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Russia can be considered the last great frontier for international hotel operators in many respects, largely because the supply of available rooms is still catching up to growing demand. However, geopolitical events in recent months could make some hotel chains reluctant to put more beds there.

Russia’s Aug. 8 invasion of Georgia caused a ripple around the world regarding foreign relations with the former Soviet Union. Even as European Union and United Nations organizers attempt to settle the ongoing conflict, hotel sector experts believe the previous rush to build rooms could be quickly reversed.

“The Russian economy has taken a major nosedive in the last two months as a result of the Georgian incursion,” observes Patrick Ford, president of Portsmouth, NH-based Lodging Econometrics, which tracks global hotel development. Many investors are pulling their money out of the region as the conflict continues, he says.

A total of 59 hotels totaling 12,731 rooms are in the development pipeline within Russia, primarily in Moscow and St. Petersburg, but also in various other cities involved in energy production, Ford says. He points out that Russia’s diversified economic base puts it among the emerging markets making up the so-called BRIC countries including Brazil, India and China.

Yet while plans for numerous hotel projects in Russia and throughout Europe are being scaled back or canceled, largely due to the limping global economy, some hotel chains are forging ahead. British-based InterContinental Hotels Group, which pursues its own goal of 2,000 rooms in Moscow by 2010, signed agreements this past summer to build the country’s first two Staybridge Suites extended-stay hotels.

“IHG is already the biggest hotel operator in Russia and, with the strong demand for internationally branded hotels combined with a booming economy, we are confident the extended-stay concept will be warmly received,” IHG CEO Andy Cosslett said in announcing the two new properties. The 176-room Staybridge Suites St. Petersburg-Moskovskaya Vorota is set to open next spring on the same site where the city’s first Holiday Inn unlocks in November, while another 78-room Staybridge Suites will be built next to a 202-room Crowne Plaza in Nizhny Novgorod, Russia’s fourth-largest city.

IHG plans to open 16 new hotels in six Russian cities over the next few years. Earlier this year, it opened the Holiday Inn Chelyabinsk-Riverside, the sixth of that brand in Russia and only the second outside Moscow, with the first having opened in Samara.

Another new Holiday Inn with 240 rooms is expected to open in mid-2010, with others planned in Rostov and Novosibirsk. IHG also has a 575-room Crowne Plaza Moscow World Trade Center, which opened last year, and plans to open a 205-room InterContinental near the Kremlin in 2010.

Other hotel chains have mapped out long-range plans for hotel development throughout Russia, including Beverly Hills, CA-based Hilton Hotels Corp., which wants to put over 70 of its flags there over the next decade. Hilton recently made its Russian debut in August with the Hilton Moscow Leningradskaya, followed by its first Hilton Garden Inn in the city of Perm.

“Russia represents some of the greatest potential for hotel growth in the world today and we are certainly entering at a pivotal time in its economic development,” Nicola McShane, Hilton’s European communications director, tells GlobeSt.com in an e-mail. “There is an almost total absence of internationally branded property throughout the regional cities, and while some international hotel brands already have a foothold on Moscow and St. Petersburg they have been slow to make an impact elsewhere.”

As hotel occupancy has increased in Moscow throughout the current decade, so have prices per room. The average room rate has increased from $136 in 2001 to $352 last year, according to a report by Deloitte and Jones Lang LaSalle Hotels. Adds Ford, “Moscow is the most expensive place in the world for hotel rooms.”

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