Western hotel companies are still operating in Russia, but this is a notable step for an industry that has been a holdout amid all the companies ditching their presence in the country following its invasion of Ukraine.
Major hotel companies are finally taking a stance on Russia after so many other industries suspended operations in the country after it invaded Ukraine.
Hilton and Hyatt all moved to freeze new developments and suspend investments in Russia, the companies announced Wednesday. Hilton also closed its Moscow corporate office. Accor made a similar move in recent days to suspend all planned openings as well as future developments in Russia, Skift has learned.
IHG also closed its corporate office in Moscow and suspended future investments, development activity, and openings in Russia, the company released in a statement following the initial publication of this story.
Marriott later announced following publication that it, too, would close its Moscow corporate office and pause future hotel openings, development, and investments in Russia. The company noted in a release that its hotels in Russia are owned by third parties and “we continue to evaluate the ability for these hotels to remain open.”
The move comes as the hotel industry faced scrutiny for continuing to operate in Russia after major U.S. and European companies like Airbus, Boeing, and even Starbucks and McDonald’s pulled back from Russia in recent days in light of its invasion of Ukraine. While the announcement notes the hotel companies are freezing development plans in Russia, each of these companies as well as Marriott and IHG still continue to operate hotels there.
“Our hotels have always been part of the fabric of our communities that we serve, and we take seriously our promise to positively impact the places where we live and work,” Hilton said in a release.
“We will continue to evaluate hotel operations in Russia, while complying with applicable sanctions and U.S. government directives as we hope for a resolution to this crisis,” a Hyatt spokesperson said in a statement. “Understanding that many people in Russia face challenges and uncertainty about their future as well, we are determining how best to support and care for our hotel colleagues and current guests in the country.”
“We are deeply saddened and shocked by the war in Ukraine and our thoughts continue to be with all those impacted by these horrific events. IHG has a commitment to look after the people and communities where we have a presence around the world,” IHG noted in its own statement. “We have long-term management or franchise agreements with independent third-party companies that own the hotels in Russia.”
Accor has more than 50 hotels in Russia. Marriott has 28 managed and franchised hotels in Russia, the company’s CEO Anthony Capuano said this week at a J.P. Morgan conference. Hilton has 26.
Company leaders voiced their support of Ukraine and refugees fleeing the country in recent weeks, but they have largely taken a tone of downplaying their respective presence in Russia instead of moving to vacate the country altogether.
“Those hotels represent significantly less than 1 percent of total fee volume. When we look at outbound Russian travelers, they’re meaningfully less than 1 percent of room night generation around the world,” Capuano said at the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum this week. “There’s the human side: We are very focused on the safety of our associates and the safety of our guests in those markets. But from a materiality perspective, in terms of the company’s financial performance, [it is] not particularly significant.”
Accor continues to operate in the country in support of its 3,500 employees there and primarily to offer hotels up as shelter for members of the media as well as non-governmental organizations, according to those familiar with company thinking.
Hilton plans to donate any profits from its Russian operations to humanitarian relief efforts in Ukraine. Hilton doesn’t own any of its hotels in the country, but they are still operating, even if they are a small part of the company’s overall business.
Hyatt is sending supplies to Ukrainian people and offering up hotels as refugee shelters across Europe. IHG and other brands are similarly offering up rooms to accommodate refugees and donating to various humanitarian causes assisting in Ukraine. Marriott earmarked $1 million to it’s employee relief fund to support associates impacted by the war in Ukraine and is also supporting humanitarian efforts in the region and offering up hotels to house refugees.
“We deplore the loss of life, widespread impacts to millions of innocent civilians and the humanitarian disaster in Ukraine,” Marriott said in a statement Thursday morning. “We strongly support those working towards peace and an end to the needless suffering.”
While the continued operations in Russia make the hotel industry a notable holdout amid the mass exodus of Western brands, hotel experts say there are a variety of financial and pro-West political reasons for why these companies might be staying.
McDonald’s temporarily pulling the plug on its 850 restaurants is a sharper stance, as it nixes food deliveries to the restaurants. But it is harder to hobble a hotel operation, experts say. There is a strong chance the owner of one of these Russian hotels would continue to operate with current branding and just find resources like bedding materials and food from a provider unaffiliated with their brand family.
“I appreciate this is not a great look for them, and I just expect there’s not an awful lot they can do about it,” Richard Clarke, a managing director covering global leisure and hotels at Bernstein said. “A McDonald’s that’s not a McDonald’s is nothing right? You can’t carry on operating McDonald’s because you need McDonald’s to supply you with the food. If Marriott stops providing you with the food, the hotel is still there. It would just be a token effort.”
There is even some Western political upside to maintaining at least some presence in Russia, Clarke added. InterContinental’s first location in Brazil wasn’t just by happenstance. U.S. President Franklin D. Roosevelt encouraged the chain’s founder, Juan Trippe of Pan Am, to build a chain of luxury hotels for business travelers.
“If we go all the way back as to why the first InterContinental was built, the first InterContinental was built in Brazil and partly funded by the American government because they wanted symbols of American wealth in the center of cities that they worried could convert to communism,” Clarke said. “So maybe their view is sort of saying, ‘Well, actually, there is some advantage of having a big Hyatt, a big Hilton, and a big Marriott in Moscow as this sort of symbol.”
But not everyone is buying the hotel industry’s defense that franchise agreements are why they have no choice but to maintain operations at existing hotels in Russia.
“You have termination clauses in every contract, and the strong companies always build into contracts some clauses that they can call on at anytime,” said Nicolas Graf, associate dean at New York University’s Jonathan M. Tisch Center of Hospitality. “I don’t think that’s an issue. For them, it’s about business relationships. I do believe that most of the owners and investors [of the hotels in Russia] are Russian, but some of them may also have properties elsewhere. Maybe it’s more about trying to manage these relationships as long as they can. Once they feel that there will be too much pressure, whether its brand or reputation of political pressure, then they will simply pull out like McDonald’s did.”
[UPDATE]: Following publication of this story, IHG Hotels & Resorts announced it will also suspend hotel development, investments, and openings in Russia as well as close its Moscow corporate office. Marriott made a similar announcement the morning after this story was initially published. This story has been updated.
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Photo credit: Major hotel companies severed their development pipelines in Russia Wednesday following growing sentiment they weren't taking a stand in the geopolitical crisis. Deensel / Wikimedia