Following more widespread news of Western hotel companies scaling back in Russia after that country invaded neighboring Ukraine, IHG Hotels & Resorts is reportedly speaking with owners in Russia about severing contracts to fully exit the market.
A new report from Russian-language news website www.Kommersant.ru states “sources say that IHG is ready to completely wind down business in the Russian Federation due to political risks … [and] to avoid fines, [IHG] intends to agree with the owners of facilities on the termination of contracts by agreement of the parties.”
The U.K.-based hotel brand company, which owns the Holiday Inn brand, announced in early April that it did “not intend to resume any investment or development activity in the foreseeable future." The company also said it had closed its corporate office in Moscow.
IHG replied to HNN's requests for comment Friday, stating it is aware there is speculation in regards to its continued business in Russia but that its position is unchanged from April 8.
An IHG spokesperson added, "We don't comment on speculation or individual conversations with owners."
On April 12, IHG issued a statement noting “IHG-branded hotels in Russia operate under complex long-term management or franchise agreements with independent third-party companies that own the hotels. Given the increasing challenges of operating in Russia, we continue to evaluate these contracts and are in discussions with owners, but this is a complicated process and will take some time.”
Hotel News Now had previously reported that IHG was one of several companies that still had potential new hotel openings in the country despite promises to end development activity, along with Hyatt Hotels Corp. The Financial Times recently reported Hyatt and BWH Hotel Group, which owns Best Western, are also actively severing contracts in Russia.
Kommersant quotes a Holiday Inn owner and two consultants familiar with the issue — Stanislav Ivashkevich, general manager of business advisory Ivashkevich Hospitality, and Yana Ukhanova, head of hotels and hospitality, Russia and Commonwealth of Independent States, at business consultancy JLL — who said IHG will lose $124 million in revenue per year by leaving Russia. The news report added the company operates 29 hotels with 6,600 rooms in Russia and is one of the three largest international hotel companies in the country.
In Kommersant's report, Ivashkevich said that “the departure of IHG will seriously affect the hotel services market, as none of the Russian operators will be able to take control of the entire portfolio of the group. Their capacities will simply not allow this."
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