The Hotel Times - September 2008 - (Page 12)

COVER STORY: RUSSIA & THE CIS The Ritz-Carlton, Moscow, lies at the edge of Red Square and features 334 guestrooms. Owned by Capital Partners, the property debuted in 2007 and will host the upcoming Russia & CIS Hotel Investment Conference. gies of the main hotel market players, due to Russia’s stable economy and its supply. Russia, where the oil, gas and mineral businesses are booming, does not depend solely on foreign companies’ business.” “St. Petersburg is a different market,” Human said. “It is a leisure-oriented market, and it is also a big city, the fourth-largest in Europe. But it is more seasonal; it is a smaller hotel market. There has been some development, not nearly as much as Moscow. But some of the brands have managed to get a presence there.” Delaroff added: “In St. Petersburg, hotel business is healthy; a lot of hotel development takes place. Development is strong and rather quick—much quicker than in Moscow, where there’s a lot of hassles … to find a nice location, go through all the administration and the bureaucracy.” Secondary markets Human said Russia’s regional cities are very much on the list of hotel companies. “There are a lot of large, emerging cities in Russia with populations of 1 millionplus, which are fast developing and, at the moment, are very undersupplied with hotels,” he said. “The hotels that exist are of very poor quality, and owners are able to charge very high rates. And so far, we’ve seen very few international branded operators getting presence in these markets. But it is now slowly gathering momentum.” “I think that what’s holding [these cities] back is the hotel companies themselves aren’t putting money into deals; they’re just wanting to either manage or franchise. So they’re relying on local partners who are not really accustomed to doing things in the international way, and so it’s a slow process. It’s very bureaucratic getting consent and building permits in these markets. But the pace certainly is improving.” “The task is huge,” Delaroff said. Accor currently has four hotels in Russia, with five more opening in 2009. Their plans include 50 new hotels opening in five to seven years and 100 over the next 10 to 15 years. Sochi, Russia, a popular resort city on the Black Sea, recently won the bid as the location of the 2014 Winter Olympic Games, which could preclude further investment in the area. Delaroff said plenty of projects are planned for Sochi. “There’s already a lot of hotels there— three-star categories—and suddenly, there’s a lot of four-star category projects in this region. I don’t know how much will really materialize because the Olympics is a short period, two weeks, and you need to work on a 365-days-per-year [schedule],” he said. “What most likely will happen is that all these big hotels that were built during the Soviet times will have to be renovated and prepared for 2014.” Yilmaz points out that in CIS countries like Kazakhstan, other frustrations may present themselves. “One of the biggest challenges to development in Kazakhstan is that it is very cost-intensive. You have to import most of the items from outside of the country,” he said. “You have to consider transportation, custom fees, etc.” CAPTIAL PARTNERS Breaking into the market Interstate, a third-party management company, currently operates five hotels in Moscow—three full-service Marriotts and two Holiday Inns. Their sixth, the new Hilton Moscow Leningradskaya, is scheduled to open in the third quarter of 2008. Ciaffone thinks branding is important in getting a start. “Our first important link is a good relationship with the various brands. That’s very, very important to us,” he said. “People will contact us either directly or via one of the consulting firms 12 The Hotel Times September 2008 www.TheHotelTimes.com http://www.TheHotelTimes.com

Table of Contents Feed for the Digital Edition of The Hotel Times - September 2008

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

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.