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. Last Updated: 07/27/2016

$30M Motel Chain Opens Its Doors

For MTIn addition to targeting private travelers, Douglas Consulting will offer special packages for trucking companies.
The country's first chain motel opened its doors on Thursday, offering motorists 85 kilometers down the Moscow-Kiev highway a bed, an en-suite bathroom and high-speed Internet -- all for roughly $80.

Whether Russian drivers are willing to fork over that amount for a room outside Naro-Fominsk should help decide the fate of the 11 Douglas Motels planned for the country's main highways by the end of 2006.

While there are several thousand unregistered hotels on Russian highways, there are currently no other motel chains.

"We're not afraid of competition because we are first on the market," said Filipp Gens, director of the project's developer Douglas Consulting. "There won't be serious competition for a long time."

Investors have put $30 million into the 11 planned motels, which, while they have not received an internationally recognized rating, will offer three-star service with four-star rooms, Gens said.

Scott Antel, a partner at DLA Piper Rudnick Gray Cary, said that the $80 figure was not unreasonable on the Russian market for that quality of room. He said, however, that getting business from enterprises in the area -- rather than just from travelers -- would be key to reaching the occupancy rates necessary to make such a project viable.

Stephane Meyrat, senior consultant at Hotel Consulting & Development Group, said a motel chain proposal he worked on in 2004 established a price of $30 to $40 as optimal for Russia.

"If you can price a room for 800 to 900 rubles per night and give people a sense of value for money, that might work," he said, describing $80 as "very high."

Meyrat gave the example of France's Formule-1, a discount chain that offers bare-bones rooms with shared bathrooms and furniture built into the walls for less than 20 euros ($24) per person.

"Since there is no competition, Douglas is trying to tap and even capture the market with high rates, though competition will quickly creep up and undermine Douglas' pricing strategy," he said.

A problem in attracting drive-in clients is that many Russians try to avoid all but essential stops on long-distance car trips, Meyrat said, citing research done for his firm's motel proposal.

Even if drivers do not take a room, Douglas Consulting plans to offer transport companies and passing motorists a range of services. Fast food and restaurant-quality Russian and European cuisine will be on the menu at each of the motels, while car repairs, gasoline and a Western-style convenience store will be available at adjacent E-Petrol service stations, also run by Douglas Consulting.

The company hopes a large part of its business will come from corporate clients -- including conferences and visiting executives -- as well as big transportation companies, said Yevgenia Poletayeva, acting general director of Douglas Motels.

The chain plans to offer major trucking companies a package including safe parking, vehicle servicing, and food and accommodation for drivers.

Olga Maslakova, head of the local logistics department at truckmaker Scania, said she was in negotiations with Douglas Consulting over such a deal.

"When a package of services is offered for transport companies, ... I think it will be interesting for everyone," she said. Douglas is planning on opening its next hotel on the Moscow-St. Petersburg highway before the end of the year.