Hotel to Open Under Hermitage Name

By Alla Tokareva

Vedomosti

Published: October 17, 2012 (Issue # 1731)

ALEXANDER BELENKY / SPT The site at 10 Ulitsa Pravdy, where a hotel licensed to operate under the Hermitage’s trademark will open in the near future.

The State Hermitage Museum has spawned a hotel of the same name.

The Hermitage Hotel will open at 10 Ulitsa Pravdy in the near future, according to the hotel’s website. The company has obtained the rights to the name, which belongs to the museum. The Hermitage signed a memorandum with International Baltic Investment Company (MBIK) regarding the partnership, and a corresponding contract is now being drawn up, said Larisa Korabelnikova, the museum’s press secretary, who declined further comment.

Malik Babayev, MBIK’s general director, did not disclose the terms of the deal with the museum. The Hermitage will likely enter into a license agreement with the hotel for the temporary use of its trademark whilst reserving all rights to it, said Yekaterina Smirnova, a lawyer at Kachkin and Partners. She estimated the cost of using the trademark at between 1 and 7 percent of the hotel’s annual turnover.

The site was originally due to host the first Swissotel-managed hotel in St. Petersburg, but this plan has now been postponed. The hotel chain’s former partner is currently completing the construction of The Hermitage Hotel.

Swissotel Hotel & Resorts and MBIK have decided to halt negotiations on their partnership, the hotel chain’s communications director Eva-Maria Penser told Vedomosti. She said that “Swissotel is still seeking an opportunity to open a hotel in St. Petersburg.” The company currently manages 29 premium hotels in cities including Moscow and Sochi.

MBIK and Swissotel signed a contract in the summer of 2010 regarding the management of a five-star hotel; MBIK had been carrying out reconstruction work on a former workers’ social club located at 10 Ulitsa Pravdy for this purpose. The property was purchased for $4.1 million, with overall investment in the project totaling $25 million; it will be about seven years before investors see a full recoupment of their money, Babayev said two years ago. A loan from the International Bank of Azerbaijan was attained for the project’s funding, he said. The company planned to open a hotel with 120 rooms by Jan. 1, 2011.

According to data from Interfax’s market and corporative analysis section SPARK, half of MBIK is owned by Babayev, while the other 50 percent is owned by and Stroikorporatsiya OKSMI. Babayev declined to comment Wednesday, mentioning only that “there are a lot of questions surrounding this project.” According to Penser, the respective parties could not settle on an international agreement as to the hotel’s management.

Negotiations stopped definitively about three months ago, said a hotelier familiar with the situation. He said that the main stumbling block was the investor’s inability to guarantee the standards set by Swissotel. It is difficult to adapt an already constructed building to new standards, the source told Vedomosti. Whether or not the investor will manage the hotel independently, Babayev did not say.

It will be a challenge for the developer to find a new partner: International hotel operators impose very high demands on sites they agree to service, and these demands are much easier to meet during the planning stage, said Yevgeniya Tuchkova, a senior consultant at Colliers International St. Petersburg. She said that the process of selection, planning modifications and negotiating of a new contract could take about a year. The standard fee for international operators amounts to 3.5 percent of the hotel’s yearly earnings; in the event that the projected figures are surpassed, further payment of between 7 and 12 percent will be made, said the expert.