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2017 year results on Sochi quality hotel market

Occupancy in Sochi mountain cluster quality hotels continues to climb while properties by the sea report slowdown

JLL presents analysis of the 2017 quality hotels market results in Sochi coastal and mountain clusters in upper segments .

Overall, the popularity of the Russian year-round resort cluster seems to be growing. Sochi Airport has registered an 8% increase in passenger traffic and served 5.7m people (of which 200,000 travelled by international airlines), according to Basel Aero statistics.

“2017 has been the first year in Krasnaya Polyana when not a single hotel closed for the ‘off-season’. Hoteliers in the Sochi’s mountain cluster, utilizing the cold summer effect and quoting lesser prices, have managed to redirect and capture some of the habitual for the sea tourist traffic.” – Tatiana Veller, Head of JLL Hotels & Hospitality Group, Russia & CIS, says. – “We trust this was additionally aided by the increased entertainment options, e.g. a casino in Gorky Gorod which has been well functioning for a whole year, as well as a busy event calendar.”

As a result, occupancy in mountain hotels increased for the third year in a row, this time by 5 ppt over 2016, and climbed up to 59%. Thus, despite only a very moderate ADR increase (by less than 1%, to RUB4,551), there has been a significant RevPAR hike, by 10%, to RUB2,669.

Sochi mountain cluster quality hotel market results, Upper segments

Source: JLL, STR

In 2017 Turkey as a destination became available again for Russian tourists; this fact was welcomed and happily taken advantage of. Plus, the habit of vacationing in Crimea seems to have settled in, and split the southbound stream of domestic tourists into two. Additionally, an unusually cold summer has taken toll on the interest of the domestic public in the Black Sea resort.

“The consequences on Sochi seaside hotels were quite predictable: they had only an insignificant increase in occupancy (less than 1 ppt), to 48%, while also suffering a drop by 1% in ADR – to RUB9,652. Hence, the positive change in RevPAR was only 8 roubles, to RUB4,639,” - Tatiana Veller comments. – “The situation could spill over to this year, should the charter flights to Egyptian resorts resume in 2018. The only month to be affected by FIFA 2018 World Cup is June, when Sochi will host five matches at the Fisht Stadium in the Imereti Lowland. This should certainly imply positive operational performance results.”

According to Tatiana Veller, the two bright spots for the quality hotels by the sea in 2017 were June and October – Confederations Cup in the former case, and a variety of large-scale sports and entertainment events in the latter. “This resulted, in June, in double-digit ADR growth (by 11%, to RUB 10,887), while October showed a 17 ppt Occupancy increase, to 62%, coupled with extra 400 roubles in ADR, and resulting in an incredible 45% gain on RevPAR vs. last year,”- she says.

Sochi coastal cluster quality hotel market results, Upper segments

Source: STR Global, JLL

The big change in the market happened in the beginning of 2017, with a wholesale tour operator Biblio-Globus taking under management almost 3,000 rooms by the sea owned by Yug-Businesspartner, to make it into an all-inclusive resort on the Russian Black Sea coast. The planned opening of Courtyard by Marriott, which was scheduled to enter market in 2017, and destined to become the first branded opening in the market since Olympic Games in 2014, was postponed to 2018.