March 4, 2014 / 6:02 PM / 6 years ago

Big hotel groups carry on despite Russia-Ukraine crisis

* Some development deals in Ukraine scrapped

* Big chains eye region as source of growth

* IHG says no plans to change Russia/CIS strategy

BERLIN, March 4 (Reuters) - Tensions between Ukraine and Russia could delay hotel projects, and some development deals have been shelved, but the world’s biggest chains are less likely to be deterred as they seek to exploit rapid expansion in eastern Europe, experts said.

The Feb. 22 ousting of Russian-backed Ukrainian President Victor Yanukovich after months of street protests in Kiev and Russia’s subsequent actions in Crimea have led to the most serious confrontation between Moscow and the West since the end of the Cold War.

Russian President Vladimir Putin on Tuesday sought to ease East-West tension over fears of war in the former Soviet republic.

“We don’t know what’s going to happen, but it may turn a lot of investors off Russia,” said one hotel expert who declined to be named due to client relations.

Marriott, which is due to open its first hotel in Kiev in 2015, says the opening will depend on how the situation develops.

“It’s hard to say right now how that will affect the hotel’s development because it wasn’t due to open this year, it’s about whether the tension continues,” Marriott Europe head Amy McPherson told Reuters at the IHIF hotel conference in Berlin.

The chain says eastern Europe was its fastest growing market in Europe in 2013 and it has plans to open 16 hotels there by the end of 2015, including six in Russia.

Gillian Saunders, from advisory firm Grant Thornton, said larger operators could afford to absorb some losses.

“The global brands will from time to time have a location where the market fails - e.g. Egypt or Kiev - but that’s why they are global and can hedge their bets,” she said.

Still, sources at the conference told Reuters that consultancy Horwath HTL had seen three potential deals for resorts and properties in the Ukraine fall through since the beginning of the unrest.

The consultancy declined to comment on specifics but said it had been affected.

“That’s the world we live in - something blows up, but then you have countries coming in from the cold too,” John Sipling, head of law firm BLP’s Abu Dhabi office said.


InterContinental Hotels Group on Tuesday announced the signing for a Holiday Inn Express at Moscow’s Sheremetyevo airport and an InterContinental in Tbilisi, Georgia.

It plans to have 100 hotels in Russia and the Commonwealth of Independent States either open or in the pipeline by 2020 and is not intending to veer away from that aim.

“It is serious and we are taking the situation seriously, but it’s important to be measured and thoughtful. We’ve spent years putting a strategy together,” IHG’s Europe head Angela Brav said. “But that doesn’t mean we’re not flexible.”

Hilton Worldwide is due to open a Hilton in Kiev at the end of March and said it was “business as usual” thus far.

“We are keeping an eye on it but it’s part and parcel of being in the hotel business, you will have challenges like this,” Simon Vincent, Hilton EMEA head told Reuters. The group has no further hotels in the pipeline for Ukraine.

Rival upscale chain Starwood opened a Hotel Bristol in Odessa at the start of the month and has plans for an Aloft hotel and a Sheraton in Kiev by the end of 2016.

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