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If one a half year ago terrorism attacks in the USA have stressed the economic vulnerability of hotel markets across the world, this year’s concern for hotel business was the outcome of the US-British involvement in Irak. During the conflict, Russia has remained on the sidelines of world events. The incidents with regard to the hostage crisis last October did more harm to the image of Moscow as a safe leisure destination, the impact on Moscow hotel performance was however minor.

The January occupancy in 2003 of top segment Moscow hotels remained practically at the same level as the previous year. The recorded change was approx +0.14 points. The mid-tier hotels performed even a little better than the previous year at 52.7% in comparison to 51% in 2002. The drop in demand in Moscow city hotels between end of December and mid-January is due to the fact that during the national holidays, most hotel guests are visiting friends and relatives. The corporate segment represents 60% of total hotel demand for Moscow city hotels. The recession of business activity is reflected in the market as a whole and on performance indicators of hotel activity.

While hotels in Moscow had not suffered from panic caused by international terrorism attacks in world cities outside Russia, the market is much more sensitive to national problems. Evidence of the latter includes the Rouble crisis in 1998, or the attempted political coup in 1991. More currently, the hostage crisis may have drawn world attention for a few weeks until the intervention of Russian government security forces put an end to the crisis. Though there were many victims to the gas used in the intervention. This negative image conveyed by media reporting during hostage crisis resulted in cancelled bookings at hotels catering heavily to international leisure travellers, lesser so to corporate travellers.

If, for example, in London after September 11th attacks in USA average hotel occupancy sank in the fourth quarter by 12,1 % in comparison with the 4^th quarter average occupancy in 2002, 4 and 5 star hotels in Moscow were relatively unaffected by these global events. In fact, recorded occupancy was 11% to 15% higher than in 2001, which has still bore the impact of the 1998 financial crisis. One of the hotels most affected by the September 11^th terrorist attacks, for example, was the Le Meridien National, which disclosed to the press, that because of terrorism attacks of September 11^th, 2001, the hotel lost approx. $500.000 in pre-booked sales revenues that had been cancelled during or following the terrorist attacks.

However losses reported losses in Moscow hotels in September, 2001 were more " «virtual", since these losses were merely based on projected rather than on achieved revenues. But even these indicators were better than comparative results achieved by 4 & 5 star hotels achieved a year ago. The rouble crisis carried a serious backlash to the customary demand of top segment hotels catering to large foreign companies. The financial crisis brought a loss of confidence from foreign representative offices in Moscow and damaged local purchasing power. As a result, luxury hotels had lost their clientele and only recovered around 2001. 1999 was an austere year for most and though the economy was recovering, revived confidence was slow to follow. The hotels positioned in the mid-tier and budget category equally survived through these hard times, some better than others. Nonetheless, during this time, the demand shifted to less expensive hotels, particularly for expense-wary companies. The loss in purchasing power forced domestic companies to seek less expensive accommodation alternatives, which kindled a reorientation in demand for mid and budget category hotels.

In general, it can be concluded from our observations, that most of the negative impact on hotel performance on the macro level is caused by internal problems, which are either economical or political in nature, rather than on world events far from home.