REGIONAL PROFILE : RUSSIA

for owners

• Lack of domestic tourism , mainly due to low income of the average household

• The high cost of transportation , which makes it difficult for domestic tourists to visit their own country

The best advice for global developers looking at the market for opportunities ? “ Closely monitor the market , as today is probably not the right time for international developers unless they are ready to become exposed to high risk ,” Blanchard says . “ But the fundamentals for Moscow and St . Petersburg do exist , and with a probable dry period for new room stock in the next few years , the market could become extremely attractive . Mitigate risk by having local partners with solid political security and development knowledge , and select them very carefully .”

When working with a hotel operator , Blanchard says developers should ensure they go beyond just a local development presence to strong local operational support . “ Beware of operators with a high number of franchised properties , as control over franchise service delivery in Russia is very difficult and this will be reflected in the brand reputation with Russian clientele ,” he says .

Don ’ t forget to check fee structures in operator contracts , Blanchard adds , as many costs are globally fixed in dollars or euros , especially for reservations and additional fees . “ With the ruble devaluation this became , and still is , a major issue as suddenly they are a major part of the operator cost . With a few exceptions , all operators have contracts with legal base and payment outside of Russia , and this can cause additional costs to the owner ,” Blanchard says .

DEALS GETTING DONE The best opportunities in Russia right now , according to Brussels-based Younes , are conversions of independently managed hotels that require commercial support provided by bigger global brands . “ There is some activity in Moscow and a few other major cities , but it is much slower than in the past ,” he says .

Younes says limited- or select-service development has been the trend over the past few years and likely will continue for the foreseeable future , especially in secondary markets that lack branded inventory .

Younes sees potential in what Radisson has in hand with its new Chinese shareholders , currently transferring from HNA Hospitality to Shanghai ’ s Jin Jiang

In September , Mandarin Oriental Hotel Group signed a management contract for a new 67-room hotel with 137 branded residences in Moscow . The project is the first branded luxury residential development in Moscow and is expected to open in 2021 on the Sofiyskaya embankment in the heart of the city , directly facing the Kremlin . The local developer is Capital Group , one of Moscow ’ s largest development companies . Pierre-Yves Rochon Studio has been appointed as the interior designer , alongside Sergey Skuratov Architects .

Hotels / Rooms

FORECAST FOR NEW OPENINGS HOTELS ROOMS 2018 22 3,901 2019 22 4,442 2020 20 3,006

Domina Hotel Group 3 / 537 4 / 659 Hilton 22 / 3,597 28 / 4,893 Hyatt Hotels Corp . 3 / 627 3 / 778 IHG 8 / 2,827 10 / 2,332 Jumeirah International 1 / 76 1 / 76 Marriott International 10 / 1,941 12 / 2,422 Palmerston Hotels & Resorts 1 / 150 1 / 150 Radisson Hotel Group 4 / 732 2 / 564 Wyndham Worldwide 4 / 732 4 / 732 Unbranded hotels 10 / 2,006 9 / 1,901 Total 79 / 15,451 91 / 16,655

Source : Lodging Econometrics

42 hotelsmag . com December 2018