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. Last Updated: 07/27/2016

Split-Up, Sell-Off in Works for Rossia

The Rossia, Russia's largest hotel once known for its elite clientele but now more for its seediness, will be split up and sold off -- possibly to foreign interests -- as part of a $250 million modernization effort, city officials said.

Terms and the timetable for planned separate tenders remain unclear, but officials said the 3,080-room Soviet-style giant just across from the Kremlin would be shut down in phases rather than closed entirely for renovation.

"The Rossia will be offered for sale in parts," said a representative of the Moscow city government's privatization department, who asked not to be named. "The idea is to create three separate hotels under different, possibly foreign management."

Tenders for different parts of the hotel -- consisting of four wings linked to a central complex -- will be held separately, and the hotel will never be closed down completely, the city privatization official said. "The central 25-floor building plus the northern wing will have to go first," he said.

The winner of the first tender will have to invest about $60 million, and the reconstruction of the northern wing should be finished in 18 months, Anatoly Romanovsky, chief of the Moscow International Tender Center, told Interfax. A total of $200 million to $250 million is needed for renovations, the agency said.

The Moscow government, which currently owns the hotel, will retain at least a 50 percent interest in the venture, said Romanovsky, whose quasi-governmental privatization agency will supervise the selloff.

Hotel officials refused to comment on the proposed sale Wednesday. "We are moving our offices," one Rossia manager said.

The Rossia, built in the late 1960s, used to accommodate mostly government and Communist Party officials on business trips to Moscow. It houses one of Russia's famous Rossia concert halls, several restaurants, a nightclub and two movie theaters.

Lately, however, the hotel has lost its prestige, becoming home to large populations of mice and cockroaches, and has a reputation for a dubious clientele. In 1994 it was closed for two months by city sanitation officials.

Lars Gudbergsen, a manager with Arthur Andersen in Moscow who follows the hotel industry, said the plan to sell off the hotel in separate tenders was "a good idea," since it would be difficult to find one investor for the whole building and costs could rise significantly by the time the project is completed.

"The hotel business here in Moscow has been one of the most profitable in the world in the last three years," Gudbergsen said. "So the interest is definitely there."

The Moscow government first announced plans to renovate the Rossia in the fall of 1994, but little has happened since."The plan at that time was to make the Rossia into a three-star, a four-star and a five-star hotel," said Gudbergsen. "It looks like they are giving up on that now."

Moscow needs more three-star hotel rooms most, Gudbergsen said, because hotel prices are even higher than in Europe and many of the Russian hotels have finally reached the European level of services. "Rossia has big potential to be a good three-star hotel," he said.

Room rates currently range from $54 to $74 for foreigners and from 115,00 to 210,000 rubles ($25 to $45) for Russians.

There are currently more than 300 hotels in Moscow, most owned by state agencies and the city government. Only a few are under foreign management.