REGIONAL PROFILE : RUSSIA
International Holdings . “ This could have a transformational impact , as our new shareholder seems to have one of the world ’ s largest loyalty programs , 80 % of which are Chinese ,” Younes says . “ So assuming an increase in Chinese tourists to Russia ( which reached a record 1.5 million in 2017 ) that could have significant impact on trading and demand , and eventually new development as Radisson will be more compelling to investors . If we can leverage the loyalty program , we can generate a lot of business in Russia and gain the attention of investors .”
The other global giant with a strong presence in Russia is third-party manager Interstate Hotels & Resorts , which is developing a fifth hotel in Sochi , a Courtyard by Marriott , according to Leslie Ng , chief investment officer . The destination is becoming more of a domestic resort destination for Russians who are more often vacationing locally due to the currency devaluation .
Interstate is developing another Marriott and a Hilton in Russia . Despite the headwinds , Ng says brands recognize Russia is still an important market — and one where the brands historically have not been that well-represented .
In fact , in recent years hotel operators have increased their resources in Russia — both for development and operational support , according to Blanchard . “ This has increased the competitive environment for management contracts and franchises and invariably driven down commercial terms , lowered fees , stimulated the application of key money and other giveaways ,” he says . “ It ’ s making the development environment for operators tougher .”
At the end of the day , Ng believes that despite myriad issues in Russia , the hotel story there remains fairly steady . “ We ’ re forecasting modest growth over the next couple years and I would say that the hotels that we ’ re building are probably taking business away from the older properties .”
ADVANTAGE ,
By CHLOE RILEY , ASSOCIATE EDITOR
Moscow-based owner-operator Azimut Hotels owns 16 properties in Russia and manages another 12 . Owned by Alexander Klyachin , who has the historic Metropol Hotel Moscow as part of his portfolio , the group today is focusing on securing more management contracts and franchises . HOTELS spoke with CEO Walter Neumann about the country ’ s challenges and opportunities .
HOTELS : What are the biggest opportunities for growth in Russia ? Walter Neumann : We are not only growing in the big cities , but in smaller cities like Yakutsk or Mirny because simply these are very important industrial destinations . There is also still a lot of opportunity in conversion and in certain B & C markets because , for example , Moscow is rather occupied . We will focus more on former CIS countries — Georgia , Armenia , Azerbaijan .
H : What are the biggest challenges right now ?
WN : The business is not bad . After the sanctions started , though , we have lost a lot of European and American business . But on
Azimut Hotels CEO
Walter Neumann
local
the other hand , it was all replaced by business from China , Iran and India , for example . Of our hotels in Moscow , there ’ s still one with a yearly occupancy over 80 %. So that business has been fully replaced .
H : You previously worked in Berlin and Dusseldorf . Tell us about your life running Azimut .
WN : In the ’ 90s , I was here for five and a half years and opened the Grand Hotel Europe . I still have my family ties here because my wife is Russian , my kids are half Russian and half German . So I was always in love with this country . If you know the culture , the language , the people , you know that to achieve certain things you have to use the local ways .
H : What advantage does Azimut have over global brands trying to grow in Russia ?
WN : We are close to our owners . We have standards and a clear vision , but we have as well flexibilities in our fees structure . Also , owners don ’ t have to pay fees in currencies because our fees are in rubles , which is a big advantage . And our people speak Russian and know the local culture .
44 hotelsmag . com December 2018