Hotel brands face obstacles scaling back in Russia, Hyatt CEO says
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Major Western hotel companies like Marriott, Hilton, Hyatt, IHG Hotels & Resorts and Accor garnered scrutiny earlier this year for maintaining a presence in Russia following its invasion of Ukraine.
Other companies like McDonald’s and Starbucks pulled out fairly quickly from Russia in light of mounting pressure to do so. Hotel companies eventually moved in lockstep earlier this year in closing corporate offices and suspending investments, planned openings and development in the country. Existing hotels remained in operation due to long-term franchise agreements between the brands and local owners of those individual properties.
But more than three months into the invasion and after several waves of sanctions on Russia, Marriott International is suspending all its operations in the country. The plan comes after Hyatt severed ties to various degrees at its hotels in the region and other companies indicated they might be exploring similar moves — but any such plan is a “complicated process,” according to an IHG announcement earlier this year.
Hyatt’s plan involved terminating or “suspending the provision of services to the third-party owners” of all Hyatt properties in Russia, according to a company release last month. But third-party owners may continue to operate the hotels in Russia under Hyatt branding, a company spokesperson told TPG following the initial publication of this story.
For more TPG news delivered each morning to your inbox, sign up for our daily newsletter.
Hotels often have third-party franchise or management agreements and, should those deals get canceled, it’s entirely likely the owner would continue to operate the hotel under existing branding and just no longer pay the fees associated with its former operations deal.
But Hyatt CEO Mark Hoplamazian noted during the NYU Hospitality Conference this week there is also a human element that makes it difficult to wind down an operation in Russia.
“We have to take great care of how you go about organizing that because there’s a lot of scrutiny,” Hoplamazian said. “The Russian government is applying a lot of scrutiny to how Western companies are behaving in Russia.”
There was an iota of defense in favor of hotel companies amid all the initial criticism, as the properties could provide some glimmer of Western influence in Russia.
InterContinental’s first location in Brazil arrived from the encouragement of U.S. President Franklin D. Roosevelt. The American leader wanted Pan Am founder Juan Trippe to build a network of business-oriented hotels with the idea the luxurious chain would be a symbol of American wealth and lifestyle and deter certain parts of the world from slipping into communism.
But sanctions levied on Russia and many of its wealthy oligarchs this year make doing business in the country impractical and even illegal in certain instances.
“We’ve worked really hard with our owners,” Hoplamazian said. “Of course, in the context of where there were specific sanctions, you’re complying with law.”
Marriott made a similar overture in its own decision to step back from Russia after doing business there for 25 years.
“Since the start of the war, we have remained in regular contact with our teams on the ground as we continued to evaluate our ability to operate in this changing legal and geopolitical landscape,” the company announced earlier this month. “We have come to the view that newly announced U.S., U.K. and EU restrictions will make it impossible for Marriott to continue to operate or franchise hotels in the Russian market.”
But leaving Russia isn’t just a matter of taking signs down, turning lights off and calling it a day.
Employees on the ground in Russia assisting a company’s decision to leave can be seen as a move against the government. Most companies aren’t giving details as to what exactly goes into the process of winding down operations apart from repeated use of the word “complex” in updates on Russia.
“What’s missing in some of the public discourse about the criticism of Western companies doing business in Russia is that there’s a human aspect to it that people are not talking about,” Hoplamazian said.
Featured image by yulenochekk/Getty Images.
Welcome to The Points Guy!
Earn 90,000 bonus miles after you spend $3,000 in purchases on your new Card in your first 3 months. Offer ends 8/3/2022.
With Status Boost™, earn 10,000 Medallion Qualification Miles (MQMs) after you spend $25,000 in purchases on your Card in a calendar year, up to two times per year getting you closer to Medallion Status. Earn 3X Miles on Delta purchases and purchases made directly with hotels, 2X Miles at restaurants and at U.S. supermarkets and earn 1X Mile on all other eligible purchases. Terms Apply.
- Limited Time Offer: Earn 90,000 bonus miles after you spend $3,000 in purchases on your new Card in your first 3 months. Offer ends 8/3/2022.
- Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs up to two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide including takeout and delivery in the U.S., and at U.S. supermarkets.
- Earn 1X Miles on all other eligible purchases.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. Payment of the government imposed taxes and fees of no more than $80 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights.
- Fee Credit for Global Entry or TSA PreCheck® after you apply through any Authorized Enrollment Provider. If approved for Global Entry, at no additional charge, you will receive access to TSA PreCheck.
- Enjoy an exclusive rate of $39 per person per visit to enter the Delta Sky Club® for you and up to two guests when traveling on a Delta flight.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees