International Hotel Chains in Russia 2018

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1 International Hotel Chains in Russia 2018

2 International hotel chains in Russia According to EY s annual market research on the presence of international hotel brands in Russia, there were 179 hotels under international management operating in the region in October 2017 with a total room stock of 38,705 keys. Moreover, nine new branded hotels (1,575 rooms) were opened in January - October 2017, compared with 13 hotels with a total room stock of 2,458 keys commissioned in Russia in New hotels opened under international brands, per year (October 2017) Number of hotels More than half of the existing room supply is concentrated in Moscow and St. Petersburg (52%), followed by Sochi (11%), the Moscow Region (6%), Ekaterinburg (3%), and other locations. It is planned that by 2022 the number of hotels under international management will increase by 102 new properties (20,249 rooms). Thus, if by 2022 all announced hotels open, the number of hotels under international management in Russia will reach 281 (58,954 rooms), located in 59 cities. In this case, by 2022 the share of Moscow and St. Petersburg will decrease by 5% (to 47%), while the share of Sochi will decline to 8%, due to the growth of branded hotel supply in the Moscow Region (7%) and Nizhny Novgorod (3%). Moreover, openings of the first ever branded hotels are planned in 22 new locations, including Khabarovsk, Novorossiysk, Ryazan, Saransk, Stavropol, Tomsk, Vladimir, Vladivostok, and others. 1 International Hotel Chains in Russia 2018

3 Share of existing room supply by cities in Russia (October 2017) Share of future room supply by cities in Russia (including existing room supply) 28% 30% 35% 29% 3% 6% 11% 22% 3% 7% 8% 18% Moscow St. Petersburg Sochi Moscow region Ekaterinburg Other cities Moscow St. Petersburg Sochi Moscow region Nizhny Novgorod Other cities Hotels under international brands are currently located in 37 cities of Russia. By 2022 their presence is planned to grow to 59 cities. International-scale events are often a key driver of the expanding footprint of international hotel operators. The biggest upcoming event is the 2018 FIFA World Cup, which will be held in Russia in 11 cities: As of October of the 11 host cities already had 123 hotels under international brands (28,394 rooms). By 2018, 20 new properties are planned to open (5,027 rooms). The graph below shows the presence of international hotel chains in Russia as of October Ekaterinburg Kaliningrad Kazan Moscow Nizhny Novgorod Rostov-on-Don Samara Saransk Sochi St. Petersburg Volgograd International Hotel Chains in Russia

4 Existing room supply under international management by city of Russia (October 2017) 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Carlson Rezidor Hotel Group Accor Hotels InterContinental Hotels Group Marriott International Hilton Worldwide Best Western Sokos Hotels Kempinski Hotels Hyatt Hotels Corporation Belmond Capella Hotel Group Lotte Hotels & Resorts Wyndham Hotel Group Louvre Hotels Group Rixos Corinthia Hotels Rocco Forte Hotels Four Seasons Hotels & Resorts Vienna House Domina Hotels Mamaison Hotels & Residences 3 International Hotel Chains in Russia 2018

5 International hotel operators footprint in Russia by 2022 Murmansk Svetlogorsk Zelenogradsk Kaliningrad St.Petersburg Arkhangelsk Veliky Novgorod Zavidovo Vladimir Moscow Yaroslavl Kaluga Ivanovo Ryazan Nizhny Novgorod Kogalym Saransk Cheboksary Kirov Lipetsk Kazan Perm Voronezh Ulyanovsk Nizhny Tagil Surgut Izhevsk Tolyatti Elabuga Ekaterinburg Sevastopol Rostov-on-Don Ufa Tyumen Yalta Samara Novorossiysk Kislovodsk Volgograd Chelyabinsk Krasnodar Tomsk Gelendzhik Krasnoyarsk Sochi Stavropol Orenburg Omsk Novosibirsk Kemerovo Astrakhan Mineralnye Vody Zheleznovodsk Novokuznetsk Irkutsk Khabarovsk Blagoveshchensk Vladivostok The total branded room stock available in Russia as of October 2017 (i.e. 179 hotels with 38,705 keys in locations) is operated or franchised by 22 international hotel chains currently present in the region. The graphs below show the actual and projected footprint of hotel operators in Russia as of October 2017 and including future projects till The largest market share (80%) is divided between five chains: Accor Hotels, Hilton Worldwide, Marriott International, Carlson Rezidor Hotel Group, InterContinental Hotels Group. Share of hotel operators distribution of existing room supply (October 2017) Share of hotel operators distribution of future room supply (including existing rooms) 20% 25% 19% 17% 11% 15% 21% 12% 13% 19% 14% 14% Carlson Rezidor Hotel Group Accor Hotels InterContinental Hotels Group Hilton Worldwide Carlson Rezidor Hotel Group Accor Hotels InterContinental Hotels Group Hilton Worldwide Marriott International Other operators Marriott International Other operators International Hotel Chains in Russia

6 Russian hotel brands Meanwhile, Russian hotel operators are increasing their presence in both Russia and abroad. National brands as a rule account for a significantly smaller proportion of hotels in the markets of most countries (except the U.S.) compared with hotels under international management. This is also true for the Russian market: currently, the share of hotels under international brands (179 hotels) is almost 1.5 times higher than the share of hotels under national management (101). In October 2016 there were 169 hotels under international management in Russia vs. 72 hotels operated by Russian chains. Thus, this year the difference has decreased by 19 hotels in favor of Russian chains. Russian operators continue to grow and are opening new hotels both on the domestic market and abroad. Major Russian hotel chains are listed in the table below: Russian hotel operators in the domestic and international markets (October 2017) Chain Number of hotels in Russia / abroad Regions / cities in Russia GOST Hotel Management 26 / 2 Moscow, Moscow region, Sochi, Nizhny Novgorod, Nizhny Novgorod region, Irkutsk, Irkutsk region, Kislovodsk, Khakasia, Abakan, Buryatiya Amaks Hotels & Resorts 19 / 4 Vladimir, Belgorod, Rostov-on-Don, Ryazan, Azov, Omsk, Veliky Novgorod, Voronezh, Tambov, Novy Urengoy, Perm, Kazan, Krasnoyarsk, Ufa, Izhevsk, Tolyatti, Yoshkar-Ola, Kurgan, Valday Azimut Hotels 18 / 8 Moscow, St. Petersburg, Sochi, Yakutsk, Vladivostok, Voronezh, Astrakhan, Murmansk, Ufa, Novosibirsk, Nizhny Novgorod, Kostroma Cronwell Hotels & Resorts 11 / 3 Moscow region, St. Petersburg, Khantymansiysk - Yugra Heliopark Hotels & Resorts 7/ 1 Solnechnogorsk, Zvenigorod, Nebug, Penza, Suzdal, Malye Soli Soyuz Marins Group 7 / - Yalta, Sochi, Ekaterinburg, Nizhny Novgorod, Rostov, Novosibirsk Countries abroad Ukraine, Austria Belarus Germany, Austria Greece Germany Cosmos Group 5 / 3 Moscow, Moscow region, Petrozavodsk, Valday Czech Republic, Italy, Namibia Alliance Hotel Management 5 / - Moscow, Obninsk, Saransk, Abakan, Tuapse - - Korston Hotels 3 / - Moscow, Ryazan, Serpukhov - Total: 101 / 21 Sources: hotel operator s data, EY analysis 5 International Hotel Chains in Russia 2018

7 New hotels: During the first ten months of 2017 the Russian hotel market increased by six new hotels opened under international brands. the end of We believe, however, that the opening of some of them may be postponed until According to information that EY has compiled from hotel operators and open sources, 14 more hotels are due to open by Hotels opened under international management in Russia in January October 2017 Chain Hotel Number of rooms City Accor Hotels Ibis Irkutsk Center 128 Irkutsk Ibis Budget Moscow Panfilovskaya 114 Moscow Ibis Moscow Oktyabrskoe Pole 240 Moscow Carlson Rezidor Hotel Group Park Inn by Radisson Izmaylovo Moscow 109 Moscow Hilton Worldwide Hilton Garden Inn Moscow Krasnoselskaya 292 Moscow Hilton St. Petersburg Expoforum 234 St. Petersburg Hilton Garden Inn Volgograd 158 Volgograd Lotte Hotels & Resorts Lotte Hotel St. Petersburg 150 St. Petersburg Marriott International Courtyard by Marriott Nizhny Novgorod 150 Nizhny Novgorod Total: 9 hotels 1,575 rooms 5 cities Hotels under international management due to open in Russia by the end of 2017 (October 2017) Chain Hotel Number of rooms City Accor Hotels Ibis Domodedovo 158 Domodedovo, Moscow region Carlson Rezidor Hotel Group Radisson Blu Hotel, Rostov-on-Don 81 Rostov-on-Don Hilton Worldwide Hilton Garden Inn Novorossiysk 125 Novorossiysk Hilton Garden Inn Orenburg 119 Orenburg Hyatt Hotels Corporation Hyatt Regency Moscow Petrovsky Park 298 Moscow InterContinental Hotels Group Holiday Inn Express Moscow - Dubininskaya 184 Moscow Marriott International Sheraton Nizhny Novgorod Kremlin 176 Nizhny Novgorod Sheraton Rostov-on-Don 307 Rostov-on-Don Four Points by Sheraton Saransk 159 Saransk Four Points by Sheraton Voronezh 108 Voronezh Voronezh Marriott Hotel 220 Voronezh Wyndham Hotel Group Ramada H&S Moscow Greenwood Park 376 Moscow Days Hotel Zolotoe Koltso 150 Pereslavl-Zalessky Ramada Resort Zolotoe Koltso 200 Pereslavl-Zalessky Total: 14 hotels 2,720 rooms 9 cities International Hotel Chains in Russia

8 Key figures for international hotel operators in Russia (October 2017) Chain Existing number of Future number of Total number by 2020 Hotels Rooms Hotels Rooms Hotels Rooms Accor Hotels 39 7, , ,380 Carlson Rezidor Hotel Group 35 9, ,228 Hilton Worldwide 24 4, , ,641 Marriott International 23 5, , ,597 InterContinental Hotels Group 18 4, , ,377 Wyndham Hotel Group , ,950 Best Western Sokos Hotels Kempinski Hotels Hyatt Hotels Corporation , ,913 Louvre Hotels Group Capella Hotel Group Rixos Rocco Forte Hotels Four Seasons Hotels and Resorts Vienna House Domina Hotels Lotte Hotels & Resorts Belmond Corinthia Hotels Mamaison Hotels & Residences Jumeirah Group Total: , , ,342 7 International Hotel Chains in Russia 2018

9 Distribution of international operators by number of hotels Existing (October 2017) Future Source: hotel operators data, EY analysis Distribution of international operators by room supply 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Existing (October 2017) Future International Hotel Chains in Russia

10 Hotel chain affiliations key benefits It is a prevailing opinion among hotel developers and owners both domestic and international that a global chain affiliation is an indispensable component of a hotel s success. Without advocating either option and given the focus of this publication, below we share our thoughts on the key benefits that an owner may expect to gain from affiliation with a global hotel chain. Major benefits of affiliation with a global hotel chain Recognition Benefit Comment Recognizable hotel brand is perceived as a quality guarantee Status of the property Safety Global booking system Integrated marketing Loyalty programs Level of service Stability in times of crisis Lower costs Lower risk to investors International brand raises the status of the property Foreign tourists prefer to stay in hotels with well-known international brands in unsafe countries Opportunity to book via various electronic channels, simplicity of search, booking without intermediaries Integrated marketing allows brand promotion costs to be reduced due to the hotel s presence on the operator s website, in booking systems, catalogs, and brochures Guests who join hotel chain loyalty programs are motivated to choose hotels in this chain due to various benefits and discounts for regular guests Common service standards, management systems and staff training in hotel chains result in a higher level of service than in independent hotels Hotel chains are more resilient in times of crisis for a number of reasons: more stable demand from loyal guests, efficient occupancy management due to presence in several global reservation systems, the availability of highly skilled professionals with experience of working in unstable economic conditions Hotel chains guarantee lower costs on consumables, maintenance and repairs, advertising and marketing due to large purchase volumes and cost distribution among all hotels in the chain International brand lowers risks and provides a great advantage when selling a property or obtaining a bank loan Source: EY analysis 9 International Hotel Chains in Russia 2018

Contact information Olga Arkhangelskaya Partner,

Tel: +7 495 755 9854 Olga.Arkhangelskaya@ru.ey.

& Leisure Advisory Services Leader in Russia

com Anna Levina Manager, Hospitality & Leisure

11 Contact information Olga Arkhangelskaya Partner, Real Estate Advisory Services Leader in the CIS Tel: Angelika Normann Senior manager, Hospitality & Leisure Advisory Services Leader in Russia Tel: Anna Levina Manager, Hospitality & Leisure Advisory Services Tel:

12 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY works together with companies across the CIS and assists them in realizing their business goals. 4,500 professionals work at 20 CIS offices (in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Kazan, Krasnodar, Rostov-on-Don, Togliatti, Vladivostok, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Bishkek, Baku, Kyiv, Tashkent, Tbilisi, Yerevan, and Minsk). EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young (CIS) B.V. All Rights Reserved. This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global EY organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor. ey.com

International Hotel Chains in Russia

International Hotel Chains in Russia - 2017 International Hotel Chains in Russia 1 International hotel chains in Russia According to EY s annual market research on the presence of international hotel brands