Moscow to become haven for low-cost tourism

The face of hospitality is changing in Moscow, as the city has decided to give up its super-expensive hotels for cheaper hostels.

City Hall has announced plans to open 180 hotels in the next five years. Around 40 are already under construction or renovation, and should be reopened soon. In addition, this year alone the city has 20 hostels offering accommodation on a budget.

This comes after a recent survey claimed the capital has over 37,000 hotel rooms, less than half of which can be considered quality accommodations. By comparison, London and Paris top the list with around 78,000 hotel rooms.

According to Mayor Sergey Sobyanin, Moscow needs four times as many hotels in order to catch up with major European tourist centers.

Most of the hotels that have opened in recent years are competing in opulence and charging astronomical rates. More of them are in the works. An Intercontinental is about to open on Tverskaya, Moscow’s main shopping street, and a Four Seasons is going up beside the British ambassador’s residence.

However, developers still shy away from the badly-needed mid-price segment, citing high borrowing costs and a slow return on investment.

In fact, this shortage of affordable hotel rooms is driving prices up. Moscow remains one of the most expensive cities in the world in terms of accommodation, and that is what keeps tourists at bay.

Moscow’s mayor has pledged to solve the problem with a plan to more than double the number of hotel rooms in the capital.

Still, industry experts say the authorities are starting at the wrong end of the problem.Before investing millions of dollars into new hotels, what needs to be changed is the structure of demand for tourist services.

Market players stress that Moscow is a city of business travelers, not holidaymakers. Individuals traveling on company expense can afford more expensive accommodations, which discourages investors willing to invest in mid-price hotels.

The government, therefore, should start with opening up the country even more to foreign tourists by lowering plane ticket prices and making infrastructure more tourist-friendly.

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