You’ll find few people shedding tears for the destruction of the Hotel Rossiya, a dour, hulking behemoth that glowers at St. Basil’s Cathedral and lurks near the Kremlin like a bad Cold War hangover.
Ask tour operators, however, and you’ll find plenty scratching their heads over the loss of its nearly 2,700 rooms and the dwindling number of Moscow hotels that are both moderately priced and of reasonable quality.
A mix of bureaucratic regulations, astronomic real estate prices and poor planning has left Moscow with few mid-range hotels, forcing tourists and business travelers far afield for lodgings or resigned to glittering, five-star hotels with head-spinning room rates.
“It’s that’s desperate,” said Helene Lloyd, a tourism market consultant in Moscow.
In addition to the Rossiya, whose exterior has inspired nicknames such as “the suitcase” and “the square,” other major hotels that have been demolished are the equally unlovely 430-room Intourist (nicknamed the “rotten tooth”) and the nearby 1,000-room Moskva (whose image graces the labels of Stolichnaya vodka).
The Ukraina, one of the few mid-range hotels remaining in the city center, was sold last year for $274 million, a substantially higher price than expected that indicates the buyers want to refit it to serve the high end of the market.
“The loss of so many rooms — bringing the total room capacity lost to date to around 6,000 — is expected to have a major impact on tourism in Moscow in 2006 and beyond,” the World Travel and Tourism Council noted in a report last month. That is just under 10 percent of the city’s total hotel rooms.
An estimated 2.5 million tourists now visit the Russian capital annually, according to official statistics, bringing in up to $1 billion for the city each year. Moscow has one of the highest occupancy rates in the world at its roughly 170 hotels. When a trade exhibit is on, attracting business people from across the country and around the world, hotels are solidly booked, though major business conventions are still often able to negotiate lower rates for large blocks of rooms.
The vast majority of Moscow’s more than 65,000 hotel beds, the WTTC noted, are of Soviet-era quality: a term invoking drafty windows, lumpy beds, surly staff and questionable plumbing. The International Olympic Committee inspectors that reviewed Moscow’s bid to host the 2012 games last year cited a lack of three-star hotels as one of several problems.
Real estate prices in Moscow — which can be among the highest in the world — have meant that commercial office space and luxury residences are the fastest way to recoup costs and reap huge profits. For Western and Russian hotel investors, four- and five-star projects yield higher, quicker returns, said Gennady Lamshin, acting director of the Russian Hotel Association.
Foreign chains including MeriStar Hospitality Corp., Wyndham International Inc. and InterContinental Hotels Group are pushing through Russia’s infamous bureaucracy to enter Moscow’s hurly-burly business climate, and a raft of new projects for four- and five-star hotels are either under construction or slated to break ground in coming years.
In fact, the glut of projects largely four stars and up could end up flooding the market, said Arthur de Haast, global chief executive with consulting group Jones Lang LaSalle, potentially pushing down rates.
“The number of projects out there at the moment, if they all get constructed, there is a danger of causing oversupply in the luxury segment of this market,” de Haast said.
As for mid-range hotels, two moderately priced Holiday Inns have opened in recent years — adding a much-needed 340 rooms — but experts say it will be at least two years and likely more before any sizable block of rooms comes on the market to serve Moscow’s nonbusiness, non-luxury travelers.
The Rossiya is slated to be replaced with a new project, including a concert hall and movie theater, along with at least 1,500 rooms that officials say will carry mid-range prices — but tourism analysts say 2010 will be the earliest that any number of its rooms will be available.
“Unfortunately, most of the supply we’re aware of is four- or five-star hotels, so there’s not a lot to attract leisure tourists,” said Lasse Restolinian, a hotel consultant with London-based HVS International.