SOCHI, Russia—Despite the delay to the start of the holiday season, hotels in the south of Russia have made it through summer with soaring tariffs and close to 100% occupancy.
Figures remain unprecedentedly high, even for the time of year, thanks to closed borders and many companies transferring their staff to remote-work practices, both of which suggest Sochi might run out of rooms when the winter season begins.
“This year, due to the pandemic, the season in the south of Russia began with a delay of two weeks to a month,” said Marina Smirnova, who is the Moscow-based head of hospitality and tourism at Cushman and Wakefield.
The government initially ordered all hotels to stay closed until 15 June, and despite uncertainty when they reopened, Smirnova said Muscovites and other Russians flocked to escape to Sochi’s warmer climate. She added guests booked primarily guest houses, mini-hotels and private apartments, whose owners were not subjected to the nationwide lockdown.
“The number of guests in Sochi increased by 10% to 50% compared to last year, depending on the area. We do not have data on occupancy yet, but it was most likely not lower than 70% to 80%, and (average daily rate) climbed by 5% to 25%,” Smirnova said.
Russian travelers spent approximately $31 billion in outbound tourism spend in 2019, according to the World Tourism Organization, a division of the United Nations. In 2020, Sochi welcomed Russian tourists who would have gone to France, Italy, or Spain, if not for the pandemic. With borders closed, outbound tourism dwindled, prompting thousands of Russian tourists instead to set their sights on domestic travel destinations.
During the summer months, Russian tourists spent 15.5 billion Russian rubles ($203.3 million) on travel, according to Russia’s second largest bank, state-owned VTB. While travel spending in the first half of the summer was lower compared to the same period of 2019, in the second half spending increased 1.5 times year over year.
In September, Sochi’s hotel occupancy increased 10.6% year over year to 76.5%, according to STR, parent company of Hotel News Now. Sochi’s average daily rate for the month increased by 45.5% to 10,397.13 rubles ($136.37), while revenue per available room jumped 60.9% to 7,958.14 rubles ($104.38).
Russian officials have also sought to aid the country’s tourism industry. Sources said the Russian government has reimbursed up to 15,000 rubles ($196.75) of tourists’ payment for hotels in Russian resorts and the transportation to reach them. The government said it plans to spend RUB15 billion ($196.7 million) on the program by the end of the year.
Sochi smiles
Russian hoteliers reported an exceptional summer season and have bright prospects for the upcoming winter.
“The 2020 summer season significantly differed from all previous ones,” said Natalia Khvostikova, head of marketing and communications, Swissôtel Resort Sochi Kamelia. “We have seen an increased demand for room reservations among individual guests. The average occupancy has grown by about 20%.”
Khvostikova agreed the closure of borders actively developed domestic tourism.
“We received bookings not only from our regular guests but also from those who have never traveled in Russia before,” she said.
Occupancy in southern Russian traditionally is relatively low in October and November, sources said, but this year will be an exception. Excellent weather conditions and extended school holidays have also played a part in increased demand.
“Given that the borders may be closed for several more months, Sochi will be one of the most popular destinations in the winter season,” Khvostikova said. “Almost all hotels in Krasnaya Polyana (a region of Sochi) are already 100% sold out. In this regard, we predict an increased demand in Sochi Downtown.”
Vladimir Shuvanov, deputy GM at Sochi’s Golden Tulip Rosa Khutor, called the summer season “successful” and added the market “enjoyed a soaring demand.” But he added hoteliers still faced challenges, including issues with staff recruitment, especially finding seasonal workers.
Shuvanov said competition for labor has led to an unplanned increase in wages and salaries.
“Occupancy remained at the same level of 60% to 70%, while (ADR) increased by 30% to 40% in comparison with the same period of last year,” he said. “This was due to increased service costs because of the need to comply with safety measures prescribed by Russian (health and hygiene organization) Rospotrebnadzor and a shortage of personnel.”
Some hotels in Sochi have no space left, said Yulia Mikhaleva, head of marketing at the Hyatt Regency Sochi.
“Occupancy changed only in the autumn. Since the opening of the hotel after quarantine at the end of June, we have almost full occupancy, and because of the warm autumn, it is still so,” Mikhaleva said. “The forecast for winter we have is only up to the New Year, and it is bright.”
Analysts predict a strong investment flow to the hospitality industry of southern Russia.
“There will be a hike of investment activity … since supply follows demand,” Smirnova said.