Budget pod hotels come to Moscow to combat sky-high room rates

A short walk from Belorusskaya railway station, a 35-minute train ride from the airport, Moscow’s first Japanese-style capsule hotel offers travellers a night’s accommodation in the city center for as little as $85.

Leonardo Terigli, a businessman from Florence who sells gourmet food products to Italian restaurants in the Russian capital, flew to Moscow for less than 24 hours to hold a single meeting, spending a total of $350 on travel, including his flight.

For Moscow, ranked as the world’s most expensive hotel destination in a U.K. study last month, the arrival of the box- like sleeping quarters with a size of less than four square meters, is a revolution for business visitors like Terigli.

“It’s incredible,” he says as he checks out of the Sleepbox Hotel, three days after it opened for business on Jan. 29. “This kind of thing was possible in London or New York, now it’s even possible in Moscow.”

The world’s first capsule hotel opened in the Japanese city of Osaka in 1979 and the concept has spread to Europe and America, with European airport locations now followed by prime downtown spots in London and New York.

Leonid Chernikov, a 25-year-old Russian entrepreneur, got the idea for his hotel, which is located on the prestigious Tverskaya-Yamskaya Street, from a similar lodging in Amsterdam. He plans to open new branches elsewhere in Moscow and other Russian cities.

Budget Accommodation

“This business scheme without any doubt will be a success,” Chernikov says as he waits on customers at the hotel reception. “In Moscow there is a major problem with a lack of budget accommodation.”

Last year, French midscale hotel chain Mercure opened a 109-room hotel in Moscow near the Foreign Ministry and historic Old Arbat street, marking its first expansion into Russia. A standard room was only available for 290 euros a night at short notice, more than twice the 135-euro price in Mercure’s branch in the center of Paris near the Bastille.

In Moscow’s Sheremetyevo airport, the V-Express Hotel charges $250 for 24 hours for its cheapest option, a windowless room big enough to fit only a bed and a bedside table.

Many budget hotels are located far outside the city center, such as the Izmailovo Hotel Complex, which is capable of housing 10,000 guests.

Hotel Rates

Moscow hotel rates for business travellers in 2012 were the highest in the world for the ninth year running at an average of more than 261 pounds, according to a study by U.K. consultancy Hogg Robinson Group released on Jan. 31. This compares to about 221 pounds for third-placed New York and 206 pounds for Geneva, in sixth place.

“Even if Moscow is becoming more affordable, it is happening excruciatingly slowly,” says Marina Usenko, an expert on the hotel industry at Jones Lang LaSalle in Moscow. “Those hotels which have an advantageous location are able to charge premium prices well in excess of their category.”

The Russian capital, which is primarily a business destination, offers more reasonable accommodation in low season in summer and winter, argues Sergei Shpilko, head of Moscow’s tourism committee.

“As business class hotels aren’t full in summer, this means that tourists can stay there, which for them is something they could only dream of,” he says.

Ritzy $500

The five-star Ritz Carlton, which opened in 2007 a stone’s throw from the Kremlin, offers a room for as little as $500 in late July on its website, a discount of more than 50 percent from the rack rate.

The hotel, which has hosted U.S. President Barack Obama and celebrities such as Madonna, boasts a branch of the U.K. luxury spas, ESPA, and panoramic views of Red Square. It has an occupancy rate of 70 to 80 percent.

Still, for business travellers without major expense accounts, the quality of cheaper accommodation is often poor because a lot of the budget hotels were built in the 1970s and 1980s and haven’t been renovated, says Shpilko.

Of the 40,000-45,000 rooms available in Moscow in hotels ranging from two to five stars, only about a third, or 15,000 rooms, are high-quality, according to Usenko from Jones Lang LaSalle.

At the Sleepbox, which has English-speaking reception staff and a large map of the Moscow subway and a timetable of trains to the airport in the entrance hall, the design is modern with white walls, bright lighting and stylish capsules intended to remind people of space travel.

Communal Showers

The capsules have good sound isolation, powerful ventilation and small windows which can be blocked off by electric curtains. The spotlessly clean showers and toilets, which have green and red indicators to show if they are occupied, are for communal use.

Guests can opt for a cut-price option of two bunk-beds in a capsule for 2600 rubles ($85), or spend up to 4900 rubles for a more spacious room with television and two double beds. In total, the hotel plans to offer 60 rooms.

While the concept is a welcome one in Moscow, it remains a drop in the ocean with five million visitors a year.

“Business travellers need more choice,” says Usenko. “One capsule hotel won’t solve that.”

Muse highlights include Mark Beech on music and James Russell on architecture.

Editors: Mark Beech and  Farah Nayeri.

To contact the writers on the story: Henry Meyer in Moscow at [email protected]; Stepan Kravchenko in Moscow at [email protected]. To contact the editor responsible for this story: Manuela Hoelterhoff at [email protected].