Hotels Facing Fine for Price Fixing Named

By Yelena Dombrova and Yulia Shmidt

Vedomosti

Published: February 13, 2009 (Issue # 1448)

Alexander Belenky / The St. Petersburg Times The Radisson SAS on Nevsky Prospekt is one of 11 local hotels facing a fine for putting up prices during the Economic Forum.

The regional division of the Federal Antimonopoly Service (FAS) has named the hotels facing fines for increasing their prices during the St. Petersburg International Economic Forum.

The FAS has ruled that the law which forbids companies to conspire or act to limit competition was violated in June by 11 local hotels: the Grand Hotel Europe, Taleon Imperial Hotel, Topaz Hotel, Hotel Kempinski Moika 22, Corinthia Nevskij Palace Hotel, Radisson SAS, Novotel St. Petersburg Center, Park Inn Pribaltiiskaya, Park Inn Pulkovskaya, Ambassador and Marco Polo.

They will receive written notification informing them that it is against the law to conspire and act to fix or artificially hold prices during state and city events, according to the FAS’ web site.

The St. Petersburg Economic Forum, which was held from June 6 to 8, 2008, attracted about 10,000 guests. From June 4 to 10, the hotels increased their room rates by 80 to 100 percent, said Oleg Kolomiichenko, head of the St. Petersburg division of the FAS. The Grand Hotel Europe increased its prices by several times. Forum participants told Vedomosti that from June 5 to 9, the hotel charged 220,000 rubles ($6,330) for a junior suite, and 380,000 rubles ($10,940) for a presidential suite. The Park Inn Pribaltiiskaya doubled its prices during the forum, a hotel source reported.

The investigation was begun at the request of St. Petersburg Governor Valentina Matviyenko, and an administrative case was opened to investigate whether the law had been broken, said Kolomiichenko.

He said that the FAS would reach a decision on the violation of the law preventing competition within 10 days. The next stage is an administrative procedure regarding the violation of article 14.32 of the Administrative Violations Code, during which the commission will determine the size of the fine. For legal entities, the article stipulates fines of one percent to 15 percent of the revenue made from the good or service for which the law was violated.

Kolomiichenko said that a fine would be issued in any event. “The hotels will have to provide us with information about their prices for this June, when the Petersburg Economic Forum will be held,” he said. “If their prices correspond to those of the season, then the size of the fine will be lower.”

In accordance with market practices all over the world, during periods of increased demand, hotel prices increase, said Yulia Pashkovskaya, a manager at the Grand Hotel Europe. She said that despite the increase in room rates, the hotel had an occupancy rate of 100 percent on June 6 and 7. Those who reserved a room in advance were able to do so at a lower rate, she added.

Increasing prices during high season and during events is a standard practice used by hotels all around the world, said Irina Lim, deputy director of West Bridge Hotel, which owns Novotel St. Petersburg.

Natalia Belik, PR director at the Corinthia Nevskij Palace hotel and Sandra Dimitrovich, director of corporate communications and PR at the Rezidor Hotel Group which manages the Park Inn hotels and the Radisson, did not wish to comment on the situation before receiving the official document from the FAS. Representatives of the Ambassador, Topaz, Marco Polo, Kempinski Moika 22 and Taleon Imperial declined to comment.

Pashkovskaya denied that the price increases were the result of a conspiracy. Dariush Futoma, head of sales and marketing at the Park Inn Pribaltiiskaya, also said that there had been no premeditated plan to increase prices at Park Inn hotels in St. Petersburg during the forum. The prices quoted to organizers were in keeping with the season and the hotel’s occupancy rate, he said.

In peak season, the price of a room can grow by 50 to 100 percent, said Alexei Musakin, a member of the council of the Russian Hospitality Association. It would be difficult to prove that there had been a conspiracy, he added, but the FAS initiative is bound to have an effect on hotel pricing policies.

The FAS decision is contentious, since it rests on the organization’s own conclusion, and there is little legal evidence, said Yegor Noskov, managing partner at Duvernois Legal law firm. According to him, the hotels have a high chance of appealing the verdict in an arbitration court.