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InterContinental Hotels Group Plc plans to slow property openings in Russia as the country’s economic crisis deepens.
The owner of the Holiday Inn and Crowne Plaza brands won’t cancel current developments, but may wait before starting new ones, according to Angela Brav, the company’s chief executive officer for Europe. The Denham, England-based company has 15 hotels open in Russia with 10 more planned.
“Growth will be slower than we expected, and slower than in the rest of Europe,” Brav said on the sidelines of the International Hotel Investment Forum in Berlin. “We’ll still be signing, but hotels will be in the pipeline perhaps a bit longer.”
InterContinental, Europe’s second-largest publicly traded hotel operator, opened its first Russian Holiday Inn Express in the city of Voronezh last year, as it seeks to meet rising demand by middle-income travelers. Hotel chains including Marriott International Inc. and Hilton Worldwide Holdings Inc. plan to open 5,200 rooms in Russia in 2015, compared with 8,500 in 2014, according to data compiled by Jones Lang LaSalle Inc. Openings last year were boosted by the Winter Olympics held in Sochi.
“Russia doesn’t have great lodging experiences in the mid-market arena, and we have brands that are geared perfectly for that market,” said Brav. “The question is at what pace we’ll get back to normal.”
Buckling under collapsing oil prices and U.S. and European sanctions amid the conflict in Ukraine, Russia’s economy may contract 3 percent this year, according to a government forecast. Prime Minister Dmitry Medvedev said on Jan. 26 that companies may start cutting jobs if the economic situation doesn’t improve.
“We are seeing developers and owners reconsidering investment plans, especially as there are significant parts of hotel fit-outs that are imported,” Jones Lang wrote in a January report.
InterContinental’s fee income in Russia and its neighbors in the Commonwealth of Independent States fell by $3 million in 2014, because of economic weakness and currency devaluation, the company said in its preliminary earnings released in February. However, layoffs aren’t planned.
“I’m not going to pull the plug on our team because there’s a blip in the political environment,” said Brav. “If we pulled out every time there’s a blip in the market, we would have pulled out everywhere in the world.”
InterContinental has 710,000 rooms in almost 100 countries. Paris-based Accor SA, with 480,000 rooms, is Europe’s biggest hotelier by market value.
–With assistance from Jason Corcoran in Moscow.
This article was written by Dalia Fahmy from Bloomberg and was legally licensed through the NewsCred publisher network.