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. Last Updated: 07/27/2016

Big-Name Hospitality Expanding To Regions

Itar-TassRadisson Hotel in Sochi, operated by Rezidor, is the among the first in the expansion plan in the regions, with more slated to open in the near future.
International hotel chains are increasingly beating a path to far-flung cities around the country in a bid to meet increasing demand for rooms outside Moscow and St. Petersburg.

From Kaliningrad to Irkutsk, world famous brands, such as Radisson SAS, Holiday Inn, Hilton and Park Inn, are set to launch in these previously untapped markets, as they try to make business and leisure travel inside the country more convenient.

Traditionally lagging several years behind Moscow on the development curve, the regions are now making tentative catch-up steps as the country's economic boom moves beyond the capital.

Rezidor, the largest foreign hotel operator in the country, entered the market 15 years ago. After heading to Moscow first, the firm expanded to the Black Sea resort of Sochi, then on to St. Petersburg and last year to Yekaterinburg.

Now the company is set to open a succession of venues around the regions. The firm will be opening high-end Radisson hotels in Tyumen, Rostov-on-Don and Kaliningrad and midrange Park Inn hotels in Voronezh, Ryazan and Irkutsk.

"Some cities are more suited for high-end hotels and some for midrange hotels," said Rezidor regional business development director Avril Hovland.

Except for Irkutsk, the hotels are principally targeted at business travelers, Hovland said.

As for the split between guests, the regional hotels will look to scoop up the growing domestic demand, but some existing hotels have shown surprisingly high figures for foreign guests.

"In Yekaterinburg we see a split of around 60 percent Russian and 40 percent foreign. This was higher than we expected," Hovland said.

Unusually, about 40 percent of the revenues from the regional hotels will come from conferences and additional services they offer, Hovland said. In general, regional towns suffer a severe shortage in such facilities.

The company is even looking at installing Paulaner brewery bars in its regional hotels, after the impressive success of a similar project in Moscow.

Proving its increasing commitment to the Russian market, Rezidor, which, instead of franchising, manages the hotels it opens in the country, has recently become the only hotel operator to open a fully dedicated branch office in Moscow.

One major problem is finding and training enough staff in regional cities, Hovland said.

Despite the company's determination to see Russian managers installed eventually, general managers for the new hotels around the country are still being hired from Europe.

Although Rezidor may have stolen a march on its competitors in the regions, it is not the only major international company branching out, and it is expecting a sharp increase in competition.

In September, InterContinental Hotel Group opened its first regional hotel in Samara, and over the summer the firm announced plans for a 200-room Holiday Inn hotel in the central Siberian city of Novosibirsk.

Penciled in to open in late 2009, the hotel will be aimed primarily at business travelers visiting the country's third-largest city.

Samara and Novosibirsk "are two key Russian cities of importance to InterContinental because of their population size, in most cases international air connections, and vibrant economies," said Michael Cooper, vice president for strategic development in Russia and Ukraine at InterContinental Hotels Group.

"We also will open Holiday Inn in Chelyabinsk in early 2008," Cooper said.

Unlike Rezidor, however, InterContinental does not manage the individual hotels around the country.

"InterContinental has expanded in Russian regions in partnership with local companies who have chosen to invest in InterContinental-branded hotels under our franchise or management flag," Cooper said. "Over the next five to 10 years, we plan to see InterContinental-branded hotels broadly spread among all of the major cities in Russia."

These ambitious expansion plans are being mirrored by Hilton.

The parvenu hotel giants are keen to engage in large-scale nationwide expansion in the coming years and have ambitiously pledged to build 50 hotels.

Last week, the Hilton group announced plans to redevelop a hotel in Perm. The midrange, 104-room Hilton Garden Inn Perm will open in late 2008.

And Hilton's move into the regions comes before the international chain has even opened its first hotel in Moscow. The Hilton Moscow on Leningradskoye Shosse is slated to open in March.

Consultants have long heralded the opportunities for potential commercial investors outside Moscow.

"Russia's growing business and leisure tourism market on one hand, and lack of international standard hotels on the other hand, create ample opportunities for major international hotel operating companies," said Yevgeny Bezel, senior vice president of Jones Lang LaSalle Hotels. "The country's growing economy and eleven time zones are big enough to support any ambition."

And the impact that the opening of an internationally recognized hotel chain has is a big positive, Bezel said.

"Every Russian city wants to have a developed infrastructure, including modern hotels which meet the requirements of today's business and leisure travelers," he said.