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. Last Updated: 07/27/2016

Skeptic Doubts City Hotel Dream

Pavel Seymov stands to profit if Moscow's much-ballyhooed hotel boom comes to fruition. But even he acknowledges that city authorities are looking at the sector through rose-colored glasses.

"The city of Moscow wants to develop about 100 small and medium-sized hotels. Let's say on average each costs about $5 million, that makes a total of about $500 million," said Seymov, co-organizer of this week's Moscow Hotel Business '96 exhibition.

"But I don't know where they will find the people or the money to build these hotels," Seymov said.

According to city officials, 14 of Moscow's 200 hotels have been modernized to high standards, 25 are under renovation or scheduled for a facelift, and 100 more are to be upgraded over the next five years. An expected 3 million visitors for next year's celebration of Moscow's 850th anniversary is girding efforts to improve accommodations.

However, "there aren't many good hotels in Moscow," reckoned Seymov, who stressed that the purpose of the Moscow Hotel Business exhibition '96 was to encourage hotels to improve their standards and service.

The exhibit, which started Tuesday and ends Friday, attracted some 165 companies representing 500 different types of products from bedsheets to bathroom faucets and nightclub equipment to floor cleaning materials.

Ninety percent of the participants are Russian companies, including Seymov's Rus-Service-Bureau company, a travel service provider for business executives. Among the 19 countries represented, German, Italian and French companies occupied the most kiosk space.

Seymov sees the show as useful to boost business, but thinks there's a limit to what the market can handle.

"They plan to build 100 hotels, not because they need them, but because they want to," Seymov said of the city government, adding that he thought 20 was a reasonable number of new hotels.

The problems facing the sector include high prices, low occupancy, byzantine regulation by the city and foreigners' perceptions of Russia.

"A room at the Hotel Ukraina costs about $150. That's the monthly salary of my secretary right here!" Seymov said.

Moscow hotel managers keep prices high because their salary is not contingent on occupancy levels, which are about 40 to 50 percent, he said.

"Ninety-five percent of Moscow's hotel administrators are good directors but they are not businessmen," he said. One way to increase demand would be to build "just comfortable, clean and safe hotels where the food is all right," he said. "It's not necessary to have bronze candelabrum like at the Metropol."

But with or without many visitors, the hotel industry is uninviting to investors, Seymov said. During Soviet times, "the hotel business was a big pie that belonged to all. Now everybody is fighting to get a piece of it ... and the rules of that business are now like those of the jungle."

Only 2 percent of Moscow hotel directors "are their own boss," he said, 10 percent are employed by the government and the rest is "one big kolkhoz [collective farm] where no one has a control package and where in each one of them is the Moscow city government."

"Tatum thought he had a control package and everything was normal," said Seymov, referring to American businessman Paul Tatum, a partner in the high-class Radisson-Slavjanskaya joint venture, who was killed Nov. 3 in an apparent contract assassination.

The killing may have scared off some foreigners who were planning to invest in Russian hotels, groups the Moscow government is counting on to finance reconstruction in the sector, Seymov said.