Michael Schlueter, GM / Sheraton Palace, Moscow

The inflow of visitors suffered a considerable decline after the August 1998 crisis, which negatively affected the hotel business in Russia. What positive developments and trends took place between 1998 and 2001?

The occupancy level has climbed up since 1998 and is almost back to the pre-crisis level.

What has the hotel's average occupancy been so far in 2002?

January — 50 percent, February — 75 percent.

What is your marketing strategy?

Our marketing strategy includes higher volume at lower rates. Excellent service is one of the best criteria. We aim to give a customer the feeling of being home away from home.

What's the structure of your client base in terms of nationality?

Mostly our clients are from the United States, Russia, Japan, the United Kingdom and Germany.

The Zolotoye Koltso program calls for investing $2.4 billion into building 17 new hotels in Moscow's center. Don't you think that after the program is fulfilled, this segment of the market may become inflated?

No. Looking at similar-sized cities, you will find all international hotels represented and competition keeps the quality up. With the positive impact of [President Vladimir] Putin's leadership of the country, we can expect more and more business and investors coming to Russia and Moscow.

What were your financial results in the last two years?

Financial results, specifically revenues, are very much down since the 1998 crisis as the average rate is far behind where it was used to be, coupled with a tremendous amount of restaurant openings in the city.

What trends do you foresee for your hotel and Russia's hotel business in general for the rest of this year and through 2004?

Taken the current stability for granted, occupancy will be at more than 70 percent; however, the market will remain price-sensitive.

Yury Matkov, GM / Metropol Hotel

How has Russia's political and economic situation of the past few years affected the country's hotel business?

The hotel business is directly connected to the situation in the country, and political instability often has a terrible impact on the inflow of tourists. After the August 1998 crisis, many foreign companies suspended or even shut down their businesses in Russia, which led to a dramatic reduction in the number of both visiting foreign businessmen and tourists. Since 2001, we've observed a trend of increasement in the inflow of foreign visitors, which is a direct result of Russia's political and economic stabilization.

What was the Metropol's occupancy rate like this year and last?

There are two periods of low business activity: one in winter, from the second half of December until late February, and one in summer, in July and August. These periods represent popular vacation seasons. These seasonal fluctuations are reflected in hotel occupancy; in Moscow, the year's average hotel occupancy varies between 40 percent and 70 percent of rated capacity. Metropol operates within these limits. Last year's main difference from the two preceding years was increased occupancy in summer, particularly due to tour groups. Occupancy in January and February of this year was 8.5 percent higher than last year's average.

How much time does it take a four- or five-star hotel in Moscow to become profitable?

This depends on many factors, specifically who the hotel's co-owners are, in what amount and on what conditions investments have been made and/or credits have been taken and the hotel's marketing strategy.

What is your own marketing strategy? Which methods of competition exist in Russia's hotel industry, apart from price wars, and what do you consider permissible in competition?

Unfortunately, dumping was the main method practiced by many hotels immediately after the August 1998 crisis. But we did not yield to the panic. On the one hand, this caused us to lose some clients and our occupancy suffered a reduction, but, on the other hand, we managed to maintain both the prices and the quality of service – which are only characteristic of five-star hotels. This approach represents our main instrument of competition. The best confirmation of success in our efforts in the field of quality is the "Golden Star for Quality" international prize awarded to us in Geneva in August 2001 by the International Committee of Business Initiative Directions. Metropol was the first among Russian hotels to get the award.

What is your client base like in terms of nationality? Is it mostly Western, or do you work with a more mixed clientele to ?

They are Americans, British, Canadians, French, Japanese, Germans, Italians, Spanish, Irish, Swiss and other nationals, and also our compatriots and guests from the other C.I.S. countries. It is interesting to note that in 2001 we acquired new friends and patrons of our hotel among Chileans, Uruguayans and Bolivians. Besides, the number of tourists and visiting businessmen from China and Korea has also increased.

How do you see the future of Moscow's hotel business? Do you think that the Zolotoye Koltso program might actually have a negative effect by inflating the market?

Taking into account the existence of very strong business interests in Russia in the world, building hotels in Moscow has been and will be a profitable business. Another question is which hotels (in terms of stars and quality level) we should build in Moscow, not only in the city center. In my opinion, there are enough five-star hotels in the center of Moscow, all the more so since most of them have still not regained pre-crisis levels of occupancy. At the same time, the number of three-star hotels with a high, Western quality level is insufficient.

Who are your partners and promoters, and how successful have you been in the post-crisis period?

Our partners are leading travel companies agencies, including Intourist, Akademservis and many others. Our Western partners include American Express, ABTA, Amadeus, The Register, UTELL and Cahners Travel Group. Also, our partners are our great promoters. The best evidence of our financial success was the "Crystal Vessel" award we received in December 2001 in the category of "Best Hotel in Terms of Stability of Financial Contribution to the City Budget in 1999-2001."

How do you envisage the future of the hotel business? How do you see the Metropol's prospects for the next few years?

Most favorable! And we wish the same to all our partners who work in the hotel business.

Yuri Podkopayev, GM / Le Royal Meridien National Hotel

How has Russia's hotel business recovered from the 1998 ruble crisis and the resulting loss of foreign businesses and visitors? What positive trends have you seen take place in the sector from 1998 until now?

This period witnessed a restoration of business activity in Russia, including contacts with foreign companies. The country has recovered from the crisis and entered a new stage of development, and this has found a reflection in the hotel business. Political and economic disturbances affect the inflow of visitors, especially as our target groups include big businessmen, representatives of political and economic organizations and official delegations.

What was the National's average occupancy in 2001 and in this year?

Sixty-five percent in 2001 and 62 percent during January and February of this year.

How long does it usually take for a high-end hotel in Moscow to start turning a profit?

Without force majeure factors and with good and efficient management (proper choice of target groups, effective promotion and PR), four to six months will be enough.

Which methods of competition exist in Russia's hotel industry, apart from price wars? Do any hotels practice such method of client attraction as improved quality of service? What do you consider permissible in competition and what is your marketing strategy?

Dumping is not a method of competition, not on Moscow's market of hotel services. Precisely through increasing the number of services and improving their quality, in combination with a wise pricing and marketing policy it is possible for a hotel to attract more clients.

What's the breakdown of your clientele by nationality?

Nationality breakdown is approximately as follows: U.S. citizens (20 percent), British (10 percent), Germans (10 percent), French (10 percent), Russians (10 percent) and other nationals - 40 percent.

What do you think of the proposed "Zolotoye Koltso" program? How many hotels does Moscow need? Is it possible that after the program is fulfilled this segment of the market may become inflated, causing more trouble for the sector?

No, this will not happen if the sector is developed properly, i.e. through filling the niche of high quality three-star hotels.

Who are your partners and promoters? What were your financial results in the last two years?

Since 1995 the National Hotel has been an associate member of the Forte & Le Meridien international chain of hotels. Some time later, a sub-group called Le Royal Meridien Hotels was set up, and National was included there in 1998. In the conditions of tough competition on Moscow's hotel market, National has proven its high potential and quality management. Since 2000, National has been operated under a new brand name – Le Royal Meridien National – hence our logo and advertising concepts have been changed. National is promoting a new corporate image, which was created in 2000 for the Le Meridien member companies. Also, our hotel is a full member of the Leading Hotels of the World association. Le Meridien provides for 11 percent of our workload.