MPs Plan to Evict Hostels from Apartments
But entrepreneurs don’t intend to pull up stakes yet
May 12, 2016
At its Friday session [Friday, May 13, 2016], the State Duma will consider a bill that could ban Russian hoteliers from housing hostels in apartment buildings. Galina Khovanskaya, chair of the Duma’s committee on housing and communal services, had tabled the amendment back in September 2015. According to MPs, mini hotels violate the rights of residents in adjacent apartments. If the changes take effect, it will be possible to install hotels in residential buildings only after rezoning the spaces from residential to non-residential. Mini hotels will have to be equipped with soundproofing, fire safety equipment, and security alarms. They will have to be located on the first floor and have a separate entrance.
The ban would have a catastrophic impact on hosteliers, argues Yevgeny Nasonov, chair of the committee on budget accommodations at the Moscow branch of Opora Russia and general director of Clover, a network of hostels. A study conducted by the League of Hostels in December 2015 showed that around 80% of Moscow’s mini hotels and serviced apartments are located in the city’s residential housing stock. In Petersburg, Crimea, and Krasnodar Territory, those percentages are even higher.
From 2012 to 2014, mini hotels were most often opened in residential buildings, says Roman Sabirzhanov, who owns sixteen hostels, including the Fabrika and the Croissant. But residents dissatisfied with their new neighbors then began complaining and showered the prosecutor’s office with lawsuits. Seeing the risks of doing business in residential buildings, Sabirzhanov opened his own hostels in non-residential buildings from the very beginning. It is not always more expensive, he claims. For example, Sabirzhanov has invested 3.5 million rubles [approx. 47,000 euros—TRR] in a new, 225-square-meter hostel on Chistye Prudy. 40% of the money went for rent; 40%, on repairs; and the remaining 20% on obtaining permits and undergoing classification. As of July 1, 2016, all hotels must be classified, receiving from one to five star, while hostels will receive the the no-stars category.
Even if the bill is not passed into law, hostels in residential buildings will be banned sooner or later, Sabirzhanov believes. At the moment, big cities are in the process of being purged of dubious flophouses in the run-up to the 2018 World Football Cup, and hostels have been subjected to more frequent inspections, he says. Even normal hotels might get the axe, the hotelier is convinced. Over the past five years, the number of beds in discount hotels and serviced apartments has grown twentyfold in Moscow, and the major hotel chains that have been lobbying the ban on hostels are not pleased with this redivision of the market, Sabirzhanov claims. He advises hoteliers against making hasty decisions. For the time being, he says, they should operate as they have before, recoup their investments, clean up their premises, and settle conflicts with building residents. At the same time, however, they should think about relocating if they have the means, launching a new hostel in a non-residential space, and going through classification. In the end, you can close the hostel and put the apartment up for rent, says Pavel Gorbov, executive director of Re:Sale Expert.
Launching a small hostel in Moscow runs you approximately two million rubles, estimates Nasonov. But rezoning a space as non-residential is quite expensive for small businesses. Nasonov cites the example of an entrepreneur he knows who has been attempting to build a separate entrance for a store in a residential building near Vykhino subway station. (The procedure for obtaining permissions is the same as for hostels.) He has already spent 1.5 million rubles on construction.
Translated by the Russian Reader.