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. Last Updated: 07/27/2016

French Firms Ready $100M Urals Hotel

French construction giant Bouygues is teaming up with Urals Mining & Metals Company, or UGMK, to build a $100 million hotel in Yekaterinburg, both companies said Wednesday.

UGMK said work should start on the five-star, 250-room hotel this spring and be ready for guests sometime in 2007. It will be Russia's first internationally branded luxury hotel outside Moscow and St. Petersburg.

The 18-story building will go up next to the headquarters of the Sverdlovsk regional government, which is enthusiastically backing the project.

The hotel will resemble a "lump of ice" because of its glass facade, according to its chief architect, Jean Pistre of the French bureau Valode & Pistre. "[It will be] not only the most beautiful building in Yekaterinburg, but in all of Russia," Pistre said in a statement.

UGMK is Russia's second-largest copper producer, controlling roughly 40 percent of the market. It posted revenues last year of 46.4 billion rubles ($1.6 billion), according to the company's web site.

Bouygues, one of the world's largest builders, with revenues of $6.1 billion last year, will serve as project developer and help UGMK secure financing from French banks, said Yury Zarubin, head of business development at Bouygues in Moscow, where the company has been active since the late 1980s.

UGMK said premium hotel operator Hyatt International will manage the property when it opens.

Andrei Abadzhidi, head of marketing at the Ararat Park Hyatt in Moscow, confirmed that negotiations were taking place, but said no management agreement had yet been signed.

The $100 million price tag stunned market players in Moscow.

"They should be able to build such a project in Yekaterinburg for half as much," said Michael O'Hare, partner at Horwath Consulting.

By comparison, the 216-room Ararat Park Hyatt, which opened three years ago, is thought to have cost about $65 million to build.

Rob Stoddard, head of hotel development at Guta Group, estimated that with an initial investment of $100 million, it would take at least 20 years for the Yekaterinburg hotel to break even -- assuming it maintains at least 50 percent occupancy and average room revenues of $300 per day.

"A difficult task in such a small market," Stoddard said, adding that the occupancy rate at the city's nicest hotel, the Atrium Palace, which is half as big as the planned Hyatt, is currently running at about 55 percent.

"I don't think Yekaterinburg is a Hyatt market. It is not even a full-service Marriott market. It is not ready for a project like that," Stoddard said.

With a population of roughly 1.2 million, Yekaterinburg is Russia's fifth-largest city, after Moscow, St. Petersburg, Novosibirsk and Nizhny Novgorod.

International hotel brands currently expanding into Yekaterinburg and other cities outside of Moscow and St. Petersburg are chiefly midlevel ones. Rezidor SAS, for example, will open its three-star Park Inn Hotel in Yekaterinburg next year. Similarly, South Africa's Protea Hotels will open its first Russian hotel, a midmarket 136-room property in Yekaterinburg, in early 2005.