International Brands Moving into Regional Russian Cities as Opportunities Increase | Horwath HTL Reports

Horwath HTL, the world's largest hotel consulting network, hosted a panel discussion on Investment Opportunities in Russia's '500k Club' those 37 regional cities with a population of more than 500 thousand inhabitants. The session, part of the Russia and CIS Hotel Investment Conference was led by Michael O'Hare, Managing Director of Horwath HTL Russia and Hungary and featured Petr Chitipakhovyan, President, CH Group, Mike Collini, VP Development, Turkey, Russia and Eastern Europe for Hilton Worldwide and Alexander Gendelsman, CEO, LLC, AZIMUT Hotels Company.

As Russia has 37 regional cities with over 500 thousand inhabitants, the International Brands have started aggressively implementing strategies to roll out their brands to regional Russia, joining AZIMUT a local Russian operator that has been active those markets for a similar length of time. Michael Collini said, "We have had Russia as a key strategic development market for some five years and we see tremendous opportunities in these regional markets for our Hampton by Hilton and Hilton Garden Inn brands".

For the developers, Petr Chitipakhovyan stressed how important it is to find the right local partner, "You really need to find someone in each city that understands the local market and is able to position and sell the hotel to maximum impact" he added that "First to market is a huge advantage, and in many cities it is the developer and operator who has been able to open before the others that gets the business". He went on to say that brands should not rush in and over supply markets where there were already international brands open, as the demand in these cities was too weak to sustain a wave of new bedrooms.

Michael O'Hare said, "It is clear that the success of the hotel markets in the primary destinations, Moscow and St Petersburg especially, have given banks and developers the confidence to look actively at the other cities, all 37 of them, that have a population large enough to sustain new bedrooms. The challenge for the operators is being flexible enough to adapt existing budget and economy models to allow for the local reality, especially in the lack of F&B outlets in many of these cities. Brands that accommodate that are likely to find the reward in the brand punching above its weight in performance as the quality will not have been seen before and will command a premium".