotelinMoscowRegionundertheRamadabrand(4,134rooms)*,locatednearDomodedovoairport.So,fiveofthesixhotelsopenedin2011enteredthemarketunderinternationalbrands,andthesixthone–Amin’evskaya–becamethefirstMoscomstroyprojecttobebuiltundertheaffordablehoteldevelopmentprogrambeingimplementedinMoscowbasedonredevelopedhostelbuildings.
InJuly2011,Vegahotel(3,967rooms)joinedtheBestWesternhotelgroup,thusbecomingthelargesthotelinMoscowintermsofthenumberofroomsunderinternationalmanagement.Wenotethatthetransitionofoperatinghotelstointernationalmanagementwithoutsignificantpriorrenovationisapositive,thoughrarepracticeintheMoscowhotelmarket.AsuccessfulexampleisSheremetevo2(3,251rooms)thatsince2010hasbeenoperatingundertheParkInnbrand(Rezidor).
Halfofnewroomscompletedin2011arein4hotels;3and5roomsaccountfor31%and19%,respectively.Interestingly,intheyearbeforelast,thedistributionofnew4-5roomswasinverse:5roomsmadeupmorethan50%ofnewsupply,while4roomsaccountedforabout35%.Incontrast,year-on-yearincreaseinroominventoryineconomyhotelsegmentremainsstableat10-15%.Thefactthatdeveloperstendoptforhigherendprojectsislargelyduetohigheryieldtheydelivercomparedtomiddlemarketproperties(in2011,RevPARinupscalehotels(4-5)was$142–twicethatof3*hotels($72)).
Asofthebeginningof2012,totalroomstockinthecity(3-5hotels)was31thousandrooms,ofwhichaboutathird(10thousand)wereinternationalbrands.WenotethatglobalhoteloperatorsbecomeincreasinglyinterestedinRussianmarketasawholeandMoscowinparticular.E.g.HiltonWorldwideannouncedplanstoextenditsnetworkinRussiato23hotelsincludingoperatingprojectsandthoseunderconstruction.IntercontinentalHotelsGroupexpectsby2020tooperateatotalof100hotelsinRussiaandCIS
(currentlythereare16operatinghotelsunderIHGbrands,including11intheRF).Thepredominanceofinternationalhotelchainsinnewsupply–about80%–islargelyresponsibleforthegrowthinqualityroomstockmeetinghighinternationalstandards.HighinterestfrominternationaloperatorstotheRussianhospitalitymarkettestifiestothecountry’spotential.
Asfarasthegeographicalspreadofhotelpropertiesisconcerned,wenotethat,giventhestrongdemandfrombusinesstravelsegment,alogicalapproachtofuturedevelopmentistobuildnewhotelsindistrictswithhighconcentrationofofficeuses,astheydoinParis,London,andothermajorcommercialcities.Thetrendissupportedbythelocationsofhotelsopenedin2011.
Source: Knight Frank Research, 2012
In the last three years the share of rooms in internationally managed hotels has increased 7%number of rooms
Room supply Share of rooms under international brands
Rooms uder international brands
%
2005 2006 2007 2008 2009 2010 2011 2012 F
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
35
30
25
20
15
10
5
0
23%34%
13%
5� hotels
4� hotels
3� hotels
Source: Knight Frank Research, 2012
53%
The supply is dominated by 3� hotels that account for more than 50%of total room stock in the city%
5 hotels
4 hotels
3 hotels
Source: Knight Frank Research, 2012
The share of 4 hotels in new supplyis gradually increasingnumber of rooms
2,000
1,600
1,200
800
400
0
2008 2009 2010 2011 2012 F
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Forinstance,thedeluxewingofCrownePlazahotelwasopenedintheimmediateneighborhoodofMoskvaCityaspartoftheWorldTradeCenter.RadissonBluBelorusskayaHotelandIntercontinentalMoscowarelocatedinavibrantnewbusinessdistrictBelorussky,andCourtyardbyMarriotPaveletskaya–inanestablishedbusinessareasurroundingPaveletskayarailwaystation.
Demand
In2011,thetourismindustrycontinuedtorecover,butataslowerpacethanin2010andthepre-recessionyears,whichisduetoincreasedinstabilityoftheglobaleconomy.AccordingtotheWorldTourismOrganization(UNWTO),theincreaseinthetotalnumberofinternationaltouristsin2011was4.4%(2010:6.9%,2005-2007:5.6%onaverage).
Intermsofinwardtourism,Russiaranks20thintheUNWTOrating.Ouranalysisofthefirstninemonthsof2011suggeststhatattheendoftheyearthenumberofforeignvisitorstoRussiawilllikelybemorethan23million.
Astheadministrative,commercial,financialandculturalcenteroftheRussianFederation,MoscowreceivesaroundonefifthofallforeignvisitorstoRussiaeachyear.Accordingtoapreliminaryestimate,in2011Moscowsawaround4.15millionforeignvisitors:a4%increaseintheMoscow’sinboundinternationaltouristtrafficcomparedwiththepreviousyear.
Foreignnationalsaccountonaveragefor25to50%ofdemandforhotelaccommodationinMoscowdependingonhotelcategory;asarule,theychoosetostayatrenownedinternationalhotelchains.
ItisclearfromacomparisonbetweeninboundinternationaltourismtrafficfiguresandoccupancyratesinMoscow,thatthetwoarecloselyrelated,andthattheincreasedsupplyhasadeterrenteffectonoccupancyrates.Thus,in2007,inMoscowtherewere6.7hotelroomsper1000foreigntourists,andin2011,theratioincreasedto7.5rooms/1,000guests.Asaresult,averageannual
occupancystabilizedat62%.In2011,occupancyratesinthe4-5hotelsegmentfell2.2percentagepoints(p.p.)from2010to62.5%againstthebackdropofasignificantincreaseinnewsupply(morethan2,300roomsoverthelasttwoyears).Inmidpricesegment,occupancyratescontinuedtorecover:asoftheendofthelastyeartheoccupancyof3hotelsincreased2.5p.p.to61%.
Source: Knight Frank Research, 2012
Inbound international tourism flow to Moscow is generally on a par with the amount of new supply, with deviations from the trend line caused by market fluctuationsnumber of rooms
Total room supply Foreign tourist flow
33,000
31,000
29,000
27,000
25,000
23,000
mln people4,4
4,2
4,0
3,8
3,6
3,4 2005 2006 2007 2008 2009 2010 2011 2012 F
Source: Knight Frank Research, 2012
In 2011, occupancy rates in 3-5 hotels in Moscow were generally on a par with the previous year’s figures. %
2010 2011
100
90
80
70
60
50
40
30
20
10
0 jan. feb. march apr. may june jule aug. sep. oct. nov. dec.
2011HOTEL REAL ESTATE MARKETMoscow
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BusinesstravelersmakeupthebulkofdemandforhotelaccommodationinMoscow.Thecontinueddependenceofoccupancyratesonbusinessenvironmentisevidentfromouranalysisofmovementsinthisratioindifferenttimeintervals(week,month,year).Thedevelopmentofcongressandexhibitiontourism,asegmentthatsofarremainsunderdevelopedinMoscow,couldhelpimproveoccupancyduringsummermonthsandsmoothoccupancyfluctuationsduringtheweek.
Commercial terms
In2011,theMoscowhotelmarketsawapositivegrowthacrossoperatingperformanceindices.Afterastabilizedperiodtheyearbefore,in2011anincreaseinaverageroomrate(ARR)wasobservedinallhotelcategories.Averageyear-on-yearincreaseinARRcomparedtothesameperiodof2010inUSdollartermsrangedfrom5%to11%dependingonthesegment.Thecostof5hotelaccommodationwasaround$310,and$197and$118for4and3accommodation,respectively.
Anincreaseinroomratesresultedinimprovedrevenueperavailableroom(RevPar)figuresacrossthecity’shotelmarket.Theupwardtrendwasparticularlynoticeableintheeconomysegmentwhichwasaresultofimprovedoccupancy:asaconsequence,theirRevParincreased13%to$72.Inthe4-5segmentthegrowthwaslessmarkedbecauseofadeclineinoccupancyandtotaledaround2%.
Source: Knight Frank Research, 2012
In 2011, the Moscow hotel industry has retained fifth place in Europe in terms of commercial performance ARR, US$
Paris
Rome
Amsterdam
Vienna
Madrid
Warsaw
Prague
Rev Par > 180
Rev Par > 130
Rev Par > 85
Moscow
Berlin
DublinBrussels
100
140
180
220
260
300
60% 65% 70% 75% 80% 85% 90%
Occupancy, %
Rev Par > 240
London
Source: Knight Frank Research, 2012
In 2011, prices for upscale (4-5) accommodation picked up in Moscow, but at a much slower rate than in the pre-recession period $
ARR Occupancy
%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
400
350
300
250
200
150
100
50
0
100
90
80
70
60
50
40
30
20
10
0
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Intermsofaverageroomrate(ARR),MoscowhastraditionallyrankedamongtopEuropeancities,andforalongperiodoftimeledthemarketinbothabsolutetermsandrelativegrowthrate:intheperiodfrom2005through2008,year-on-yearincreaseinARRwas18%.Revenueperavailableroom(RevPar)wasevenmoreimpressiveamidrelativelyhighoccupancyrates,withaverageyear-on-yearincreaseof25%.Followingthedropinroomratesbymorethan40%in2009causedbytheglobalrecession,MoscowlostitsnumberonepositionintheEuropeanhotelratingintermsofcommercialperformanceandhasconsistentlyheldthefifthplacefortwoyearsinarow.
Outlook
Severallargehoteldevelopmentprojectswithatotalofover1,600roomshavebeenannouncedforcompletionin2012.TheseincludetwohotelsunderbrandsthatarenotyetpresentinMoscow.
∙ TheopeningofDoubleTreebyHiltonMoscowmaybecomeasignificantmarketevent:onLeningradskoeHwy(4,270rooms)andinVnukovoairport(4,443rooms);
∙ InFebruary2012,MercureArbatisscheduledtoopenforbusiness(4,103rooms).
Asofthebeginningof2012,morethan25hotelprojectstotaling7,000
roomsareatvariousstagesofdesignanddevelopmentintheRussiancapital.Ouranalysisofthehoteldevelopmentprojectssuggeststhattheproportionofeconomyhotels,includingthoseunderinternationalmanagement,isgradually
goingup.Inparticular,in2013theworld’slargestHolidayInnhotel(3,1000rooms)isscheduledtobeopenedinMoscow,andthefirstofthefourIbisprojectsscheduledforopeninginthenextfouryearshasbeenlaunched.
Significant hotel projects scheduled for commissioning in 2012
Project Address Category Number of rooms
KempinskiHotelNikolskaya
NikolskayaSt.,12/1 5 200
DoubleTreebyHilton Vnukovoairport 4 443
NovotelMoscow-City Moscow-City,8А 4 362
DoubleTreeLeningradskyRiverside
LeningradskoyeHwy,39 4 270
HiltonGardenInnNewRiga
NovorizhskoyeHwy 4 162
MercureArbat SmolenskayaSq.,6 4 103
AzimuthHotelMoscow NovodanilovskayaEmb.,9 3 134
Source:KnightFrankResearch,2012
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Sincerecently,theMoscowauthoritieshaveincreasinglyfocusedonhospitalityindustry.Inparticular,theydevelopedtheRecreationandTourismIndustryDevelopmentProgramfor2012-2016whichprovidedforanincreaseinthecity’sroomstockby4,500roomsby2016.However,forittosucceed,ongoingmonitoringbythegovernmentandfurthermeasurestoencouragehoteldevelopmentwillberequired.
Theprogramalsoaimstoincreaseinboundtourismtrafficto4.5millionin2012,whichisa5%increaseon2011,andto6.6mlnin2015.Iftouristtrafficgrowsasexpected,newsupplywilllikelyhelpkeepoccupancyratesintheupscalesegmentattheircurrentlevel.
Asfarasoperatingperformanceisconcerned,theslowdowningrowthratesacrosskeyperformanceindicatorsobservedinlate2011asaresultofincreaseduncertaintyintheglobaleconomy,islikelytocontinueinto2012.
Brief glossary of basic terms
Rack Rate - thefulladvertisedpriceofahotelroomnetofanydiscounts.
ARR (Average Room Rate)- meanpricechargeforagivenperiodoftime(night,month,year).Itcanbecalculatedbydividingthetotalroomsrevenuebythenumberofroomssoldinthatperiodoftime.
Occupancy, Occ. Rate - theproportionofroomssoldtototalroomsavailableforsaleforagivenperiodoftime(night,month,year),expressedasapercentage.
RevPAR (Revenue Per Available Room) -Averagerevenueperoneroominagivenperiodoftime(night,month,year).Itcanbecalculatedbydividingthetotalroomsrevenuebythenumberofroomsavailableforsaleinthatperiodoftime.Thisratioismathematicallyequaltotheproductofaverageroomratebyoccupancyrate.
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