Hotels venture is booked in for the long term
Sunday 07 June 1998
Richard Power, commercial director of RF Hotels, believes the near-halving in stock values and the recent shock tactic of raising interest rates to 150 per cent won't affect the long-term success of the company's projects in the Russian Federation.
"You have to look at the locations we're in, and the market we're trying to serve, which is principally in-bound travel," he said. "Our top line is not a factor of domestic demand." Income in dollars against costs in roubles affords further protection. And everyone investing in Russia, he said, would expect bumps on the way.
Sir Rocco created RF Hotels in the aftermath of the bloody battle for Forte when he was ousted by Granada. He made his first investment in Russia last year, buying a 25 per cent stake in the voting shares of St Petersburg's fabled Astoria Hotel.
Russia's hotel business has a dim reputation, with tales of Mafia intrigue culminating in the bloody execution of American businessman Paul Tatum 18 months ago. Gunned down in the Metro after leaving the Moscow Radisson, the hotel he opened with a Russian group, Mr Tatum was the victim of a turf war.
RF Hotels has avoided Mafia entanglements. Instead it has the ambitious target of creating a hotel chain in Russia and the Commonwealth of Independent States catering for business travellers. In Nizhniy Novgorod, building work on the company's first start-up hotel in the country is in full swing. The 150-room four-star City Plaza in Russia's third largest city should open in August 1999, the first of up to 15 City Plazas across the former USSR. City Plazas aim to provide a standard level of service for business travellers.
RF Hotels is looking at sites in Permas in the Urals, and is negotiating a site in Baku, Azerbaijan, where it hopes to begin building this autumn. Both cities appeal because of their local industry. Permas has a substantial industrial complex focused on metals, with several multinationals considering investment in the area. Baku, near the Caspian Sea oil reserves, has an estimated 2,500 expatriates based in the region, but that is expected to swell to 40,000 within five years. The European Bank for Reconstruction and Development is examining the potential of investing in the hotels project.
RF Hotels has a headstart over the opposition. Hilton International, owned by Ladbroke Group, is seeking to enter the Russian market and is looking for a hotel in Moscow and discussing prospects in Kiev and Baku. Novotel is looking at the region but has yet to strike any deals. There is a Marriott International in Moscow, franchised to a US operator.
RF Hotels gained control of the flagship five-star Astoria in St Petersburg after the company won a privatisation tender. It owns 49 per cent of the shares and 25 per cent of voting rights. The city hopes to tender the rest of its shares some time this year, but details have yet to be confirmed. In the meantime, RF Hotels is about to embark on a $13m (pounds 8m) refurbishment programme.
The biggest problem doing business in Russia is the lack of commercial awareness in staff, says Michael Goerdt, general manager of the Astoria. Communication between functions within companies is also poor. Progress is also hampered by the extraordinary layers of official bureaucracy which can threaten a business's existence.
But the Astoria has already begun to see improvements as new techniques are introduced. Occupancy rates are up almost 8 per cent on 1997, at 64 per cent in May with 72 per cent projected for June.
- 1 Lego breaks out of the toy box and heads for the gallery
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 5 Grandmas keep accidentally tagging themselves as Grandmaster Flash on Facebook
David Haines remembered: Death of British hostage executed by Isis lamented from the Balkans to Sudan
Jennifer Lawrence and Kate Upton nude pictures exhibition cancelled after artist concedes photos were 'stolen property'
David Haines beheading: David Cameron says Britain will hunt down Isis 'monsters' shown in video murdering aid worker
Piers Morgan attempts to save the Union by promising to go back to the US if Scotland votes 'No' to independence
Jennifer Lawrence to make public appearance after nude photo leaks as Met Gala Ball 2015 co-host
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
George Galloway on Scottish independence: The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Scottish independence: Britain faces 'constitutional crisis' at next election
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...