Oliver Eller, Director of the Baltschug Kempinski Moscow Hotel and Regional Director of the Kempinski Hotel Group for Russia and the CIS, is well acquainted with the hotel industry in Russia. In 2005, he first came to Moscow and his task was to open the Ritz-Carlton Hotel. Since then, he has been actively studying Russian, loves Russian cuisine and tirelessly adopts Russian traditions. Oliver has a Russian wife and two children.
How do you assess the state of the hotel industry in Russia at the moment?
I see many positive changes in Russia, and I have something to compare with: I first started working in Russia in 2005. Of course, the hotel business is developing in the country, and this is especially noticeable in Moscow. As you know, in recent years the number of hotels has increased, which naturally affects the structure of the market: it is becoming more saturated and international.
In my opinion, another distinguishing point is that employees working in the hospitality business demonstrate their active interest and good education. Hotel schools and universities contribute to the fact that now, compared to the situation five years ago, when I left Russia to work in Germany, the understanding of the hotel business is at a significantly higher level. The current state of the market under the influence of the crisis, of course, has an impact on business in Russia, including the hotel business. However, there are political aspects that are not directly related to the industry and which we cannot influence. But the quality of service is truly higher than ever. In my opinion, today Moscow is a huge international city, comparable to London, Paris, Tokyo, New York. Moscow is a metropolis with an established history of hospitality and can be justifiably proud of it.
If we pay attention to the premium segment of the market, we can note that it feels most confident now. In the first half of the year, we saw a solid increase in utilization compared to the same parameters last year. The summer months of the current year for luxury hotels in Moscow and St. Petersburg were distinguished by record figures, and August was the peak month in terms of occupancy growth. At the Baltschug Kempinski Hotel, the average occupancy in the summer period increased 1.5 times compared to 2014.
At the moment, most of our colleagues in the league of premium hotels are seeing positive dynamics and significant growth in business volumes due to the strengthening of domestic tourism and an increase in the number of groups from the BRICS countries, which are not least attracted by the favorable price offer due to exchange rate fluctuations. Generally speaking, it can be noted that in the current year the average annual occupancy in the hotel market in Moscow is returning to the indicators of 2013. The revenue received in 2015 in ruble terms is similar to or higher than the indicators of 2013 and significantly exceeds the revenue of the previous year, but one should not discount the significant changes in the ruble exchange rate.
If we are talking about hotels of the upper middle and middle price segment, then the economic situation has influenced them more significantly, and hotels in this category have experienced a decrease in occupancy. At the same time, taking into account the development potential in the Russian regions, even a forced temporary slowdown does not cancel the forecast for the growth of indicators in the future and does not call into question the prospects of investing in this area. Import substitution at the stage of equipping hotel facilities opens up new prospects for owners, and the development of hotel infrastructure in the regions will continue regardless of economic fluctuations. At the same time, the need for further development of hotel colleges and institutes in the regions is obvious, because the development of the industry is directly related to the availability of professional personnel.
What are the main client portraits that can be identified today?
The key markets for the Baltschug Kempinski Moscow Hotel are Germany, Great Britain, the USA, Austria, the leading positions are retained by the Russian market and the CIS countries - and this geography has not changed recently. Moreover, we see a strengthening of business and tourist flows from such promising destinations as China or Brazil.
70% of our guests arrive in the capital for business purposes, most often planning short-term visits. At the same time, we can rightfully be proud of the fact that the number of regular guests who prefer our hotel is steadily growing.
Regardless of their nationality, our clients expect impeccable comfort, which means helpful service and the highest quality of service. In our segment, among the expectations of customers, not least the emotional component of the stay appears, so we pay significant attention to creating a memorable pleasant experience for hotel guests.
The philosophy of the Kempinski group - the oldest European group of luxury hotels - is based on the fact that each hotel should have an individual character and embody the culture and style of the region where it is located, providing guests with the opportunity to discover inimitable. We strive to provide guests with a genuine experience in which traditions of hospitality are interspersed with innovations, the degree of cultural events is not inferior to the taste of gastronomic ones, and where the defining concept is “art of living” in its best sense.
Which hotels will flourish in Russia in the coming years, and which will be more difficult?
I see clear prospects for the development of the hotel industry in Russia due to the positive dynamics of growth in the popularity of domestic tourism. Both premium segment hotels in cities with a population of one million and hotels of the middle and upper middle price range in regional centers will be in demand. More than half of the hotels in the regions are not represented under the hotel brand - it will obviously be more difficult for such hotels to survive. The obligatory classification of hotel properties will keep the most powerful players afloat.
In any case, my credo is the understanding that one of the key factors for the success of a hotel, regardless of its category, is the chosen vector of management and teamwork. It is important to build a management strategy, implement know-how in a timely manner and take care of the hotel's image formation. We are truly in a business built for people and based on human communications. Of course, other factors of success are: ensuring high profitability, strengthening the reputation and brand, and increasing customer loyalty.
How do currency fluctuations affect the hotel business? How has the unstable economic situation affected the Baltschug Kempinski Hotel?
Inflation has affected the prices of a number of imported goods, food products and technology services provided by foreign suppliers. The cost of the above goods and services depends on fluctuations in the exchange rate of foreign currencies. At the same time, the Baltschug Kempinski Moscow Hotel, like other Kempinski hotels, has long been focused on working with local suppliers in order to receive the freshest products and quality services directly from manufacturers. It should be emphasized that today in Russia there is a large selection of high-quality food products that are not inferior to foreign counterparts.
Among the "bonuses" that the current economic situation has brought us is an increase in the attractiveness of the hotel offer for foreign travelers who can afford a higher level of services and related costs due to exchange rate changes. As you know, for many years in a row, Moscow has been positioned as one of the most expensive megacities in the world, and today the usual picture has radically changed, ensuring the growth of the city's tourist attractiveness.
At the same time, if we are talking about domestic business tourism, then there are fewer reasons for optimism due to the decrease in the number of business trips and the depth of bookings. Nevertheless, the level of tariffs and customer requests remain unchanged, which, in general, indicates a slowdown in activity, but maintaining the positions of the leading market players.
As fate willed, I already worked in Russia during the 2008-2009 crisis. Both then and now I saw and see my main task in being the captain of the ship: to be confident in the chosen course, to see icebergs and pitfalls and to make the trip safe and successful for my entire crew.
What is your forecast for 2016 in terms of the activity of the hotel business, and the Baltschug Kempinski Hotel in particular?
At the moment, hotels feel confident enough and are gradually starting to raise prices in rubles in order to partially compensate for the resulting exchange rate difference. These changes are gradual: most of the hotels are bound by existing contractual obligations and are planning to increase prices only from January 2016. Next year we can confidently expect an increase in the average prices for the supply of hotel rooms on the market.
Whatever the forecasts and reality, I believe that in our business it is important to realize: changes are inevitable, they need to be analyzed, expected, able to quickly adapt, change yourself and find positive aspects in this.
In your opinion, will the percentage of domestic tourism increase?
The current year has already shown active positive dynamics in the development of domestic tourism, and the trend has every chance of further strengthening. This is facilitated by a number of diverse factors: state policy to support domestic tourism, travelers' preferences in favor of ruble zones, high-quality development of hotel infrastructure and diversification of supply, here we can even note the development of high-quality websites and mobile applications that make the territory of a large country much more accessible both for interactive and for tourist development.
What can you say about online booking? How many numbers are purchased online today?
This segment is growing today at a truly colossal pace. So, over the past few years, the number of online bookings has grown by an average of 40% annually. In this regard, a high-quality presentation of the hotel on the largest booking sites, the presence of its own multifunctional site and a clear strategy for promoting the product on key platforms is an obvious necessity. Russian guests increasingly find online bookings reliable and convenient, so I am confident that this area will once again show solid growth rates in the coming year.
What Western trends in the development of the hotel business could be successfully applied to the Russian market?
With great interest I follow innovative cases in the hotel industry, which can relate to both small aspects of the service and more global innovations. And, of course, I believe that positive experience can and should be learned from foreign colleagues. These innovations, among other things, may be invisible to the guest, but very tangible from the point of view of doing business. For example, today in Russia in the field of business travel, the current parties rely heavily on the technologies of previous years, while maintaining confidence in mainly bank transfers, while in the West a business traveler in 99% of cases will pay for accommodation with a credit card. Electronic payments in a few clicks can increase the transparency of operations for companies-customers, for clients they mean ease of use of services, and for counterparties - a decrease in operating costs.
I believe that today a full-fledged contact with both existing and potential audiences on social networks is also needed. In this vein, attractive visual content and the use of the so-called “storyteller's currency” are essential, because today the story of a brand is more important than ever to its audience.
As we know, the Baltschug Kempinski Hotel has been participating in the All-Russian Russian Hospitality Awards for two years in a row. What category is the hotel taking part in this year and why? In your opinion, what role do professional hospitality awards play in shaping the country's hotel market?
Professional awards allow you to identify the strongest, reward them for their merits and provide important incentives to competitors. The appearance on the Russian market of the RHA award can be assessed exclusively from a positive point of view, given the fact that the jury consisted of renowned experts. I have already noted that in 2016 new names appeared in the list of nominations - and I am sure that the results of the ceremony in February will be of interest and significance for the entire industry.
Hotel Baltschug Kempinski Moscow will remain faithful to traditions and will be presented in the nominations Luxury Hotel of the Year and Historic Hotel of the Year. Baltschug Island traces its history of hospitality back to the 16th century, and not only the territory where the hotel stands, but also the existing building, which is actually the same age as Kempinski and has been chronicled since the end of the 19th century, is permeated with historical dotted lines. Where luxurious rooms are located today, at the beginning of the 20th century there were studios of famous artists Kuindzhi, Kramskoy, Vasnetsov … It was they who immortalized on their canvases the famous panorama that opens from the windows of the hotel. The historical weight of Balchug is complemented by the fact that it became the first five-star international hotel in Moscow, and the page of modern Russian hospitality begins with its name.
In addition to its historic merit, the hotel is proud of the results of an extensive renovation, thanks to which our guests can now appreciate the luxurious new interiors of restaurants and bars, a multifunctional conference floor, as well as bright and spacious rooms and suites. Therefore, we believe that both nominations define the connection of time that is so important for us - Baltschug Kempinski has been and remains not only the keeper, but also one of the leading creators of the traditions of hospitality.
