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The Ritz-Carlton Moscow threw open its neo-imperial doors near the Kremlin last week. The cheapest room for the summer tourist season is US$1036 ($1324) with tax.
That rate reflects how Moscow hotel openings are lagging behind room demand fuelled by soaring tourism, exports and investor interest in the world's largest energy producer.
"I can't spend more than US$200 a night, so I ended up a 15-minute bus ride beyond the southern end of a subway line," said Peter Beck, Korea director for International Crisis Group, after arriving from Seoul. "When a Russian looked at the address of my hotel, he said, 'Don't go out at night."'
Little relief is in sight for business travellers. While the number of visitors to Moscow hit 3.8 million last year, up from 300,000 in 1991, wrecking crews have demolished four Soviet-era hotels in the past five years, wiping out 5000 hotel rooms within a 10-minute walk of Red Square.
Moscow, Europe's most populous city, has 70,000 hotel rooms, little more than it had a century ago during the reign of Czar Nicholas II, according to Iosif Ordzhonikidze, deputy mayor for international relations.
To attack the shortage, the city government is reviewing projects that would more than double available hotel rooms to 180,000 by 2010, when Moscow expects 5 million visitors.
Forward Planning Projects include a US$700 million, 210-room Four Seasons next to the Kremlin, as well as hotels proposed by InterContinental Hotels Group Plc, Novotel and Sofitel, two units of France's Accor SA.
"Every three days, we are going to open a hotel," Ordzhonikidze said, adding that hotel openings will peak at 190 in 2009. "Tourists cannot stay in rooms at US$500 a night."
Hotel industry analysts are skeptical Moscow will cut red tape fast enough to spark a hotel boom.
In 2003, city officials promised to double the number of hotel rooms in Moscow to 130,000 by 2005. Instead, hotel expansion barely kept up with demolition. The Ritz-Carlton, a US$350 million project, opened three months late.
"If you compare with what they have said and what they have done, there is a big discrepancy," said Stephane Meyrat, an associate director for hospitality at Colliers International. "It takes too much time and money to get all the signatures."
For now, foreign visitors resort to planning far ahead, keeping their visits short and staying greater distances from downtown. Close to the Kremlin, hotel bills hit four figures for a single night.
"The room goes for US$700 to US$800, then they get you on the extras - US$35 a day for wireless internet, US$40 to US$50 to deliver a cheeseburger to your room," Abraham Wagner, a Los Angeles- based lawyer, said after staying at the Savoy Hotel Moscow.
The newly renovated, 67-room downtown hotel charges US$755, tax included, for its cheapest room. That drops to US$682 for the summer season, June 29 to August 19. Room service delivery of a cheeseburger sets a guest back US$22, according to the hotel.
At the Savoy Hotel in London, under different ownership, the cheapest room rate on the hotel web site is US$339, tax included. Wireless internet access is free in the lobby, and a room-service cheeseburger costs US$37.
High hotel prices reflect Russia's economic outlook. Foreign direct investment reached US$9.8 billion in the first quarter, an increase of 150 per cent from the same time last year, according to the Federal Statistics Office. Russia's economy is now about US$1 trillion, ranking it 10th in the world between Spain and Brazil.
"There is huge foreign investment coming in," said Andrew Somers, president of the American Chamber of Commerce in Russia.
"The only feedback I get is not cancellations, but shock at the room rates."
Part of the problem is the disappearance of bargain hotels in the city of 10 million people.
The Rossiya Hotel, once Europe's largest, once offered rooms for as little as US$60 a night. The Rossiya was torn down two years ago to make way for a US$1 billion complex that will include four hotels with 1200 rooms, the deputy mayor said.
Some international chains are breaking through the bureaucracy associated with getting projects off the ground.
Three Holiday Inns have opened outside of central Moscow, adding 1138 rooms.
For now, spur-of-the-moment trips to Moscow remain only for business travellers with deep pockets or sturdy walking shoes.
- BLOOMBERG
