The Radisson Royal Moscow
In a vast country like Russia , whose economy is no bigger than New York state , when the cost of capital rises , the viability of hotel projects decreases .
“ Russia has a future , but it ’ s just in a pretty hard place at the moment ,” says Darren Blanchard , a hotel real estate development professional in Eastern Europe and former vice president of development for a major global brand .
Radisson Hotel Group Executive Vice President and Chief Development Officer Elie Younes believes 2019 will provide more clarity around when dealmaking will make sense ; it ’ s difficult to draw conclusions this year when the World Cup distorted current trends . “ Next year is the year which one can start making forecasts for a recovery ,” says Younes , whose group has 36 hotels open and three under development — the biggest of all the global players in the Russian market . “ Toward the end of 2019 and early 2020 , assuming liquidity improves , we might see a positive impact on development .”
Until then , among other things , Blanchard cites several impediments to pipeline growth , with financing at the top of his list . “ The main challenge in Russia for hotel development remains the high cost of borrowing and the too-short duration of the credit offered by the banks , which is not really project financing ,” he says .
Blanchard cites the following :
• Outdated construction standards
• Tightening operational control
• Incomprehensible and fiscal legislation creating fiscal risks
IA :
A LACK OF LIQUIDITY , CURRENCY DEVALUATION AND HIGH INTEREST RATES WITH SHORT TERMS MAKES RUSSIA A LONG-TERM PLAY .
By JEFF WEINSTEIN , EDITOR IN CHIEF
THE NEAR TERM
December 2018 hotelsmag . com 41