Regions Checking Out of Soviet-Era Hotels

Acourtesy Of MayakThe Ramada in Yekaterinburg will have 156 rooms, a conference center, restaurants, a jazz bar and a nightclub.
The days of Russian hotels that featured surprise cold showers, burned-out light bulbs and mysterious-smelling blankets are slowly passing into the realm of funny memories.

"Right at the end of the Soviet Union, everything was still Soviet standard. There was only one model bed that was approved for use in hotels for foreigners. If you're 6-foot-2 like I am, you're missing about 4 inches of bed," said Paul Goncharoff, an American businessman who has been working in Russia since 1976. "Unless I unscrewed the baseboard of the bed, I could never stretch out."

Today, business travelers no longer have to carry around screwdrivers, ready to take apart bed frames, as the unpredictable Soviet-era hotels of Russia's regions steadily lose market share to standardized chain hotels like Radisson SAS, Hilton and Park Inn.

Following the pattern, with some significant differences, Wyndham Hotel Group International will open its first Ramada hotel in Yekaterinburg in the fourth quarter of 2008.

Currently, "there are not a lot of branded hotels in Yekaterinburg," said Christian Michel, the regional vice president of development for Wyndham. "We want to position this as a business hotel just outside the city."

Ramada, along with Park Inn, the city's only other branded hotel, looks set to make the most of the Yekaterinburg's growth.

Yekaterinburg "has been put on the international map," said Yevgeny Bezel, the senior vice president in charge of investment sales at Jones Lang LaSalle Hotels.

Known since its founding as the country's third capital and the capital of the Urals, Yekaterinburg will soon expand its transportation infrastructure, with its airport probably becoming a major air hub in the Urals, Bezel said.

To take advantage of this, leading local construction firm Mayak will build the hotel on the Novokoltsovsky Trakt outside the center on the way to the airport.

Opening its doors in December, the hotel will also be able to capitalize on the Shanghai Cooperation Organization's annual conference, which will be held in the city in the summer of 2009. A Hyatt and a Novotel are also under construction, Michel said.

The difference between other branded operations and the Ramada is that it, along with Sophos Hotels SA and Hilton, are "pushing the franchise scheme," Bezel said.

"Franchises," said Bezel, "are more advanced and easy to use and provide a financial advantage."

Otherwise, the Yekaterinburg Ramada will be just like any other corporate business hotel.

It will feature 156 rooms averaging around 25 square meters and will include larger rooms and suites. The building will also house a conference center with seating for 150 people.

Business travelers will find plenty to do off hours, too, as the hotel will have six private lakeside villas, restaurants, a jazz bar, a champagne bar, a nightclub and a spa, Michel said.

Wyndham will have 20 properties open or under development in Russia by 2012, Michel added.

"We plan on being in all the major cities of Russia. Yekaterinburg is one of the biggest cities in Russia and is one of our main development targets. With the same developer we are planning to open additional hotels in Yekaterinburg and in the Sverdlovsk region," said Michel.

The appearance of branded hotels is hardly limited to Yekaterinburg, however, as demand for higher-quality hotels spreads from Kaliningrad to Irkutsk.

These hotels "ensure certain quality," said Denis Sokolov, the head of research at Cushman & Wakefield Stiles and Riabokobylko.

Wyndham's Michel said that with a brand, local operators receive "the support of the brand, quality construction, training, quality assessment and, most importantly, an international reservation system."

Yet some problems still exist that cannot be won over by professionalism.

The difficulty with developing new hotels in regional cities is that many of the prime central locations are taken by obsolete Soviet hotels.

"In Russia I'll go for higher quality but a worse location," said Sokolov, adding that the opposite was true in Europe. "If there's a branded hotel in the regions with a reasonable price, I will obviously take it."

And this desire for quality will lead in the near future to the saturation of the hotel development market in cities with populations of a million or more, Sokolov predicted.

"The most interesting trend in the regions is that the smaller cities with populations between 1 million and 500,000 will begin to see branded hotel development because of the strong interest of retailers and local developers," Sokolov said.

"It is hard to imagine the market reaching equilibrium before 2010. That is why, during the next three or four years, demand will outstrip supply and prices will keep on rising," wrote Sergei Demyanchuk, a residential property analyst at Knight Frank.

"In Russia right now you have room for everybody. Yekaterinburg could take three or four more hotels," said Wyndham's Michel.

The mid-range and high-end business hotel scene has changed dramatically in the three decades that Paul Goncharoff has been working and traveling here.

"Back then, the towels at the hotels were so thin they weren't even worth stealing," Goncharoff laughed.