The Hotel Times - September 2008 - (Page 11)

COVER STORY: RUSSIA & THE CIS of the development is using Russian capital rather than international. “The hotel companies are having to forge relationships with local groups rather than going in with tried and trusted partners,” Human said. Henry L. Ciaffone, president of international operations and development for Interstate Hotels & Resorts, agreed that Russia is not an easy market in which to move. What’s key, Ciaffone said, is establishing confidence in the Russian hotel owners and/or developers. “There are, obviously, cultural challenges,” he said. “If you’re a developer of hotels, there are significant challenges in going through the process in order to get a project approved.” Moscow and St. Petersburg Moscow certainly has a long way to grow, as far as quality rooms. Alexis Delaroff, director of operations for Accor in Russia-CIS, explained, “In Moscow, there are fewer hotels of international standards, managed by international hotel chains, than are found around Paris’ Charles deGaulle airport.” Human agrees. “Moscow is one of the hot markets of the world at the moment. It is still massively undersupplied by quality hotels,” he said. “They have [only] 8,000 branded hotel rooms and, therefore, it is seeing very strong room rates. But most of the brands do now at least have some formal presence in Moscow. There’s been a lot of development, particularly in the luxury end of the market.” “The local developers are more eager to develop other kinds of real estate,” Delaroff said. “Plus, the land lots that have been allocated by the city for hotels most of the time have a very poor location, which will never fit normal hotel development. All this makes the development slow, plus there are other hurdles linked to the lack of electric power, sewage capacity, construction capacity—and there’s always this fiHILTON HOTELS CORP. nancial crush that is felt by Russia.” E. Murat Yilmaz, hotel business development and asset management director for Capital Partners in Kazakhstan, said 75 percent of the Moscow market depends on business travelers. “For hotel operators, it is really challenging to deal with this mixed demand—high in weekdays and very low weekend business. Due to visa regulations, a short summer season and very high room rates, leisure business did not achieve what Moscow deserves—it is a beautiful, historical, cultural city, and the heart of the CIS countries in terms of art, business and shopping.” Yilmaz said his company, which owns The Ritz-Carlton, Moscow, saw price sensitivity in foreign corporate customers after the worldwide financial crisis. “But it did not change the price strate- The Hilton Moscow Leningradskaya will open soon. Managed by Interstate Hotels & Resorts, the hotel will occupy one of the city’s famous Russian Baroque “seven sisters” skyscrapers. www.TheHotelTimes.com September 2008 The Hotel Times 11 http://www.TheHotelTimes.com

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The Hotel Times - September 2008 Business Outlook Editorial Outlook Contents In The News Transactional Facts Hurry Up and Wait Capital Outlook Development Outlook Brokerage Outlook International Litigation: Who gets sued? Insurance Outlook Economic Crisis: Stress or Opportunity for Franchisees? Franchise Outlook Ad/Edit Index In Closing

The Hotel Times - September 2008

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