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Aparthotels are squeezing hotels

High season of 2021 was more fruitful for apart-hotels in St. Petersburg than for classical hotels. The occupancy varied from 75 to 90% depending on the location and the project, while the usual hotels averaged 50% occupancy. However, the market has not yet reached the pre-crisis indicators. With the decline in tourist activity, managers are gradually reorienting most of the rooms to medium- and long-term rentals.

By the volume of rooms apartments in St. Petersburg are catching up with classic hotels, thus aggravating the already weak competitive position of the latter, especially in the comfort class (category "two and three stars").

According to the Maris company in association with CBRE, as of the 3rd quarter of 2021 there are 58 apart-hotels in St. Petersburg and the Leningrad region with 20 719 units, which is more than 1.1 million square meters. Among these 12,123 units (59%) are service apartments (526,855 sq.m.).
According to Colliers, at the end of 2020 the quality room stock of classical hotels in St. Petersburg had 23 448 rooms. It means that the difference in indicators between the two segments of the hospitality market is already small. But if you consider only serviced apartments, the hotels have a significant advantage.

At the same time four more quite large apart-hotel projects are to be put into operation by the end of the year: Start, BW Zoom Hotel, Adagio Access and "AVENUE on Muzhestvo".

Classic of the genre

The hotel segment is one of the most affected by the crisis. The analysts of Colliers say that in the first half of 2021 (there is no more recent data) its recovery began. The occupancy of the hotels was gradually growing and at the end of six months of the year reached 50% on average, that is almost twice higher than during the same period of 2020. Average daily room rate (ADR) and the revenue per available room (RevPAR) also increased slightly: up to 5194 and 2579 rubles per room. However, these values are still below the pre-crisis levels of 2019: by 18% and 38%, respectively. According to the results of three quarters the main indicators of the industry will probably be higher because in summer St. Petersburg hosted SPIEF and the European Football Championship. The "Scarlet Sails" holiday also took place. However, experts forecast hotels to regain the lost positions only in 2023 and even if the positive dynamics will be preserved.

Apart-hotels closed the season with more encouraging indicators. Occupancy at the VALO aparthotel complex averaged 74 percent during the high season. "At the same time July, in spite of the events held in the city, did not meet our expectations: the occupancy was only 66%. But in August and September the figures began to grow: in August the occupancy was 81%, and by the end of September - 95%", - says Konstantin Storozhev, general manager of the VALO Service management company.
During the first two months of summer there was a parity between short-term and long-term rent in VALO. Since August company has increased the number of rooms for long term rentals.
Nikolay Pana, the development director of Vertical hotel chain (a Becar Asset Management company) thinks that the growth of basic indicators in the current season was promoted by the outflow of the tourist traffic from the southern resorts to Karelia and St. Petersburg (apart from big political, business and sport events). Average occupancy of the Vertical apart hotels reached 75-80%. During hot months up to 70% of the room stock was occupied by daily rent. Today we can see an inverse relationship: 70% of units are rented for a medium or long term, and 30 % are occupied by short-term rentals.
New projects in central areas show even higher results. The apart-hotel chain YE'S reports about the loading of 95%, and during some periods it is 100%. True, they do not name the prices.
Oksana Bazyrina, director of the business unit Orange Hotels (develops hotel chain izzzi) said that during the high season occupancy of their hotel near Gostiny Dvor reached 90%. The hotel tariff varied from 4500 to 6500 rubles per room. Today it has been halved: from 2200 to 3500 rubles per day.

At the apart-hotel ARTSTUDIO Nevsky on 2nd Sovetskaya Street (developed by RBI Group) during the high season the price ranged from 8300 to 16 000 rubles per night, not counting the times of SPIEF and the European Championship. Almost all rooms at that time were switched to daily rent. A small pool of remaining units was rented for long periods at rates from 120,000 to 240,000 per month. The occupancy rate of ARTSTUDIO Nevsky from May to September was 80%.

In August the RBI Group opened the second ARTSTUDIO Moskovsky hotel on Zaozernaya Street. And according to the data of Karina Shalnova, the Director of RBI PM (a part of RBI Group) in the same month its occupancy reached 93% and in September it reached 85%. The average rate - 3065 rubles per day, the average rate in "long term" - 49 000 rubles per month.

Movies at the apartments.

From May to August the Avenue-Apart occupancy was 90-95%. If the rate at the beginning of the season was about 3500 rubles per night, by the end of the season it reached 4500-5000 rubles. And during St. Petersburg International Economic Forum and European Championship a 30-meter studio was rented for 7000 rubles. Guests rented such units for one to three days. "Many booked rooms to the day - this is the nature of travel during the pandemic as people are not sure if they can come. Because of the high demand with limited supply, prices were higher", - says Nikolay Antonov, a partner, general director of “MTL. Real Estate Management” (part of Best Group).

During this period in the Avenue-Apart 70% of rooms were daily rented, the rest - in the long term and at higher summer rates.

"This year we had movie crews coming back to us. Film crews usually rent many rooms at once for periods of one month or more. They took a break for the pandemic, but by the beginning of the White Nights they showed up again," says Mr. Antonov. - There were more tenants among executives and senior managers, project groups from Moscow construction companies. But there are fewer freelancers.

Docklands Development recorded the activity of movie crews and tourists from the regions in summer period. According to the commercial director of the firm Ekaterina Zaporozhchenko, they managed to recover some pre-crisis indicators, and some of them even exceeded. Thus, the occupancy level of the apart-hotel Docklands 4* from May to August fluctuated within 79-82%. The maximum ADR for individual guests was reached in June and amounted to 10 378 rubles. The average price for the season was 7,720 rubles.

"We considered the unpredictability of the market and kept the format of long-term rentals during the summer, raising the rates. Numerous corporate contracts, the basis of which were the organizers of Euro-2020, brought stability to the hotel. These guests have already made advance reservations for the UEFA Champions League in May 2022" - says Ekaterina Zaporozhchenko.

The most popular with all operators were, of course, the most compact rooms, which are chosen by guests traveling alone or as a couple. However, no less in demand were the largest units with two bedrooms. According to Karina Shalnova, these rooms in existing apartment complexes were very few, so interest in them was as high as the most popular studios. The large apartments were booked by the travelers with families.

By the way, due to the abnormal heat this summer renters often preferred apartments with air conditioning, of which in St. Petersburg also found a few. As a rule, apartments are equipped with them in business class hotels or four star apart-hotels.

The art of "seduction".

To attract tenants market participants use all known channels: advertising, including on the aggregator sites, direct sales, booking "from the rack". Some operators managed to build a certain client base, and some of the guests become regular customers or return occasionally; others come by the recommendations of friends or acquaintances.

The developed infrastructure of the apart-hotel (fitness center, swimming pool, food court etc.) also becomes an additional "magnet" for the guests. Similar services are available in the VALO apart-hotel complex opposite Bukharestskaya metro station and in the YE'S chain project. We&I by Vertical does not have a swimming pool, but it has a co-working space and a large public area with a bar. These options appeal to young people. Once a week there are events for the guests, which are also attended by locals. At the same time, anti-COVID requirements are met. According to Nikolai Pana, all the hotel employees are vaccinated, and trainings are regularly held with them. Moreover, all the objects have got the QR codes of security.

There are travelers who do not part with their pets, but you can stay with them not everywhere. Some apartment hotels make that a reality. "We actively positioned Avenue-Apart as a pet-friendly hotel, so there were a lot of guests with pets. Besides cats and dogs, we have seen rabbits," laughs Nikolay Antonov. You can also stay with your four-legged friends in the YE'S chain.

Avenue-Apart adjusted its pricing policy this year. For long-term tenants it developed fixed rates with a maximum package of services "all inclusive". "We've moved away from renting out household equipment for an additional fee. This is convenient for both individuals and legal entities because at the end of the month there is one clear payment, in which everything is sewn up," explains Mr. Antonov.

RBI Group has, as always, taken a creative approach to attracting clients. In the small building of the apart-hotel ARTSTUDIO Moskovsky on Zaozernaya Street (it was opened for guests in August), the managing company has implemented a system of QR-coding: at any time, the guests may scan a code and get the information about the services, contact the staff. Every employee of the apart-hotel has a QR code on his chest instead of a name tag on his lapel, as it is common in classical hotels. As Karina Shalnova told, till the end of October the management company plans to launch a project of interactive performance-installation "Letters from St. Petersburg" within the concept Art for Apart. With the help of QR-codes placed in the most unexpected places of the room a guest can listen the famous musical compositions and letters of famous people, read by modern actors. They are dedicated to peculiarities of life and lifestyle of writers, artists, architects who used to live in St. Petersburg. The manager implements the project "Letters from St. Petersburg" together with the director Semyon Alexandrovsky (a laureate of "Golden Mask", the founder of Pop-Up Theater). Plans are to hold art contests among the guests.

By the way, the interiors of the rooms and public areas of the ARTSTUDIO Moskovsky apart-hotel are decorated with posters from the "Leningrad Modernism" series by the Russian designer Peter Bankov. "We wanted to make the hotel special, to connect it with art in some way. We turned to Liza Savina. She is a very well-known gallery owner, curator, art critic, and art manager in St. Petersburg. Together we came up with the concept of Art for Apart (art in a hotel). It was a collaboration with the graphic designer Pyotr Bankov who created a whole series of such images for our hotel", - says Karina Shalnova. The theme of Leningrad modernism was not chosen by chance as the hotel is located on the territory of the new Leningrad, which was being rebuilt after the blockade. In the paintings of Peter Bankov recognizable symbols of the time: the Finland Station, the Palace of Sports "Jubilee", "October" Concert Hall, the old building of Pulkovo airport, etc., - a total of 12 subjects.