End of Budget Travel?

Sakhalin’s Aniva lighthouse sits off the southeastern tip of Sakhalin Island. The sentinel was built by the Japanese in 1939 (they called it Naka Shiretoko Saki) but is today empty and inactive, sitting atop a possibly radioactive generator and, reportedly, a 300 kg pool of mercury. Yaroslav Shurayev

Russia cracks down on hostels

After years of threatening to ban cheap dormitory-like hostels and any other accomodation in residential buildings, Russian lawmakers have approved a measure that could cause many private individuals to stop renting out beds, driving up lodging costs for young travelers.

The bill, that at press time flew through the Federation Council (the upper legislative chamber) and on to the Kremlin, declares that no hotel services (namely, providing overnight shelter and breakfast) can be provided in residences. If a hostel or guest house is within a residential building, it must convert its premises to non-residential, meaning it must provide ground-floor access separate from the main entrance, and outfit the premises to pass fire safety, sanitation, and other inspections.

The bill, which ostensibly is in the interest of Russian apartment owners, once enacted, will outlaw such rentals starting October 1.

What will this mean for tourists to Russia? While it is difficult to say how many hostels operate under the conditions that are to be banned, industry experts say a fair share of them will need to close or relocate. This would be especially true in St. Petersburg, where 80 percent of hostels and guest houses are in residential buildings. It is a question of real estate: there are too few spaces in the city center available for developing budget-travel accommodations.

Forbes Russia looked into the economics of Russia’s hostel business and concluded the new laws could make it untenable. A large hostel that rents 500 square meters would only be able to use 300 square meters for accommodations, which amounts to a maximum 120 sleeping spots. And if they charged the current average price for a dormitory berth, 700R, they would not be able to afford the rent on 500 meters at current city center rates.

The upshot is that soon tourists who want to stay in central Moscow or St. Petersburg may only have the option of staying in expensive hotels. Or, as is often the case in Russia, hostels may simply start paying “fees” for various oversight agencies to look the other way: this would raise prices, but might allow them to keep operating in a distinctly grey area.

Some regions are already sounding the alarm. Andrei Yermak, Culture and Tourism Minister in Kaliningrad, said the law would be a “serious blow” to business, since young tourists who formerly stayed in creative hostels would simply find cheap ways to stay in people’s apartments, which means the government would lose the tax revenues they now reap from such tourist accommodations.

Best estimates are that there are over 1,500 hostels operating in Russia.