Best Western Signs On to $250M Hotel Plan
By Denis Maternovsky, Staff Writer

The Moscow Times
Tuesday, April 5, 2005. Issue 3139. Page 9.

The Best Western Neptune in St. Petersburg, which opened in 1994,
is currently the chain’s only Russian outlet.

U.S. hospitality giant Best Western International has signed a
franchise agreement with a local firm that may potentially make Best
Western the country’s largest hotel chain.

The franchise agreement for Russia and the CIS was signed with the
Bonita Group, a Russian company that has extensive construction
experience in Kazakhstan, chiefly in infrastructure projects.

Bonita also operates a 14-room, five-star Albion residence hotel in
Aktyubinsk, northern Kazakhstan, which was built in 1995.

“This is where our interest in the hospitality industry originated
initially, and this is how our understanding of the business began
to form,” said Nikolai Shekhovtsov, president of the Bonita Group,
referring to the Albion.

In 2003, Bonita and Best Western signed a letter of intent to build
hotels in Russia. They are about to open their pilot project under the
agreement, a 150-room property near Sheremetyevo Airport that Bonita
is financing jointly with the Moscow city government. The hotel,
which will also feature a 3,300-square-meter Class B office center,
is scheduled for an October 2005 opening.

Shekhovtsov said the Sheremetyevo project was part of a larger plan,
in which up to $250 million will be invested into building hotels in
the next five years. Roughly 30 percent of this sum will come from
the company. The remaining 70 percent will be bank financing.

“The idea of developing a Best Western hotel near Sheremetyevo is
welcome because there are at the moment only two hotels located there,”
said Stephane Meyrat, senior consultant at the Hotel Consulting &
Development Group.

“Because of its proximity to Sheremetyevo-2 and the absence of
competition, Novotel Sheremetyevo enjoys the highest occupancy rate
in the city — between 90 and 100 percent year-round,” he added,
offering an example of the nature of the market near the airport.

In addition to the Sheremetyevo project, Bonita is negotiating the
acquisition of roughly a dozen sites for Best Western hotel development
— two more in Moscow, two in Volgograd, two in St. Petersburg and
the Leningrad region, and one each in Samara, Yekaterinburg, Vladimir
and the Tver region.

There is currently only one Best Western in the country — St.
Petersburg’s 154-room Neptune Best Western, opened in 1994. The
86-room Art Hotel near Moscow’s Sokol metro station operated under
the Best Western brand until last year, but is now nonbranded.

By comparison, there are 2,220 Best Westerns in the United States,
222 in France, 142 in Germany and 17 in Portugal.

Consisting of more than 4,100 independently owned and operated hotels
with some 310,000 rooms in 79 countries, Best Western, originally
launched as an informal referral system, is currently the world’s
largest hotel company operating under a single brand name.

Shekhovtsov said the company was interested both in building new
hotels and in refurbishing existing Soviet-era properties. “In 20
years, we would like to have 50,000 hotel rooms,” he added.

Best Westerns in Moscow and St. Petersburg will have rack rates of
$100 to $120, while regional hotels will charge significantly less,
$80 to $90 per night.

In order to spearhead its expansion, Bonita hired a “well-known German
firm” to design a hotel prototype.

“Because of its design, it can be easily adjusted for different types
of travelers,” said Damir Kaftanarov, general director of City Hotel,
a Bonita subsidiary overlooking the hotel business. “We can add a
business center, a restaurant or a bowling club depending on whether
a specific hotel is catering to businesspeople or to tourists.”

Bonita’s development activity will be concentrated on Russia, with
Best Western hotels also built in Kazakhstan and Ukraine.

The Best Western projects are one of a series of ambitious midrange
hotel expansion plans announced recently in Russia, with a severe
nationwide lack of quality accommodation being a driving force
behind them.

For example, late last year Russian Hotels, a company close to metals
conglomerate Basic Element, announced plans to invest between $200
million and $250 million into a chain of 20 to 30 midrange hotels
and office centers. They would be located chiefly in the Russian
regions and CIS capitals, such as Kiev, Tbilisi, Georgia, and Yerevan,
Armenia. The company is negotiating with South Africa’s Protea Hotels
to operate its project in Novosibirsk, scheduled for a 2007 opening.

Also in late 2004, U.S.-based Cendant Corporation, the world’s
largest lodging franchiser, signed a deal with Hermitage Hospitality
to develop 45 midlevel Days Inn hotels in Russia and 14 former Soviet
republics over the next five years.

“The Russian hotel market is such that it will welcome any foreign
hotel brand, since the brand guarantees a certain quality of service,”
said Marina Usenko, vice president at Jones Lang LaSalle Hotels. “And
the fact that such recognizable brands as Best Western are actively
looking at the market is indicative of the market becoming more
attractive.”