People in the Know: The Revival of Intourist

President of Intourist Hotel Group, a structural division of Intourist holding, Phillip Brisbua represents a businessman and manager who has literally climbed all the steps of a career ladder, since first being employed in the front-office of a hotel. Having studied the hotel industry for several years, from within service in the hotels of Russia, Europe and the US, he is now directing the big ship that is the familiar to Russians "Intourist" brand to conquest new heights. Brisbua assures that Intourist never ceased to exist, neither during perestroika, nor during the crisis of the 1990s. But now, in the 21st century, a new era has come for the hotel business.

Did you purposefully set out to head one of the largest Russian hotel holdings?

I actually began my career in a bank. And then one day, I suddenly found myself in a hotel. I worked in the front-office of Novotel-Sheremetyevo-2. If I’m honest, at the time I thought it was just temporary. But it turns out that i have remained in the hospitality industry, which I do not regret. This sphere is extremely interesting to me. My first education is not connected in any way with the hotel business: I graduated from the Russian state social university. But when i understood that I would work in hotels i decided to raise my qualifications and passed a special course on international hotel technologies and management in Germany, Portugal and the US.

Can you name three of the main qualities of a successful hotelier?

Efficiency, flexibility and self-control.

Lets talk about the business in which every minute you need to demonstrate these skills. The Soviet Intourist, like all others in the USSR, was state. But during new times the company was redeemed by AFK Sistema.

Intourist is one of the oldest assets of Sistema. But Intourist Hotel Group is another matter, it is a young company, and only appeared as a hotel division in the structure of Intourist in 2003. Since 2006 we have made some changes to the Intourist holding and as a result Intourist Hotel Groups became GK Intourist.

At a press conference in Uglich, which took place this year to mark the opening of the city's Moskva and Golden Ring of Russia hotels, representatives from your company spoke about how a vertically-integrated holding has become fashionable these days. Modern Intourist has also actually turned into such a holding. Explain how this structure works.

All-Union joint-stock company (VAO) Intourist is a vertically-integrated tourist holding. To make it more clear, it is a large system of branches. For example, Intourist Hotel Groups has its main office in Moscow and a chain of hotels with branches of the company, or representatives, in several regions, namely: Rostov, Uglich, the Yaroslavsky region, Ivanovo, Nizhny Novgorod, Petrozavodsk, etc.

Is there a development division within this system?

The developing division is directly under VАО Intourist. We, as the operating company, are more engaged in consultations in the regions, concerning the designing and construction of hotels, and the management of hotels. We of course, convey all developing hotel projects to our head company. But the building division acts more as an auxiliary tool by means of which we achieve the volume of funds necessary to us. Now the purpose of Intourist Hotel Groups is to create a strong hotel chain.

How do the four divisions of Intourist - the company-tour operator, the department for retail tour products, transport services and the hotel business - cooperate among themselves?

The strategy of development for our company - Intourist Hotel Group is just being built in cooperation with the work of the company-tour operator, NTK Intourist, which is part of the Intourist system. Naturally, we will go first of all to the cities where our tour operator in Russia and abroad already works.

Do you know what the structure of Intourist was during Soviet times? How did it annd who controlled that?

VАО Intourist was created in 1929 by Anastasom Mikoyan, a famous person in the USSR - a member of the Central Committee and the people's commissar for external and domestic trade. The structure was created especially in order to organize employees' business trips abroad and the arrival of several foreigners to the Soviet Union.

Later an alternative company, Sputnik, appeared and some trade unions also. Nevertheless all tickets and hotel rooms were processed by Intourist. From those times to the modern system, VAO Intourist has passed on the richest experience which has been gathered by the previous generations of employees and work traditions. But now we are trying to introduce everything new and progressive to the Intourist system, including technology.

In total you currently have 10 operating premises under your management?

At the moment about 7 operating hotels. But they already have no relation to the former soviet system of Intourist. It is an absolutely new chain of hotels. We do intend to restore a chain of hotels from the past. Our task is to create a modern hotel chain on the basis of those premises that we currently rent or are building.

In which regions, in Russia and abroad, have hotels under the management of the modern Intourist Hotel Groups been opened?

Abroad, there is the resort in Karlovy Vary in the Czech Republic, where our well-known 5-star Savoy Westend Hotel is located. The Princip in Italy is currently undergoing reconstruction.

In Russia the most important strategic sector is Moscow. In St. Petersburg we still don't have any hotels under our management. But this city and as a whole the Northwest region is extremely interesting to us. Therefore, I think, we will find an opportunity to enter the market there. It is necessary to mention also Nizhny Novgorod where we have reconstructed the Oktyabr hotel.

Petrozavodsk, is also an interesting tourist city. It requires, certainly, development of infrastructure. We have there the Severnaya hotel, the central hotel of the city. In Samara we also actively work, having signed an agreement with the privately owned Volga hotel. The Intourist Hotel Groups cooperates with both state proprietors of hotels, and with private owners.

Under our brand there are also already well-known hotels in the Yaroslavsky Region - Moskovsky Trakt in Rostov Veliky and Moskva in Uglich, which were constructed together with the property department of the capital under a development program for 3* hotels and.

Does Intourist have more hotels under its management than it owns?

If we talk about the Moscow hotels Pekin and Kosmos then they are the property of VАО Intourist and under the control of Intourist Hotel Group. It also owns the Savoy Westend Hotel and a reconstructed complex in Italy. Those hotels with which Intourist Hotel Group has signed agreements with on their management, may be both the property of our head company, and owned by other people. But questions of ownership are not in my jurisdiction.

You only manage two hotels in Moscow? What plans for expansion do you have in the capital?

We are working on several development projects, as far as i know. I cannot share the details of our holding's plans in the capital yet. But in general I can say that in the near future there will most likely be two hotels: one - inside the Garden ring, and another - within the limits of the Third Transport Ring. Both buildings have private owners. The one within the Third ring, was recently constructed. The other, on the Garden ring, is being constructed.

What percentage is received on the Moscow market by the operating company for their services and how is this percentage calculated?

The percentage is calculated differently: from proceeds, from profit, from net profit. Everything depends on each specific case. Or it may be a fixed sum.

As the hotel services market in the country has only just been formed, currently the best form of work for operating companies in view of our tax laws is the renting of hotel buildings. Sometimes the operating company leases a hotel and all the business processes, and the proprietor of the premises is completely removed from the business and agrees on receiving compensation in the form of fixed payments or a percentage from the profit. Everything depends on the arrangement with the owner.

Franchising is also convenient. Our holding in this case is promoting the Intourist brand in Russia. That is we suggest to partners to work with us under franchise contracts.

How the earnings of a operating company are calculated, I can explain with an example. Let's say we have a 3* hotel somewhere in Volga. We, as the operating company, rent it from the property department of Moscow and we pay a rental rate that has been especially calculated with expert organizations involved in the project (according to the agreement it cannot be announced). The income of the hotel depends on the operational profit it earns. In this case Intourist Hotel Group pays only rent of the building to the capital proprietor of the project, all other money earned is ours. All municipal, legal and miscellaneous costs are the responsibility of the tenant, i. е. our company.

But the time will come when we will need to talk about the continual profit that the hotel is making. It is also necessary to consider that the hotel in the Yaroslavsky region is new and does not have its own history. Also until now there were no such hotels of this category in Uglich. The first year of work for the hotel can be called a trial when in practice its founders see whether everything has turned out successfully, and will make any adjustments.

Every hotel chain has its own solid format. Someone emphasizes on resorts or country hotels. Some companies develop SPA services. Others specialize in hotels for businessmen. What format or, maybe, formats have appeared in the Russian market thanks to Intourist Hotel Groups?

We have a SPA-hotel format, which includes the Czech Republic's Savoy Westend Hotel and the reconstructed hotel in Italy. But if you notice, it is 5* hotels, rather than 3-4*. In general, the SPA format is more suitable for country and resort hotels.

Will you develop this sector?

Yes, for example, we are interested in the Krasnodar region, the Black Sea coast of the Caucasus; we are looking there for buildings and land.

This year Vedomosti wrote that Intourist intends to buy the Zhemchuzhina hotel in Sochi. Has it? What projects do you have in the Krasnodar territory?

Yes, you wrote that in Sochi Sistema-Gals - a developer division of Sistema - is reconstructing a boarding house to transform it into a modern multipurpose complex. And also that the boarding house was on a 6.3 hectare site. And that within the structure of the complex there would be a hotel. And Intourist Hotel Group would become its operating company. But we cannot say if this has happened, at the moment it has not yet been concluded.

I get the impression that you are guided more by the 3-4* segment.

Quite right. We are guided by the mass segment. There is only great demand for 5* hotels in Russia and St. Petersburg. In cities with a population of at least one million in other regions, we consider it irrelevant to develop a chain of 5* hotels. We consider a more expensive segment to be abroad.

Of the large hotels in Moscow we manage the 4* Kosmos and Pekin hotels, which are currently under reconstruction. We yet have not decided yet what class they will be, but more than likely 4*.

These two hotels have different concepts. Kosmos is a large hotel, the 25-storey building has 1777 rooms, of which 35 are delux and junior suites, and there are six apartments. Pekin is not so big. The hotel is in a 13-storey building which for the first time received visitors in 1956, and today is included on the list of monuments of architecture. Kosmos is more oriented to businessmen, and also corporate services - congresses, conferences, meetings. And Pekin is more a chamber hotel in the city center.

How much does a room cost in the Kosmos?

In Kosmos prices vary from 6,000 rubles for a standard room to 15,000 rubles for a delux room.

What can you tell us about projects in the future?

Serious development can be found in the Volga region. All territories along the river Volga. We are also actively working in the Republic of Tatarstan where we are negotiating with private hotel owners who are interested in working with us under a franchise. There is a project in Kalmykia - in a place near Astrakhan, on the coast of the Volga.

We are not limited to the projects which we create together with the government of Moscow. Within the limits of the Golden ring of Russia program other cities except for Uglich, Yaroslavl and Rostov Veliky are also interesting to us. For example, Suzdal, Vladimir… The deficit of hotel rooms in the Golden Ring is estimated in the thousands. We are also interested in premises in Tver. Abroad such countries, as Turkey, Egypt, Bulgaria, Italy, Greece, Croatia, etc, are interesting for us.

What volume of investments has been put into the first hotel of the Golden Ring project, Moskovsky Trakt ?

Initial investments total almost $400 000, this is only in order to open and start operating.

How many years into the future is thought over in the development strategy of Intourist Hotel Groups?

Up to 2010. By that time we should have built the largest national hotel chain, which will be the operator of hotels in Russia and abroad.

Are there any hotel chain operators you classify as competitors on the Russian market?

The problem is that there are no chains, either national, or foreign, in Moscow. If we talk about Moscow, we can name Marriott and Accor. But we do not compete with either chains, or companies. Some Russian companies have attempted to create chain projects. I know from experience of talking with proprietors of different hotels, that many hotels have tried to attract foreign operators but nobody has agreed to it yet. I think, there is a formation of demand for services of the network operating companies. There are not enough experts, there are not always sufficient resources, and not everyone own technologies.

How is your safety system constructed? Do you use any technologies?

Intourist Hotel Groups has an exclusive product. We develop an electronic control system for our chain of hotels. Management can now be carried out directly from the central office in Moscow. In essence we have taken a software product of the last generation of German company HRS and on its base we have created a centralized control system. It is a new development also for HRS - Opera Hotel Edition. Version 4.0. The product is now being tested, in part thanks to our company.

Work looks like this: operators, in the Moscow operations hall, can reserve rooms in any Intourist hotel. Under the condition of course, that this system is installed in that hotel. For example: if the client is staying at the Kosmos hotel then a corresponding profile like a dossier is made. And when the same visitor will stay, lets say, in the Savoy Westend Hotel in Karlovy Vary, the system there will recognize him even if he has never stayed at the Savoy before and only once visited the Kosmos. It is done not only for the sake of safety, but also as information for the employees of hotel on the preferences of each client.

Booking is made on a new intellectual online system in which information on the rooms of hotel chain is also updated. Such systems are now being used by many hotels. However there are only about 40 of such products in the world. In the fourth quarter of 2007 we plan to install the system in the Kosmos. The project is difficult and labor-consuming. Pekin, Moskovsky Trakt, Moskva and Oktybr are already connected. Other hotels will be connected by the end of 2007.

How much does it cost to install the system?

For the central office the project as a whole cost $1.5 million. For each separate hotel, installation of the program will cost from $60,000. For a hotel like the Kosmos it will cost $350,000, and for Pekin, approximately $100,000.

Your company is also developing another business segment besides hotels - managing fitness clubs?

For Intourist Hotel Group this is a new direction. Actually this business belonged to AFK Sistema. A sports club in the Kuntsevo area, now under our management, is one of the first. Sistema has entrusted Intourist with this work. The chain is known under the brand Olympic Star. Some of the sports clubs are in our hotels. There is a club in the Czech Republic’s Savoy, and in Moscow's Kosmos.

In the severnaya hotle in Petrozavodsk a good fitness center is being created. It is a whole new direction for Petrozavodsk in general. In particular, we need to form demand there for these kind of services.

There are also Olympic Star clubs separate, not in hotels. This includes the Olympic Star in Kuntsevo which is located in the Kaskad business center on Rochdelsky ulitsa and the Temp fitness studio on Bolshaya Tatarskaya ulitsa. this is a profitable business in which we are interested. The new hotel in Uglich also has a sports club. We intend for there to be a good sports premises in Yaroslavl where the hotel now is under construction. And in the resort-hotel complex Altai-Resort.

Sports clubs in hotels work rather differently from separately standing sports clubs. In a hotel to a greater degree they are part of the general infrastructure for clients. To open it to visitors from outside the hotel, to make money from it, must always be done carefully. We do not want to create any inconveniences for our hotel guests.

Phillip Brisbua was born in Moscow in 1976. Has graduated from the Moscow higher economic-linguistic college and the Russian state social university. He has additional vocational training in international hotel technologies and management in Germany, Portugal, the US. He is now president of Intourist Hotel Groups. Prior to this he gained more than 10 years operational experience in the hotel business, including in international chains Accor (Novotel) and Marriott International. His hobbies are books, travel and cars.

The operating company of a chain of hotels Intourist Hotel Group was created in 2003. It is part of the Intourist group of companies. In 2003 Intourist Hotel Group launched the centralized booking system Opera Reservation System - ORS, which is a new generation of intellectual systems for hotels. In July 2007, four Intourist hotels were connected to the system. Along with the booking system a centralized information system of data about clients - Customer Information System (CIS) has been completely integrated.

By the start of 2010 the Intourist group of companies plans to complete the construction of the Altai-Resort resort-hotel complex in the Maiminsky region of the Republic of Altai, on a land plot which is being rented long-term by the Stepankovo company (100 per cent owned by VАО Intourist). The tourist complex will include a 4* hotel with 120 rooms, mountain-skiing infrastructure and a SPA complex. The area of the hotel building will be 13,000 sq.m. The area of the site on which the building will be built and on which will be created a recreational zone will be 15 hectares. Intourist Hotel Group will act as the hotel operator. The prospective investments in the project are estimated at $20 million. the hotel will also offer additional services: medical procedures and various kinds of massage.

VАО Intourist is the oldest travel agency in Russia and was established in 1929. 65.1 per cent of VАО Intourist belongs to AFK Sistema, 25.04 per cent belongs to the property department of Moscow, and 8.75 per cent belongs to open joint-stock company Moskva. Annually the company serves about 500 000 foreign and Russian tourists. The consolidated turnover in 2005 was almost $130 million. In 2006 the group of companies' turnover totaled $338.31 million, with the number of foreign and Russian tourists servbed standing at 500,000 people. The company is present in 34 regions of the Russian Federation, has representatives abroad, and cooperates with 7000 partners in 168 countries of the world. Since 2006 VАО Intourist began re-structuring its assets and creating a vertically-integrated tourist holding. Intourist offers such business services to the market, as tour handling, retail tour products, transport services and hotel business.