Russia's two biggest markets have seen improvements in hotel performance over the last several months.

Since November 2020, Moscow has topped the list of European capitals with the highest average occupancy. Now, hoteliers could further benefit from the mandatory vaccination policy recently ordered by Moscow City Hall.

Global business advisory Cushman & Wakefield reported Moscow’s average occupancy reached 43.6% late in 2020, compared to 39% in Istanbul, which was ranked second among European capitals with the highest occupancy. By May 2021, the gap widened as Moscow hotels saw average occupancy of 62.5%, compared to 31% in London, and 24.7% in Paris, said Marina Smirnova, Cushman & Wakefield's head of the hospitality and tourism based in Moscow.

Smirnova said not all Moscow hotels equally benefited from this ongoing market recovery.

“Moscow always had more Russian clients than foreigners. In top luxury hotels, the share of foreigners [reached a] maximal of 60%, while in the middle-price and budget hotels, the share of Russians was 80% and more,” Smirnova said.

In the worst months of the COVID-19 pandemic, luxury hotels experienced a slump in occupancy, which on average went down to as much as 4%.

The middle-price segment saw average occupancy of 52.6% during that period, Smirnova said.

In May 2021, the upper-midscale segment showed the best occupancy performance, 70%, which Smirnova said would have been considered a good result even during pre-coronavirus times.

Stanislav Kondov, general manager of Radisson Collection Hotel, Moscow, said his hotel has enjoyed a spike in occupancy since early 2021, although he added tourist flow has yet to recover to pre-crisis levels due to borders remaining closed for most countries.

“Judging from the positive dynamics I evidence, in the monetary terms this year promises to be better than 2017, but we still lag behind 2019 by 15% to 20%,” Kondov said.

Elena Borisova, general manager of the Crowne Plaza Moscow World Trade Centre, said Moscow hotels saw occupancy approach 2019 figures due to the city’s sights attracting both local and regional travelers.

“Although some local restrictions are temporarily imposed by the government, our tourism industry has some air to breathe compared to our European colleagues,” she said.

On June 16, Moscow City Hall issued a decree ordering 60% of workers with public-facing roles receive their first vaccination within a month. Borisova said this mandate should boost future hotel demand and bookings, perhaps as early as the end of 2021.

“We believe that mass vaccination will help significantly in the nearest future, giving us a chance to perform well during the forthcoming business and exhibition season,” Borisova said.

Her hotel stayed open throughout 2021, even during a period of complete lockdown, with the adoption of IHG Hotels & Resorts’ cleaning protocols.

Some Moscow hoteliers rushed to beat the vaccination target even before it was introduced.

Lada Samodumskaya, general manager of the Hotel Baltschug Kempinski Moscow, said 85% of her staff has already been inoculated.

Across May and June, her hotel saw average occupancy of 70% in week days and as much as 90% during the last week of that two-month period.

The pandemic forced Moscow hoteliers to adjust nightly rates, and thus average daily rate has yet to recover to pre-pandemic levels.

Vladimir Yurko, business development manager at Mamaison All-Suites Spa Hotel Pokrovka, said during the first wave of the pandemic, the hotel dropped rates to their minimum. At that time, the property's occupancy dropped to 20%.

“The occupancy bounced back and now is estimated at 80%,” Yurko said, adding ADR has risen to reflect that increase.

Galina Soldatova, commercial director at the Peter I Hotel in Moscow, said domestic tourists are less willing to pay high hotel rates than international visitors.

“Our country is huge. Domestic tourism gives a good flow of guests, but the payment ability of compatriots is much lower than that of the guests from abroad,” she said.

Soldatova added quarantine restrictions, such as the introduction of QR codes, affected ADR and prompted hoteliers to adjust rates.

The QR code, introduced in Moscow as a mandatory requirement before visiting a restaurant or mass event exceeding 500 people, confirms the holder has been vaccinated, recovered from COVID-19 or did not prove to have the virus after having a valid PCR test.

In the first five months of 2021, Moscow’s year-to-date hotel occupancy totaled 54.9%, up 45.6% compared to the same period in 2020, according to data from STR, CoStar Group’s hospitality analytics firm. Additional STR data showed year-to-date ADR through May was 5,181 Russian rubles ($70.38), which was 3.6% lower than in 2020, while revenue per available room jumped 40.4% to 2,843 rubles.

St. Petersburg traditionally fares weaker than Moscow at the beginning of the year in regard to hotel performance, Smirnova said, but Russia’s northern capital is expecting a bumper summer.

“In June, St. Petersburg hosted big events [such as the] St. Petersburg International Economic Forum and UEFA Euro 2020,” Smirnova said, adding she expects to see those events boost both average occupancy and ADR.

“We forecasted that the average [rate] would jump to between 14,000 and 15,000 Russian rubles from 8,000 rubles in May, while occupancy is [likely] to reach 60% to 65% compared to 49% in May,” Smirnova said.

According to STR, St. Petersburg's year-to-date occupancy through May 2021 reached 38.3%, a 52.5% increase compared to the same period in 2020. ADR jumped 28.6% to 5,407 rubles and RevPAR rose 96.2% to 2,070 rubles.

Yulia Meshchaninova, cluster sales director for Radisson Hotel Group and based in St. Petersburg, said the market started seeing a recovery of tourists in May.

“Around this time, some domestic flights were launched, and St. Petersburg, as an architectural capital, undoubtedly became one of the points of attraction for tourists,” Meshchaninova said.

Radisson employees in St. Petersburg have embraced the vaccines, and the rate of protection — which includes vaccinated staff and employees with antibodies against COVID-19 — is approaching 90%, she said.

St. Petersburg’s authorities has copied Moscow’s mandatory vaccination campaign, which is expected to stimulate further improvement of performance metrics.

“We consider mandatory international vaccination as the most prominent and only way to restore the flow of international travelers and corporate tourists from abroad, as well as the return of major events,” Meshchaninova said.