Although the hospitality business in the Urals region is gathering momentum, and international chains are entering the market, the stated level of hotels often does not conform to the quality of services rendered. Everywhere can you see “homemade” stars on facades and never receive the quality expected. Sometimes a hotel is “promoted” to a star level when a city badly needs accomodations of that class. To prevent this phenomenon from spreading, the expert community is talking about creating an integrated and well-organized hospitality business space with universal hotel service standards.

Herring-Bone versus Stars

The American organizers of an automobile club were the first to develop a hotel classification. Since, in those days, the automobile was a luxury rather than a means of transportation, handbills were distributed in places popular with the elite. It was then that they came up with a classification to distinguish hotels for affluent people and the middle class.

As of today about 30 types of hotels grading can be found the world over: the star system (European), the alphabetic system (Greek), the system of crowns (UK), keys, moons, apples, diamonds and so on. There are two classification systems in Russia. One of them (the herring-bone pattern) is rather rarely used – mainly for grading holiday resorts and suburban inns – and the other more common system is one of stars. Under the new classification adopted in Russia in 2005, the assessment of accommodation conformity is performed by classification agencies, whose experts formalize protocols and draw up an assessment act. The documents are handed over to a central body, where expert examination is carried out and then sent to the certifying commission.

Class as Level of Comfort

Experts say that the hotel classification was invented, above all, for clients to have an idea of the set of services they may expect at a given place. “It guides the consumers as to the service quality and premises they may get for a certain price. This is especially important on those markets where world-renowned brands are absent,” we were told at the Hotels Consulting & Development Group. “Awarding an accommodation with a certain class is nothing other than a brief description of the comfort level and service quality. The daily room charge largely depends on the hotel class,” confirm experts at Hotel Technology.

The official Resolution No. 1004p “Classification of Hotels and Other Accommodation Facilities” of July 15, 2005, says “the main goals of the classification system are differentiation of hotels and other accommodation facilities depending on the variety and quality of services rendered and providing the consumer with credible information that the category of hotel or other accommodation is confirmed by the results of classification and complies with the criteria set by normative documents.” However, this resolution notwithstanding, every owner makes an individual decision about the number of stars on his hotel facade. Furthermore, the new classification system has rather stiff codes, according to Ural-Germes.

“Nevertheless, the standards adopted are rather progressive by nature in comparison with earlier standards and, in some parameters, even exceed the requirements developed in 1989 by the World Tourist Organization. Perhaps for this very reason not all national hospitality chains seek official ‘stars’ on their facades,” opine the experts at Ural-Germes.

But the owners have their own vision. Sergei Lysenkov, CEO of Azimuth Hotel Chain, a Russian hospitality chain, says the way an operator runs a given hotel is more important than the number of stars. “What do you think is more important: a good breakfast and a smiling staff instantly solving all your problems or the number of stars on the signboard?” It’s hard to refute this argument, especially with the disastrous shortage of room stock. As reported by experts at Ural-Germes, the number of hotel beds in almost all big cities in the Urals is 2-3 times less than the standard prescribed level. “With a lack of accommodations, star status loses its significance, because in the high season, the occupancy rate at favorably located and comfortable hotels may exceed 90%. In this situation, the consumer is more concerned about reservations than the number of stars,” say the experts. This is why Russian hotel owners do not seek official corroboration of their status, although their hotels need it badly.

International hotel chains generally do not need any corroboration of the quality of their service. They received it once in their historical homeland and do not seek the Russian classification.

“The international chains entering the Russian market do not need any national certification. Their brand name has already gained popularity and now works for them,” we were told at Hotel Invest. “A popular world brand maintains its well-established standards everywhere in the world and every loyal guest is aware that he will never encounter unpleasant surprises if he chooses to stay at a hotel with a well-known brand name. ‘Stars’ are sought by local hoteliers with one or two hotel projects to let guests know what level of service they may expect and how much they will have to pay.”

This view is shared by Andrei Soldatov, deputy CEO of Verkh-Isetskaya, the Yekaterinburg-based investment-construction company that is delivering the Hyatt Regency Ekaterinburg Hotel. “The national classification gives nothing to world brands such as Hyatt, Park Inn and other international hoteliers. This grading is sought by those who develop single projects without the involvement of well-known brands and hotel operators.”

Indeed, an American Marriott will differ little from a Russian Marriott. International chains treasure their reputation and try to adhere to their quality standards in every national market they enter. Nevertheless, a number of experts believe that international hotel players would be wise to corroborate their status in a given country. All hotels that pass through this certification procedure are entered on Federal Tourism Agency lists, which are accessible to consumers.

Plans and Ambitions

However, the current shartage of hotel beds is quickly being filled up. A strategic project for Yekaterinburg hotel development foresees the construction of up to 70 new hotels in the city of Yekaterinburg by 2015. “When the consumer is able to choose between different hotels (a consumer’s market), star status will assume great importance,” they recapitulated at Ural-Germes. Now old accommodations partly renovated by Russian hospitality chains are on offer in the Urals region. Thus the Amaks Grand Hotels chain entered the markets in Perm and Ufa and redeveloped old hotels into the Amaks Tourist Hotel in Ufa and Amaks Premiere Hotel in Perm.

The Moscow-based Azimuth Hotel Chain has also entered the Perm region. An eponymous hotel has appeared as a result of the redevelopment of the old Hotel Rossiya. International hospitality operators have not neglected the Urals region either. Ural-Germes reports that Park Inn is already present in Yekaterinburg, and Novatel and Hyatt are expected soon. The four-star Rezidor SAS Hotel is being constructed in Tyumen. Such well-known hotel operators as Accor Group (hotels under the Ibis and Novotel brands), Hermitage Hospitality, Seven Days, et al., have also announced their entry into the Tyumen market.

“Our country needs more hotels in various price segments, as all of them will be in demand, because the present situation is very far from saturation,” agrees Lysenkov. In fact, this advice has been taken to heart by regional and national hotel developers. The acute shortage of accommodations is felt in all regions of the country. In Yekaterinburg alone, almost all hotels, with only rare exceptions, are hung with homemade stars, according to Mr. Soldatov.

From Quantity to Quality

Many experts on the hospitality market believe the classification adopted is formal by nature and that is why you often see a “homemade” star on the hotel facade. According to Alexander Zasukhin, CEO of Ural-Germes, the issue of using the general hotel classification in the big regional cities is largely one of hospitality market development in those regions. “So far, the development pattern has been extensive rather than intensive. At some later time, a transition to quality criteria will take place. In fact, this process has already begun in some large cities. At the stage of quality development, the number of stars will play a significant role in a hotel competitive ability,” he believes.

Unfortunately, unlike most Western countries, no penalties are imposed on hotels that provide false information on the level and quality of their service. “Both the hotel’s reputation and its economics suffer in case of willful ascription of stars. At the construction stage, the developer can do without any classification, as he seldom cares about what will happen to a property in four or five years. Every owner should have his own exit strategy from property and maintain a certain level of liquidity. When a developer has a hotel without a well-known brand name but complying to certain set standards, it will be easier to sell it. But when a developer builds a hotel without any regard for classification and makes 30-40% luxury suites (in a three-star hotel, their proportion is far lower), the property’s value will hardly be adequate to the investments made,” we were told at Jones Lang LaSalle.

But when a hotel is built to suit a specific hotelier who provides stiff supervision over the entire construction process, this project will be more liquid. “An international operator will never agree to manage a hotel unless it complies to set standards,” say the experts of Hotels Consulting & Development Group. “When he signs a 20-year management contract, the hotelier will have accept that the hotel does not conform to the level claimed, which will directly damage his the trademark.”

For example, InterContinental, which is represented on the Russian market by the Holiday Inn hotels chain, has rather stiff standards for facilities operating under that brand name, and they apply both to those directly managed by the brand and those operating under a franchising agreement. If the standards and requirements are not met, the license to use the trademark is revoked according to the terms of the contract and the hotel is excluded from the chain, experts tell. But every rule has its exceptions. When a hotel falls a little short of the required standards but boasts excellent location, the building is shaped up either by the property developer or by the operator. Moreover, there is a multitude of multi-brand operators on the hospitality market that manage hotels of different classes: Sofitel – 5 stars, Novotel – 4 stars, Mercury – 3 stars, Ibis – 2 stars, Etap – 1 star, Formula 1 – no stars.

In spite of classification formality and the unwillingness of hotel owners to submit to official classification, when more hotels managed by international operators appear in the Urals region, competition will stiffen. Even if it happens in the distant future, the hotels owners should ponder the lifetime of their properties now.