October 21, 2011 / 10:11 AM / 6 years ago

Rezidor Hotel Group doubling Russia presence

MOSCOW, Oct 21 (Reuters) - Russia's largest international hotel group is pursuing an aggressive growth plan in the country, betting on the prospect of higher returns than in more industrial markets as the global economic outlook darkens.

Rezidor Hotel Group , the owner of the Radisson and Park Inn brands outside the United States, is in the process of building or developing 19 new hotels in Russia -- more than doubling its portfolio to 37 and its overall number of rooms by 40 percent to 9,300.

"Russia is one of the biggest priorities just now. That is where there is genuine demand," chief executive Kurt Ritter told Reuters.

"It requires a little more courage, because every project is a learning curve. But once the hotels are up and standing the returns are much better than in more industrial countries," he said.

The average time it takes to develop a hotel is around two years longer than in more developed markets.

Moscow is the world's most expensive city to stay in with an average room rate of 261 pounds ($409) per night, according to British travel company Hogg Robinson . Ritter said that could be explained simply by a lack of options and a shortage of quality rooms in Moscow during the week.

"Business goes down at the weekend but we are very busy midweek. Prices are high, but it is supply and demand that causes it," he said.

Rezidor first entered Russia in 1991 with the opening of Moscow's Radisson Slavyanskaya and last year completed a three year renovation of the Hotel Ukraina, one of the giant Stalin-era 'Seven Sisters' buildings, now rebranded as the Radisson Royal.

Having brought the Radisson and Park Inn brands to Russia, Rezidor now plans to open a Missoni, a boutique hotel named after the Italian fashion house but is struggling to find a location.

BUREAUCRACY, FINANCING

Ritter said the group's long experience in Russia had kept it ahead of rivals such as Intercontinental Hotels Group in terms of scale and made it easier to find local partners and investors who ultimately own the properties -- both in Moscow and regional cities.

The Radisson Royal is owned by the billionaires Zarakh Iliev and God Nisanov, for example, while Rezidor manages the property, which has around 550 rooms.

Arild Hovland, Rezidor's Russia-based head of business development, said bureaucracy and problems arranging financing were issues that regularly beset Russian projects, which can take up to half a decade to complete.

"You can have a scenario (elsewhere) when the design will take typically a year and the building takes two years. For Moscow, that is a bit of a dream. Here it will take about five years," he said.

HALLELUJAH

Rezidor, which is listed in Stockholm and 51 percent owned by the US Radisson owner Carlson, posted a 3 percent rise in like-for-like revPAR (revenue per available room) in the second quarter, down from 6.5 percent in the first period.

The group's performance was hit by the political unrest during the 'Arab Spring', which affected the its hotels across North Africa and the Middle East.

Ritter said the global economic situation -- dogged by concerns over the US economy and the financial health of the euro zone -- made it impossible to predict the future health of the industry.

"How does tomorrow look? I don't know. I would expect the market to do better in Q3 than in H1, but it's nothing to sing 'hallelujah' about. With September having been not a bad month we will probably see better results in the market," he said.

Rezidor will report third quarter results on October 28.

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