Russian Investors to Inject $1.5 Billion in Three Upscale Moscow Hotels

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A group of Russian businessmen is planning to start construction of several five-star hotels in Moscow.

God Nisan and Zarah Iliev, well-known Russian billionaires, are planning to invest up to $1.5 billion in the construction of three luxury hotels in the downtown of Moscow, which will be operated by Four Seasons and the Rezidor Hotel Group.

A source close to the project said that both investors have already reached an agreement with a number of foreign banks to provide funds for the projects.

The construction is scheduled to complete by 2012.

Nisanov and Iliev already own two hotels in Moscow, both managed by Rezidor - Radisson Royal Hotel Moscow and Radisson SAS Slavyanskaya.

The construction of the new hotels, as well as reconstruction of already existing properties, will allow the businessmen to triple their hotel assets.

This is the first large project launched in the Russian hotel industry since the start of the economic crisis. Until now, Russian banks were reluctant to provide funds for the hotel projects in Russia, given their big payback period up to 7-10 years.

Currently, the market of upscale hotels in Russia remains underdeveloped, with a 100% concentration of five-star hotels in major Russian cities, such as Moscow and St. Petersburg.

Analysts of the Russian consulting agency Praedium said that currently the total room stock of Moscow is nearly 37,000 rooms, with 3,000 positioned for upscale category (8% of total stock).

The average cost of accommodation in a Moscow five-star hotel at the end of 2009 amounted to $750 per day.

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