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15 May, 2008 17:00

Mid-range hotels tempt investors

Slovak investor J&T group has bought a 75 per cent stake in one of Moscow’s best situated hotels, the Balchug Kempinsky, outbidding several Russian companies. However, experts say a five-star hotel in Moscow is more a sign of prestige for investors, as th

With views over the Kremlin and a reputation for high-quality service, the Balchug Kempinsky hotel is an attractive option for both tourists and potential investors. Kempinisky got full control of the hotel two years ago when the Moscow authorities put their share in Balchug up for sale.

But the operator has moved quickly to sell a 75 per cent stake to Slovak investor J&T at a time when hotels still generate healthy profits.

Patrik Tkac, J&T Banka Chairman, says the Kempinsky is still making money.

“After a couple of years when five-star hotel sector will be saturated, we can expect that the price of the hotel as compared to the profits will be not enough, but now the Kempinsky is still bringing in money”.

Market watchers expect another four luxury hotels to appear in Moscow, but experts say this sector is no longer where the real money is to be made. Three and four-star hotels outside Moscow are likely to guarantee higher returns for investors.

Ilya Shershnev from Swiss Realty Group says there’s a great shortage of hotels in the whole country.

“Take any region of Russia – you won’t be able to find a hotel to stay. It’s an opportunity for investors to buy or to develop new three or four-star projects”.

Foreign investors have already started flocking to this profitable sector. Along with Balchug, J&T already has several projects for four-star hotels in the Moscow region and other Russian cities.

Another financial corporation, IFC, says it’s looking at buying a blocking stake in hotel operator Heliopark, which owns a chain of three and four-star hotels in central Russia.