Italy's Domina Group launches hotel chain in Russia

Updated September 10, 2008

   Domina Hotels Group (DHG) launches the project on the construction of three- and four-star hotel chain for 1 000 rooms estimated at €150 million in Russia. Unlike other western operators, such as Rezidor SAS, Marriott, Hilton, the Italian company will construct hotels independently instead of taking control over them. This strategy will assist DHG in catching up the rivals: the opening of DHG’s hotels will not depend on the financial condition of Russia’ local developers that can suspend the projects because of the expensive loans.

   Italy’s Domina Hotels Group hotel chain (DHG) (owns about 20 hotels for 3 000 rooms in Europe and in the Near East) enters Russia’s market, as the company’s co-owner Ernesto Preatoni said. The Group intends to construct from scratch a hotel chain for 1 000 rooms in Russia by 2010. As Vladimir Maslov representing Ernesto Preatoni reported, by 2010, the company plans to finalize the construction of five three- and four-star hotels in Kaliningrad (170 rooms), Lipetsk (180 rooms), Novosibirsk (225 rooms), Tomsk (100 rooms), and Tyumen (171 rooms). In addition, Ernesto Preatoni’s objects own 60% in stakes of House on Moika Ltd. engaged in the construction of five-star hotel for 108 rooms located on Bolshaya Morskaya Street in St. Petersburg. The business director of Azimut Hotels Company Mikhail Feldman is aware of DHG’s plans in Russia. According to his calculations, the investments’ volume in the chain development can reach €150 million.

   Along with the development of the hotel chain, the other developer structure of the Italian businessman - Pro Kapital Grupp (since 1998 invests in the real estate of the Baltic countries) - will construct four or five shopping malls and several residential estates in the Russian cities. The overall sum Mr. Preatoni is going to invest in Russia’s real estate exceeds €2 billion.

   DHG is entering the Russian regions two or three years later as compared to other foreign chains: today, almost all world hotel operators, such as Rezidor SAS, Marriott, Intercontinental Hotels, Hyatt International Hotels & Resorts, Accor Group, Hilton, launch their projects in Russia. Thus, the western chains prefer leasing hotels or taking control over them instead of constructing from scratch, because they don’t want to divert resources from the key business.

   Unlike its rivals, DHG is targeted at the implementation of the developer projects, and the problems of the local market players with the funding give large advantages for the Italian company, as the experts and market participants mark. "Because of the expensive loans that led to the facilities’ shortage among Russia’s developers, the western chains can face the failure of realization terms or even freezing of the regional projects. The launch of DHG’s hotels depends only on the company’s financial condition", as the head of the representative office of Starwood Hotels & Resorts Worldwide in Russia and the CIS Anatoly Kondratenko explains. The price of Pro Kapital Grupp’s assets (owns DHG) exceeds €1 billion. According to the results of 2007, DHG’ profit totaled €66 million.

   Moreover, there is a certain number of small regional companies that are ready to sell parcels and projects with the 30-percent (and even more) discount because of some troubles with attracting loans, as the partner of S. A. Ricci/King Sturge Vladimir Avdeev adds.

   According to the data of Knight Frank, despite the plans of the western players, there is a heavy shortage of hotels in Russia’s cities: in Kaliningrad, 4,73 rooms fall to 1 000 men, in Yekaterinburg and Novosibirsk - 3,76 and 0,86 respectively. Thus, this index ranges from 10 to 15 rooms in the large European cities.