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. Last Updated: 07/27/2016

Radisson to Operate New Black Sea Hotel

SOCHI, Russia -- The Radisson Hotel Corp. this week signed an agreement with Russian and Turkish investors to manage a 25-story hotel in Russia's sub-tropical Black Sea coast.

The owners of the 300-room Lazurnaya Hotel are the Russian gas producer Gazprom, the hotel association of Sochi and two Turkish companies who have helped in the $40 million completion of the site which was left half-built for almost 10 years.

Radisson won a bid last month to manage the hotel, beating competitors such as Penta and Marco Polo, and Radisson's president, John Norlander, flew to Sochi on Thursday to sign the deal.

Boris Averyanov, general manager of the Lazurnaya joint venture, said that Gazprom invested $7. 5 million and provided a credit of another $28 million with the hotel as collateral.

Turkish investors put up another $7. 5 million and the hotel association, supported by the city of Sochi, provided the land for the hotel in return for a third of the shares in the joint venture.

The Lazurnaya was first designed in 1968, but construction faltered in the early 1970s and the building remained unfinished for over a decade, Averianov said. After a failed joint venture with a U. S. firm, the Sochi city authorities attracted the Turkish constructors and investors, who began finishing the building last year.

Norlander said Radisson was attracted to Sochi as a low-cost sea resort for European tourists. Radisson will be marketing the hotel through its parent company, Carlson Companies Inc. which includes the Carlson Travel Group, Norlander said.

The hotel is the first new property to be managed by Radisson in Russia since the Radisson Slavjanskaya in Moscow opened. Radisson owns two hotels in the world but manages almost 350, mostly for local partners, Norlander said.

The company also signed a management deal with Mosintour, the Moscow city's tourism organization in November to manage its Moscow city hotels but the deal came unstuck, because the hotels are being privatized and no longer belong to Moscow city.

Norlander said that limiting its activities to management was in some ways "a handicap" but it also allowed the company to grow faster, as it is not risking any capital. However, Radisson, Gazprom and their Turkish partners, Gama and ERNA, are still taking a risk. "We have to find a new market", said Norlander. That may not be easy, as the city is within 150 kilometers of the civil war in Abkhazia.

If Moscow is a difficult place to run a hotel, it is easy compared to Sochi When the Slavjanskaya first opened, according to Frank Klare, vice president of operations Europe, Radisson bought local food. When food supplies ran out in 1991, the company flew in food from Azerbaijan. But when airplane fuel ran out, the company decided to fly in U. S. supplies. Sochi may offer a reliable supply of fruits, the rest will still need to be flown in, Klare said.