The Great Mini-Hotels of St Petersburg Bubble

The last three years have seen a remarkable rise in the "Mini hotels of St Petersburg". As many of you will be aware, 2003 was the 300th Anniversary of St Petersburg's founding by Peter the Great. This visionary Czar founded the great city on the banks of the Neva as a "Window on the West".

The tercentenary was a remarkable event and it made a worldwide impact by promoting and publicizing the city. Government delegations and the great and the good congregated to celebrate right in the heart of the tourist season. This caused huge disruption to the tourist industry – a massive spike in demand for rooms in a city that has always suffered from peaks and troughs in demand. St Petersburg has always suffered from huge popularity in the "White nights" but ultra-low levels of occupancy in city hotels in the winter months.

In 2003, the major hotels were all heavily booked and many were extremely over-booked. We recall one hotel being overbooked by over 1000 rooms on one particularly awful night. Tour operators and travel agencies struggled to cope the massive demand, hotels hiked their prices, and clients had a rough time. Stories of clients being outbooked by hotels to Novgorod were common. Novgorod is a 3-hour coach ride from St Petersburg.

The result was a large number of entrepreneurial citizens buying old apartments and converting them to "mini-hotels". Mini-hotels appeared overnight like mushrooms in the autumn. Mini-hotels were soon on every street and through the city.

This is fine with strong demand, but demand in 2004, 2005 and 2006 slumped due to the hiking of prices in 2003. Mini-hotels continued to open everywhere, damaging the business of traditional hotels, but were often poorly managed and poorly run. No insurance, high fees for registering visas, 4th floor apartments without lifts (no mention of this on their websites!) And odd locations were the order of the day.

Nowadays, the good ones and the ones with sensible prices, good locations and clever management have survived and flourished. Some demand that you wear slippers indoors and operate as a home from home, some offer wireless internet connections, and some have developed into fully fledged hotels with 100 rooms and more and proper marketing and distribution channels on the web – but many more have closed, or shut up for the winter months or been sold off as luxury apartments.

A classic bubble …. one wonders if Peter The Great knew what an impact he was going to have on the hotel market in St Petersburg!