Experts Warn Hotels Against Dangerous Price Hikes

Experts Warn Hotels Against Dangerous Price Hikes

Published: June 22, 2012 (Issue # 1714)


Analysts say hotels should think about the city’s long-term image when raising their prices for events such as the forum.

The annual St. Petersburg International Economic Forum (SPIEF) brings with it a 20-percent increase in St. Petersburg hotel room rates. As a result, say analysts, the city loses tourists and gains the reputation of a city that is extremely expensive to visit.

“When the first forums were held, hotels suggested moving the event to another time of year when there is lower tourist occupancy, since in June there are many city guests and visitors staying in hotels. Unfortunately, the hotels’ suggestion was not heeded,” said Natalya Minina, general manager of the city’s Helvetia Hotel.

The high season for hotels starts in the middle of May and lasts until the end of June. From April to mid-May and from July to September is the shoulder season, while the low season is from October to mid-April. The average price for a hotel room reserved at the hotel reception desk during the low season ranges from 2,550 rubles to 11,000 rubles ($78-$340). During the shoulder season, rooms are available from 3,500 rubles to 15,300 rubles ($108-$470) per night. The high season is the most expensive, during which a three-star hotel room costs approximately 4,500 rubles ($138) and a five-star hotel room 19,500 rubles ($600), according to data from Maris real estate company, part of the CBRE network. Some hotels also increase their high season prices for significant dates and events such as forums.

“In general, hotel room rates in St. Petersburg are quite comparable with other European cities — 5,000 to 10,000 rubles ($150 to $300) per standard double room is an average price for a four- or five-star hotel,” said Walter Spaltenstein, head of the SwissAm Hospitality Business School.

“But when it becomes 12,000 rubles ($365), 14,000 rubles ($426) or 16,000 rubles ($486), that’s too high.”

After the 2008 forum, the Federal Antimonopoly Service claimed 11 local hotels had increased their rates by 80 to 100 percent during the event. These hotels were consequently fined for violating a law forbidding companies from conspiring or acting to limit competition. This decision was, however, challenged in court and the hotels were not required to pay.

“The room rates are decided by hotel owners,” said Sergei Korneyev, vice president of the Russian Tourism Industry Union.

“Often when the demand is greater than the supply, the hotels try to regulate the situation themselves by increasing prices. Seasonal increases are a market practice all over the world. Many hotels in Ukraine and Poland, for example, increased room rates to take advantage of those visiting the Euro 2012. However, just how much hotels decide to hike their prices can vary,” he said.

“Increasing prices for a certain period is quite a common thing; even airlines do it,” said Spaltenstein. “Seasonal price changes are well-known and people are prepared for it. But if hotels start doubling the room rate just for a week, it’s not very clever. People get the wrong impression about high prices in the city,” he added.

“We do not increase rates especially for the forum, but with such high demand, we offer rooms for the maximum seasonal price,” said Minina. “During these dates, room rates don’t increase by more than 20 percent of the average June price for a room.”

Some hotels offer guests lower rates for booking in advance, or extra services during special events.

“We greet guests with a welcome letter and a gift and put complimentary gifts in their room every day. We also organize a showing of forum sessions to be projected on a big screen in the conference hall,” said Minina.

Korneyev believes there should be a gradual growth in room rates in order to avoid damaging St. Petersburg’s reputation and making it known as a city of expensive hotels.

“Hotels should understand what is more important for them: Short-term profit or making a good impression in order to have a long-term effect,” said Korneyev.

“When hotel prices double or even triple, this serves as an anti-advertisement for St. Petersburg. It creates a myth about high accommodation prices in the city, when nowadays there are really lots of economy class hotels with a European standard of service. Visitors can find these hotels during the summer season, but because of the hotels that drastically increase their rates, it seems to many that such high prices are everywhere,” he said.

In St. Petersburg, there are currently a total of 69 three-, four- and five-star hotels with up to 50 rooms, according to Maris data. This figure consists mostly of three- and four-star hotels, however, it is still a common complaint that there are not enough three-star hotels, especially close to the city center.

Despite the lack of three-star accommodation, developers are continuing to build more expensive hotels such as the five-star Domina Prestige that opened this year on the Moika embankment, just off St. Isaac’s Square. Most tourist accommodation is traditionally situated in the central districts, namely Tsentralny, Admiralteisky, Petrogradsky and Vasileostrovsky. The Moskovsky district has also become a popular area to build hotels due to its close proximity to the airport. Next year a Marriott hotel is planned to open in the district, along with two Hilton hotels in 2014, according to Maris specialists.

“Something new has recently emerged on the St. Petersburg hotel market — the boutique hotel,” said Natalya Kireyeva, a senior analyst in Maris’ consulting and valuation department. “These are usually relatively small hotels with a unique style and atmosphere. Such hotels often pride themselves on being particularly attentive to each and every guest. There are currently three boutique hotels in the city and another is preparing to open.”

There are currently 14 international hotel operators in St. Petersburg, who manage 50 percent of all rooms in the city. According to Maris data, Russian hotel chains are also developing.

The duration of the economic forum and white nights season is the only time of year when it is difficult to find accommodation in the city. Throughout the rest of the year, there are far more rooms than tourists. In the first quarter of 2012, for example, hotel capacity was only at 40 to 50 percent, according to Maris data. In order to attract guests during the low season, hotels often offer discounts and specials.

Experts expect tourism to the city this year to increase by ten percent compared to last year, when about 5.5 million people visited St. Petersburg.

Leave a comment