Government to regulate hotel prices for Olympic Games in Sochi

The Ministry for Culture, taking care of the image of Russia, tries to prevent the growth of insatiable appetites of Sochi hoteliers during the 2014 Olympics. During the Olympic Games in London and at the European Football Championship in Kiev, hotel businesses showed many signs of inadequate price policy. The authorities have already prepared a draft decree to control hotel prices.

The call-center through which people can book hotel rooms for the period from 7 to 23 of February and from 7 to 16 of March 2014 has already started working in Sochi. The single booking office unites about 500 local hotels, private houses, as well as mini-hotels.

The state plans to take control of prices for hotel services from January 1, 2013. The limits will stay in effect before July 1st, 2014.

The experience of the London Olympics seems very interesting in this connection. In an anticipation of the 2012 Olympic Games, London hoteliers raised prices on hotel rooms. In June, the average cost of an overnight stay in the capital of the UK grew by 10 percent to 226 euros. For the time of the Olympic tournament, hotel services went up by an average of 36 percent - up to 350 euros per night.

London hotels put the horse before the cart, though. At some point, it became obvious that there were plenty of free rooms in the British capital for the period of the Games. Having sensed the prospects of failure, the British Hospitality Industry made a step back. They had to lower the prices by about a quarter.

As a result, the owners of four-star hotels, who wanted 300-400 pounds per day, tempered their requests to 109-150 pounds. A two-star hotel now asks an average of 50 pounds per person per night vs. 200 pounds before the Olympics.

However, the number of hotels in Sochi is much smaller than that in London. In contrast to the British capital, in Russia people prefer to rent rooms in private houses. The private sector is quite capable of accommodating quite a bulk of sports fans. As for operators, they focused on the projects higher than three stars, which may result in their abundance on the market after the Olympics.

Today, staying in a Sochi hotel costs from 350 to 17,500 rubles a day ($11 - $564). The market is seasonal, so prices fluctuate 1.5-2 times a year. The state-proposed maximum price for a double room of "luxury" category in a five-star hotel will be limited to 13,900 rubles ($448) per day. The cheapest accommodation in a hotel should be, according to the state's idea, not more than 3,000 rubles ($96) per night. This is the limit set on a single room in a two-star hotel. The price of a standard room should be limited to 8,300 ($267) for single and 10,600 ($341) - for double accommodation.

Staying in a top category room of a four-star hotel should not be more expensive than 13,000 rubles ($419) and 5,800 ($187) for a standard room - (6,500  ($209) for double accommodation). In a three-star hotel, prices can range from 9,000 ($290) to 4,300 rubles  ($138) (5,700 ($183) for double room).

For one-star, two-star hotels and mini-hotels, the cost of the most expensive rooms should be not higher than 5,700 rubles ($183), whereas standard rooms are evaluated at 2,900 ($93) (4,600 ($148) for double accommodation).

As many as 42,000 hotel rooms will be ready to receive guests for the Olympic Games in Sochi - 27,000 of those rooms will be brand new. Twenty-six new hotel facilities are to be built by the beginning of the Olympic Games in Sochi, but it is possible that the final number will be smaller.

Thus, the largest Olympic developer, the company Rose Khutor, said in September that instead of the previously planned 1,660 rooms, the company will complete 1,359. Company officials believe that after the Olympics both Sochi and Krasnaya Polyana resort will face oversupply of hotel rooms. Therefore, the company prefers to save about $40 million on construction.

The state regulation of hotel room prices still allow hoteliers to compensate the potential losses by raising the prices on additional services.

In addition, the government intends to regulate the prices on Olympic tickets, including the tickets on the opening and closing ceremonies.

Sergei Nikolayev


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Author`s name Dmitry Sudakov