Russia identified as one of the key hotel markets in 2012

Russia identified as one of the key hotel markets in 2012
REPORT - ITB BERLIN 2012 - BERLIN: Russia was identified as one of the key markets for growth in the hotel sector for 2012 in a plenary session at the prestigious International Hotel Investment Forum in Berlin.
Top industry experts that included Michael O’Hare, Managing Director for Horwath HTL Russia, attended the session, entitled “Top predictions for 2012, where should you invest?” which looked at the global hotel performance and real estate markets, looking to see what regions showed strong potential for growth over the coming 12 months. Horwath HTL (HTL), the world oldest and largest hospitality-consulting network, is also a sponsor of the International Hotel Investment forum, now in its 15th year.

O’Hare pointed to a number of strong contributing factors that lead to his assessment of the region, specifically highlighting the strong price of oil and above all the chronic undersupply of hotels, particularly in the secondary and tertiary markets in the midmarket and budget sectors.

O’Hare who has been active in Russia and the CIS for over 20 years said that these conditions are combining to create one of the few hot spots for hotel development outside of Asia Pac, saying” We have seen a real increase in the number of projects coming on stream that we have been asked to look at, which is always a good sign of confidence in the market. The second indication is to look at the number of deals that have been announced, signed or under consideration by the major hotel groups, which shows not only a strong pipeline but also a real investment in the region to roll out their brands. It’s no secret that there is a chronic undersupply of bedrooms in Russia and the Ukraine and that demand will have to be met over the coming years. Add to the mix the winter Olympics and the World cup and you have all the conditions for sustained growth”.

One area that has been a challenge for development is the difficulty in securing financing for hotel projects, which has lead to local developers finding other ways of securing the deals. “International banking activity in Russia in the hotel sector has all but dried up, and interest rates on offer from domestic banks are still high, so developers are putting a much larger equity stake in initially, and securing financing once the property is up and running”.
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