Sochi: hotels vs private rentals

Over the past three years, Sochi has transformed into a year-round resort destination, attracting a significant amount of private investment. How successful are these investments during the winter period? Can private individuals compete with hotels, and what are apartment owners willing to do to find tenants?

Hotel Share

Today's Sochi offers a variety of hotel options for all classes of vacationers. "The average annual price for a five-star hotel starts at 12,500 rubles. The average annual price for a four-star hotel is 7,000 rubles. The average annual price for a three-star hotel is 4,500 rubles," says Vladimir Strigin, Vice President of "Gals Development", whose hotel "Swissotel Resort Sochi Kamelia" has repeatedly been recognized as one of the best in the five-star category in the city center. Other experts from JLL, "Glavstroi", and Kalinka Realty agency provide similar figures.

However, buying demand during the winter is lower compared to the summer period. To generate interest, many luxury hotels even offer various promotions (e.g. 2,700 rubles "all-inclusive" per night for two at one of the best hotels in Krasnaya Polyana). Nevertheless, the hotel occupancy rate can reach 95-100% during peak popularity periods such as New Year, February 23rd, and March 8th, and it remains at 70-80% in the mountains and up to 45% in the coastal area the rest of the time. This year, there has been even more decline due to the slight stabilization of the ruble exchange rate, the "adaptation effect" of Russians to the economic sanctions situation, and as a result, a gradual return to their favorite European resorts. "According to our data, the occupancy rate of hotels in Krasnaya Polyana does not exceed 60% on average during the winter months," notes Natalya Rosenblum, representative of Top Hotel Experts. However, hotel owners remain optimistic and have high hopes for international and government events taking place in Sochi this winter, such as the International Investment Forum, World Military Games, All-Star Match of the VTB United League, F1 events, and others. Participants in these delegations, especially foreign ones, traditionally stay in hotels rather than with private owners.

By the way, regarding foreigners. Is it worth betting on them? Experts emphasize that despite the multi-million PR and the status of an Olympic capital, the inflow of foreign tourists to Sochi is still low, with the exception of the winter period. "If foreigners visit, it is for a short-term vacation in the mountains during the winter. Their numbers are insignificant because Krasnaya Polyana is of interest to foreign guests only because of its off-piste skiing, which is extreme and practiced by only 4-5% of active skiers," says Ms. Rosenblum.

Nevertheless, the rental price in Sochi continues to rise: "Since 2014, the average price increase in Sochi based on the RevPar indicator has been 20% per year," notes Vladimir Strigin.

Ekaterina Rumyantseva, Chairman of the Board of Directors of Kalinka Group, agrees with him and provides figures for luxury real estate: "On average, according to our estimates, rental prices for top-tier mountain properties in Sochi have increased by 30-35% since 2014."

But while hotels manage to stay afloat in winter thanks to a pool of official events and a flexible pricing policy, targeted at a large customer base, how do private individuals survive?

Rental Owners are Willing to Do Anything

According to experts, private individuals need to be creative and proactive to compete with hotels. Offering additional services and amenities, such as in-room kitchens or private ski instructors, can attract more tenants. Flexible rental terms and lower prices during less popular times may also help generate interest.

Additionally, it is important for private owners to actively market their properties and create a strong online presence. They can utilize vacation rental platforms and social media to reach potential tenants. Building a positive reputation through reviews and word-of-mouth recommendations is crucial in attracting guests.

Ultimately, private individuals must adapt and stay attentive to the demands of the market to effectively compete with hotels and attract tenants during the winter season in Sochi.

At the time of writing this text, the popular Airbnb booking service offered more than 150 accommodation options in the city and in Krasnaya Polyana right on the day of inquiry. Live - don't want! The rental cost from private individuals ranged from 600 rubles to 55 thousand rubles for two people per day, already including the portal's commission: from a small studio to a luxurious villa for 10-14 people, and all options were accompanied by a set of photos showing the offered accommodation. Under the guise of a "mystery shopper," I interviewed approximately 10% of the hosts and received responses from almost all of them, and very promptly - Sochi homeowners are on a first-name basis with modern technology, always accessible, and every one of them attaches the instant booking service to their account. Among the main requirements that I had for the property owners were: a request for a discount or Airbnb commission, the ability to come with young children, a place to store ski equipment (a service that is often included for free in European apartment hotels), the ability to bring pets, and permission to smoke. The economy segment (from 1.5 thousand to 4 thousand rubles per day for two) turned out to be the most flexible in terms of conditions: almost everyone was willing to accept children and pets under the owner's personal responsibility, absolutely everyone provided some space for storing skis (balcony, spacious wardrobe), and no one had any objections to smokers. However, there were problems with discounts or booking outside the system: none of the owners agreed to these conditions. It is understandable: the profit is already small. At the same time, Airbnb instantly holds funds upon booking, thereby motivating the buyer to choose this particular host. By the way, hosts of this segment have the most reviews, which also reflects the dynamics of demand in the private rental market. Villa and luxury homeowners turned out to be the most loyal, or rather, their managers: they easily switched to negotiations from personal numbers, willingly waiving the service's commission (which could amount to 20-25 thousand rubles for a week's stay), and were ready to tolerate children, pets, and parties. It is characteristic that accommodation in this segment is rented out with resident staff - gardeners, maids, who presumably also perform the functions of local security and control. Here too, you can observe a pattern: there are far fewer buyers who rent villas (although the format can be successfully mastered by corporate trips), so the owners fight for each owner. For comparison: a double room at Stalin's dacha in Hosta, a villa with 14 bedrooms, a swimming pool, a pine grove, and a fully preserved interior, could be rented for 8.5 thousand rubles for two people per day until recently. The representatives of the comfort and business classes turned out to be the least flexible. For example, an offer in the "Versailles" residential complex - a studio with one bedroom and a view of the Marine Station for 10.5 thousand rubles for two people per day. The agency representing the owner's interests refused to accommodate children and store equipment. At the same time, the apartments can still be found on the website and are currently available for any date until the end of the month. Despite all the assurances from hosts about overbooking year-round, most apartments are still vacant and available for booking. It gives the impression that in the winter period, most homeowners in mountainous areas desperately engage in dumping and are open to compromises in an attempt to attract clients. Is it worth buying property in Sochi today as an investment and for long-term capital gain? On the one hand, the city does offer all the necessary opportunities for recreation and business year-round. On the other hand, the market oversaturation of hotel and private accommodation offers is evident. So, if you live permanently, for example, in Moscow and rely exclusively on the diligence of a local agency, it is unlikely that you will become a successful landlord in Sochi today. Dina Nazarova