Industry Update
Opinion Article10 September 2007

Today's Russian Hotel Industry

While the Russian hotel industry certainly had a unique start, today it shares many of the problems with the rest of the world

By Tatiana Veller

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One can trace back the origins of the European hotel industry to the Medieval Ages. The history of hotels is intimately connected to that of the civilizations that thrived in Europe over the centuries. The Greeks developed thermal baths in villages designed for rest and relaxation. Later, the Romans built mansions to provide accommodation for travellers on government business. But the true hotel industry, as we recognise it today, has its origins in France and England dating back to the beginning of the 15th century when laws were passed requiring inns to keep a guest register.

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Russia too followed this development with its own version of hotels – “postoyaliye dvory”, which offered food and basic accommodation to travellers. In the 18th and 19th centuries, as more and more Russian Tsars started to marry European women, and thus visit Europe, the hotels that we know today started to emerge in Russia. The Bolshevik revolution however stalled this development and Russian hotels became a part of the Soviet economy, in other words: dull, rude, and cheap. The exceptions – hotels that reflected true Russian luxury, grace and hospitality such as Baltschug, Natsional, Metropol hotels in Moscow and Astoria, Angleterre and Grand Hotel Europe in St. Petersburg – were unfortunately few and far between.

Frankly, it is tempting to say that the Russian hotel industry is only about 15 years old. Shortly after the fall of the Iron Curtain in 1989 the Penta Renaissance and the Radisson Slavjanskaya opened in Moscow. This heralded a new era for Russian hotels, and indeed for the Russian economy. Russia stopped being the Terra Incognita for international hotel brands and the likes of Sheraton and Marriott were quick to catch on. Even though the Russian hotel industry had an 80 year setback due to the Soviet regime, it has rapidly started attracting international brands and the industry has bounced back quickly and more profitably than ever before. In this short period Moscow has been able to reach the #1 position on the European RevPAR charts, along with being listed as the most expensive city in the world by the Cost of Living Survey by Mercer Consulting.

So while the Russian hotel industry certainly had a unique start, today it shares many of the problems as faced by hotels in the rest of Europe; particularly when it relates to attracting, motivating, training and retaining people. Here we will talk about the hourly, or non-management employees.

The continuing growth of the hospitality industry around the world has meant a continuing demand for staff, especially for skilled employees. Russia is no exception. Kamel Chaieb, General Manager of Novotel Moscow City Centre, shares: “With the business development in the hospitality industry in Moscow, all hoteliers are facing a tough situation in finding staff. I am not even talking about trained staff. The needs are huge and I don’t think that the demand can be fulfilled by the Moscow labour market.” Thomas Noll, General Manager of Grand Hotel Europe in St.-Petersburg agrees: “It became a challenge to attract and retain non-management employees, due to the booming economy in most industries. Many new investments come into the city; all of them need employees and where better to find educated staff with foreign language knowledge than in a hotel?”

The US is dealing with a huge influx of Hispanic labour into the housekeeping, kitchen and F&B departments of hotels. In Russia, we are seeing the switch to a workforce from the “near abroad”, which is what Russians call the former USSR states – Ukraine, Belarus, Moldova, Tajikistan, Uzbekistan, Kazakhstan. They seem to be the only ones still attracted by the salaries and type of work offered.

According to Maria Bek, HR Director at Park Hyatt Ararat in Moscow, “This work is rather hard, thus the high turnover. Housekeepers, for example, are all from outside Moscow, mainly from Kalmykia, who have come to Moscow to make a quick buck. It’s impossible to attract locals into these jobs. Waiters are mainly students. Almost nobody thinks of hospitality as a career, most people are just in it for a short-term, to earn a living.”

The Russian hotel industry is suffering due to the proliferation of motivational issues, alongside the problems of attracting the right kind of workforce. This especially relates to the people that have a language barrier even with their own employers – many line level staff speak poor Russian. Forget about being able to communicate with the guests from further abroad!

Still, Russian hoteliers, as well as their US counterparts, would be happy if they could just fill all their open positions with “warm bodies”. Kamel Chaieb comments on the situation: “I guess the Moscow labour situation requires us to urgently hire staff from outside of Moscow, and eventually from other republics, I don't see any other solution. This reminds me of the [fatal lack of staff] situation we had in Europe not too long ago …” However, immigration laws in Russia don’t help this quest. Consider this: the Russian government is talking about lessening the number of work permits for the citizens of the “near abroad”. The reason given is that the quota in previous years wasn’t used up. At the same time, international hotels, which do not want to go the typical route of many Russian enterprises who hire immigrant workers “unofficially”, are struggling because of the bureaucratic difficulties of quickly obtaining work permits for their line employees.

So, what are the potential solutions to such a labour shortage in the major Russian hotel markets? Hoteliers appear to share a common belief that the way out is to educate, train and retain the talented people with the right attitude.

Maria Bek, of Park Hyatt Ararat in Moscow: “We have just recently started getting some traction on the idea of collaboration with the major Hotel Management schools. For example, recently the Agreement was signed with the Moscow Institute of Economics, Management and Law which will have a group of their students study under a special curriculum, under which they will spend half of their time in a classroom, and the other half in the practical situation at the hotel.”

Thomas Noll, of Grand Hotel Europe in St.-Petersburg, is considering an even deeper involvement: “Another good solution for our very strong seasonal pattern in St. Petersburg would be a Hotel School with the Swiss concept, meaning that in the winter time the students are full time at the school, some of the top department heads and specialists of hotels can be lecturers and in the summer, when we need every pair of hands we can get, they work in hotels and get practical experience. The educational programme should be ideally for 3 years. This way we could develop a lot more professionals for our industry.”

Educational programs, however, are a long-term commitment, and aren’t likely to yield the necessary results – a bigger labour pool for the industry to choose from – in the near future. In the interim, there are a couple of alternatives available. First would be to create a higher awareness among the general population of the hospitality industry as a potential, desirable workplace, offering flexibility and interesting career opportunities. Second would be to create a better situation for the hired immigrant workforce so that they decide to stay longer. As Thomas Noll suggests: “We are researching alternatives now, such as renting apartments and finding employees in other cities of the country where people are still hungry for a job in our industry and at the salaries we pay. This might be the way forward like it is practiced in many resorts elsewhere in the world.”

Recently, Moscow has been a consistent top performer in the European RevPAR charts. Some of that success could be contributed to the low levels of payroll. Could salary levels be the reason for the Russian hotel industry’s inability to attract qualified workforce with the right attitude? It’s quite likely that an upward revision of the line employees’ and junior management’s salary levels will open up other areas of the general labour market for picking by hotel HR departments. Paying higher salaries could also help improve poor retention rates, which hotels are notoriously famous for.


Tatiana Veller is Managing Director of HVS Executive Search – Russia. Tatiana specializes in Executive Search and compensation consulting for all facets of the Hospitality industry in the territory of Russia, CIS and the Baltics. For more information, questions and comments please contact Tatiana Veller at [email protected] or phone numbers +7 (495) 660-3653 and +7 (909) 642-0313.


HVS International is a hospitality services firm providing industry skill and knowledge worldwide. The organization and its specialists possess a wide range of expertise and offer market feasibility studies, valuations, strategic analyses, development planning, and litigation support. Additionally, HVS International supplies unique knowledge in the areas of executive search, investment banking, environmental sustainability, timeshare consulting, food and beverage operations, interior design, gaming, technology strategies, organizational assessments, operational management, strategy development, convention facilities consulting, marketing communications, property tax appeals and investment consulting. Since 1980, HVS International has provided hospitality services to more than 10,000 hotels throughout the world. Principals and associates of the firm have authored textbooks and thousands of articles regarding all aspects of the hospitality industry. Click here for more...

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