Hotel In Volgograd - Already Not Beneficial!

In 2010, the Administration of the Volgograd region proudly announced that in 2018 the football championship of FIFA 2018 will be held in the region and on this basis tourist processes are becoming more active in the city. The consequence of this news was that there appeared here and there statements that a new hotel would be built in Volgograd, and not even one, or even ten.

To date, the city plans to build 16 hotels with 41 existing ones. The paradox is that this number exceeds the lack of places for the championship more than 3 times. Of the declared 7,500 places for the duration of the event, 6,500 are provided by operating hotels, and 1,000 remaining seats can provide a maximum of 5 new hotels.

Optimism for investors and builders inspires a boom that will create a championship around them and they expect a much larger flow of tourists than stated, hoping to make substantial profits on it and return some of their funds. It should be noted that before the championship, the market for new hotels will be uninteresting - for the current flow of tourists and business trips, the available quantity is more than enough. The average load of hotels around the city fluctuates at the level of 30-40% per year. And this means that a hotel of 100 rooms with an average cost of 3000 rubles. It is possible to earn from the possible 109.5 million rubles. A year maximum of 27.5 million rubles. The rise in prices in the conditions of the ongoing crisis will not improve the situation for the hotel, as it will significantly affect the hotel loading.

What is guided by a modern investor, actively taking up work on the construction of a new hotel on the eve of the championship? The fact that the championship lasts a month and during which he can already recoup his investments. For information, the construction of one new room in a 4 * hotel costs 2.4 million rubles, and rooms in a 3 * hotel at 1.6 million rubles. Imagine a new hotel for 150 rooms, class 3 * in the center of the city. Undoubtedly, it will be a success and will be loaded by 90-95%. The average cost of a place in a similar hotel is 3500 rubles. ($ 113). A potential investor, as it turns out in the course of simple arithmetic calculations, earns at the championship a maximum of 12 million per month for living. Imagine also that guests will also eat at the hotel and this will bring another 2.5 million rubles. Such a high income should also be reduced by the amount of taxes, salaries, contributions, other expenses , etc. Nevertheless, even with 14.5 million rubles earned for the month. Pay back the hotel, costing the investor 240 million during the championship will not succeed.

Most of the initiators of hotel projects described above understand the situation and hope that the prices for the championship period can be increased almost doubled. But the events of the Olympics in Beijing, the royal wedding in London showed that this is a utopian way. During the Royal Wedding, the situation with hotels in London was similar to the situation in Volgograd: it was expected that the supply of services would significantly exceed demand, but nevertheless prices for most rooms remained at the same high level, and some were even raised. As a result of this, some of the guests of the city decided to break camps on the streets because of high prices. And the indicators of the level of occupancy of hotels dropped significantly during the week when the royal wedding took place. At the time of the Olympic Games in 2008, to the great chagrin of the owners of the capital's hotels, slightly more than half of the expected tourists arrived at the Games. Because of this, tens of thousands of hotel rooms in which prices were raised remained empty. The future hotelier should be aware of the fact that many tourists, seeing the rise in prices for accommodation in hotels, simply refuse to book them.

The conclusion is simple: to build a hotel only on the eve of the championship is an extremely rash step. However, if the investor plans to build a hotel for a long time and work hard on it, then he should be prepared for the following difficulties:

• The payback period of the hotel is 3 * - 8-10 years, 4 * hotels - from 12 years and up, provided that inflation is practically zero;
• In hotels of class 3 * and 4 * it is unacceptable to save on the situation, infrastructure and personnel - the cheapest sofa, plastic pipe and manager without higher education will not allow to pass categorization and get the treasured asterisks;
• The situation with the staff in the city is extremely deplorable - staffing at least the reception and accommodation service, the service staff and restaurant staff serving English-speaking workers will be very expensive or almost impossible. In the conditions of the increased demand for such kind of personnel, the prices of it will also significantly increase, and quality, on the contrary, will decrease;
• The demand will not be new hotels, but hotels that have proven themselves in the market - if you do not accumulate a loyal customer base, you should not expect a big load;
• The hotel market in the city is already divided - it will only be possible to win its own segment with the help of prolonged expensive advertising or dumping prices;
• In the eyes of guests will throw loud names. For example, for 2 years in Volgograd at ul. Trade Union, 13 will be built by Hampton by Hilton hotel group of companies "Stolia". This fact sets the general vector of development for future hotels - the Hilton is always a premium class and premium services, and you need to be able to compete with them, otherwise they will not come to you.

In conclusion, I want to note that the Volgograd region judging by recent research is one of the most investment-unattractive regions for business. The hotel industry, for the moment, is in outsiders. Before you build a hotel, think and consult with a marketer, it may be more profitable and convenient to put money on a deposit at 10% per annum or to build an office building with a payback period of 4-5 years?