5-Star Hotels Come to Yekaterinburg

Itar-TassMore high-end hotels are being built in Yekaterinburg, but will they find occupants as the economy continues to slow?
Yekaterinburg is seeing a mini-boom in the construction of high-end hotels, with projects from several international hospitality chains already nearing completion. But as the financial crisis takes a toll on corporate budgets, experts question whether cheaper accommodations wouldn't be a better idea.

In 2007, more than 675,000 foreigners visited Yekaterinburg, according to statistics provided by the city's public relations department. This year, the figure is expected to grow to 800,000.

The city government expects the number of foreign visitors to grow further -- up to an estimated 1.5 million in 2015.

Up to 90 percent of visitors arrive in the city on business, said Irina Maksimova, a senior analyst at Jones Lang LaSalle Hotels.

Of the city's 46 hotels, only one -- the Atrium Palace Hotel -- is a five-star hotel, while most of the others are three-star and below, said Tatyana Gushchina, a member of the city's Social Services Committee.

By the end of 2008, however, another 690 rooms are expected to be added, the majority of them in three new five-star hotels that are currently under construction -- the Hyatt Regency Yekaterinburg, the Ramada Hotel and the Onegin Plaza.

Most of the other hotels planned to open in the city are of the four-star variety, said Maximova. One such hotel is the 200-plus-room Angelo Hotel, which is slated to open in May 2009 near Koltsovo International Airport and is to be operated by the Vienna International management company. The city government has also discussed plans to attract the Hilton, Radisson and Marriott hotel chains to the city.

Experts warned, however, that the large number of four- and five-star hotels might swamp the market with expensive rooms.

"Developers are working in the four-star segment because these projects can be sold for a higher price," said Maksimova. "Nobody is giving much thought to how successfully the hotels will function in the future."

The demand for higher-end accommodations in Yekaterinburg doesn't exceed 500 rooms, said Mikhail Khaikin, development director of Alur, a real estate investment company active in the region.

The city could, however, use another 1,000 three-star rooms, he said.

"They would definitely be a more attractive option for investors," Khaikin said.

Dmitry Zemerov, corporate consulting director of Unicom Partners, an investment company currently building a three-star hotel near the city center, agrees.

"Visiting foreigners don't have enough quality, yet fairly priced, options available," he said. "That's why we plan to work in this niche."

Not all visitors to Yekaterinburg are looking to stay in a Hilton or Marriott, or even in a three-star hotel.

Gushchina, from the city's Social Services Committee, said that visiting Russian business travelers have shown interest in budget accommodations. While the cost of a night in a four-star room in Yekaterinburg can start at 4500 rubles ($164) and a three-star hotel costs around 4000 rubles per night, many Russian business travelers are choosing to forego hotels altogether to rent short-term apartments, she said.

"During crisis conditions, companies prefer to rent a 2500 ruble-per-night apartment for their employees, rather than pay for a hotel," she said.