ROME, Italy—There still is time to jump on the hotel-development bandwagon in Russia. Those who have a foot in the door recognize that there are enough opportunities to go around, according to participants in a Think Tank at the International Hotel Conference in October in Rome.
Tony Potter, CEO and managing director of Malta-based CHI Hotels & Resorts, said: “There are places in the world that will do quite well in the next few years … Financing is another thing, but if you look at supply of hotels in these big Russian cities, it’s not sufficient. Right now it’s a situation of, ‘I’ve got 1,100 rooms in Prague—poor me.’
“The St. Petersburg Corinthia (Nevskij Palace Hotel) is budgeted to be the biggest growth we’ve got this year—it will be affected by recent economic events, but I don’t think it will be hit like some of the other European cities will be,” Potter said.
Russian development has to be taken on city by city, according to the participants.
Nobody has the clout in every city, said Scott Antel, partner at DLA Piper Rus Limited in Moscow, and moderator of the session “Russia and Eastern Europe Hospitality Update.”
“Commitment of the brands has sped up,” said Michael O’Hare, managing director of Horwath HTL Hungary & Russia. “All the big groups are in there—and 95 percent of hotel groups are in the Europe side of Russia.”
But from the development side, no single partner can handle it all, he added.
Michael Collini, VP development for Northern Europe for Hilton, said that there are huge opportunities for midmarket and economy segment properties. Hilton currently is targeting key cities, he said.
Building the foundations
Building a successful relationship that results in developing a hotel in Russia takes time, according to the panelists.
Potter said Corinthia’s parent company International Hotel Investments is in talks to form a joint venture with Intourist, a Russian travel and hotel company, to develop four- and five-star Intourist properties in various Russian markets and possibly one Corinthia property in Moscow.
“We may be using the Intourist brand, or we may create a new name or may create several brands involved with that brand,” he said.
“CHI Resorts & Hotels will not manage it for them, but assist them, and it will be a subdivision. We’re looking at a complete Russian play here that will be run by Russian and European management. It’s entirely independent, which we think is best way of going about it.”
Potter cautioned: “One does have to be careful, one does need the local knowledge and one does need the local contacts before you get into these things.”
Francois Baudin, VP development, EAME for Fairmont Raffles Hotels International, said relationships for development in Russia take time and energy. The company owns, operates and manages properties under the Fairmont, Raffles and Swissôtel brands.
Raffles announced in June that it would open a Raffles Moscow in 2011 in the Kitay-Gorod district. The Swissôtel Krasnye Holmy is open in Moscow, and the Swissôtel Novosibirsk is scheduled to open next year.
“But one thing you can say in this region, when you have that relationship, the developer will start to approach you, and might have the opportunity for two or more projects in different cities,” Baudin said.
Micha Polak, senior VP and chief development officer of Amsterdam-based Park Plaza Hotels Limited, said the company is planning to develop 15 to 20 hotels in the next five years on the European side of Russia. Park Plaza has already signed with a local partner and two banks.
“The No.1 challenge is staffing,” he said.
Baudin agreed that the challenges build as projects becomes reality.
“Signing is not the challenge,” Baudin said. “It’s everything afterward.”