As other high profile brands pull out of Russia, major U.S. hotel companies have remained. It’s complicated, they explain.
U.S. Hotel Brands Continue Operations In Russia
This week saw McDonalds, Starbucks, and Coca Cola announce plans to sever ties with Russia. However, U.S. hotel brands including Hilton, Hyatt, and Marriott continue to operate inside the Russian Federation.
To understand why, it is instructive to look to Syria. In Damascus, Four Seasons abruptly ended its management of the Four Seasons Damascus in 2019, citing U.S. sanctions against its owner, Samer Foz. While cut off from the Four Seasons global booking system, the hotel still operates under the Four Seasons brand within Syria, risking repetitional damage to the brand name and consumer confusion. Legal redress within Syria is limited for foreign corporations.
In Russia, most hotels are not owned by the brand themselves (U.S. hotel brands tend primarily to be management companies). So while Marriott or Hilton could pull out from these hotels and cut them off from their global booking systems, the risk is high that hotel franchisees would simply ignore cease and desist letters and maintain existing signage (a whole new reason for hotels to deny Bonvoy benefits…).
Hilton says it has closed its corporate offices in Russia and is not adding new franchises. It is also donating profit to support Ukraine relief efforts. Marriott explains, “Our hotels in Russia are owned by third parties and we continue to evaluate the ability for these hotels to remain open.” Hilton operates 26 hotels while Marriott operates 28, including its flagship Ritz Carlton in Moscow.
Hyatt, which operates only five hotels in Russia, noted it would “continue to evaluate hotel operations in Russia, while complying with applicable sanctions and U.S. government directives as we hope for a resolution to this crisis,” but also added:
“Understanding that many people in Russia face challenges and uncertainty about their future as well, we are determining how best to support and care for our hotel colleagues and current guests in the country.”
Other Considerations At Play
There are other considerations at play. The Kremlin has threatened to nationalize assets of corporations that leave Russia over the Ukraine war. While that may be a grave threat for foreign manufactures in Russia, it could be seen as just the opposite for hotel brands, since they actually exercise so little control over their franchises. Such threats make it even more difficult to view the Russian market as a stable investment or worthy of the public scrutiny that comes from maintaining presence in a country with a questionable human rights record (not that such concerns have stopped companies from operating within Mainland China…).
And some companies are staying. PepsiCo, for example, told employees “we must stay true to the humanitarian aspect of our business” and argued that pulling out of Russia would create undue hardship for ordinary citizens (the PepsiCo portfolio includes dairy products, baby food, and formula). Public reaction appears to have accepted this, though luxury hotels are not in the same category as baby formula.
One hotel company that would stand to gain immensely from U.S. brands leaving is Radisson, which was acquired in 2018 by Jin Jiang International, a Chinese state-owned hospitality company. Already, Radisson has more rooms than any other hotel chain in Russia. It stands ready to take over management of western hotel chains, should the opportunity arise.
CONCLUSION
Whether western hotel brands should remain in Russia is a dicey issue, clouded by legal questions and land mines at every turn. For now, major hotel brands like Hilton, Hyatt, and Marriott will continue operations in Russia.
Do you think U.S. hotel brands should continue to operate in Russia? If they leave now, will it simply be seen as pandering to public pressure?
image: Hyatt
Good decision by the hotels and Pepsi, unlike those who closed. The citizens of a country shouldn’t be punished for the decisions of their leaders or in this case, leader.
The idea of sanctions is to directly impact the citizens of a country because of the actions of their leaders. By continuing to mitigate the impact of sanctions upon everyday citizens, it makes the impact lessened – thereby lessening the value of sanctions.
If sanctions bite enough then the leaders have to make a decision between alienating their citizens, or continuing the action that is prompting the sanctions.
The big hotel chains should block the ability to book any Russian properties via all sales channels and donate ALL management fees to The Red Cross.
At the end of day everyone is an a-hole. They love money. People that are leaving have decided that the damage to the brand name will be worse than the money they will make staying.
These hotels think they either have no brand name or people have no alternative. How many idiots come here complaining about mariott or hilton or hyatt and then stick with them. Will these hotel chains be charged for breaking sanctions? Again it’s better to pick on china for sanction busting when israel and uae are doing the same.
The sanctions are for show too. They are much cheaper for the US than having to go to war. This way the west can continue pretending they care about democracy without incurring losses. Russia was pretending to be strong too. In reality the only think it has are nukes that we don’t know if they work and oil and ng that they need western help to extract. Putin is a hollow strong man.
Ukraine was always Russia’s bitch. Zelensky should have bent over for Putin until ukraine was strong enough to defend itself without needing external help. Trump was smart like that. He always wanted to be putins bitch and so he keeps bending over for Putin, and people are scratching their heads, maybe Putin has compromat on trump. Nope, trump loves bending for Putin. That’s his kink. Ever seen that the most vocal anti gay Republicans themselves turn out to be gay? And they usually get busted in airport lavatories.
Amen brutha
Debit, you confuse me…..
“Trump was smart”
My God man, the delusional nonsense you just typed
Get help
You mean they should’ve kept their nuclear weapons instead of believing other countries, like Russia and US?
Yes
“a whole new reason for hotels to deny Bonvoy benefits…” was a great line.
EXACTLY what happened here in Venezuela! when the U.S. government put hard sanctions on the Maduro regime, one of them was NO U.S. company can do business with the regime nor within Venezuela. however to this day the Marriott “flag” continues to operate a J.W. Marriott propert and a Renaisance property in Caracas. I found out these are franchise operators. there are no more Hiltons or Hyatts, as they were expropriated under Chavez.
Great article, Matthew. A few thoughts…
Indeed, the Damascus Marriott is a pretty good indicator as to what would happen if the Hotel brands globally decide to do the right thing and abandon their contracts in Russia. But given they have little physical investment that is exactly the reason they should. They are just providing a brand. Removing these hotels from reservation systems and management contracts would have huge impacts on their ability to function as legitimate hotels and send further needed shockwaves into the daily life of Russians who are seeing nothing in comparison to the widespread death and destruction the Ukrainian people are enduring. Further, this would be done with very little loss to Hyatt, Marriott, etc.
To me, the management contracts are the big one. Take the Four Seasons in Moscow as an example. While I usually stay at the Park Hyatt there I know enough from many other Four Seasons properties that the GM and high level management team in each property are usually teams brought in from Four Seasons corporate. If you study the managers at each they come from a long line of different FS properties around the world and are tied to Toronto far more than they are to the franchisee. They will, I am sure, lose a significant number of them. That is if many have not left anyway in the recent days.
The hotel brands doing business in Russia have largely fallen under the radar of backlash. Unlike Uniqlo who had to backtrack quickly and close their stores after the Japanese CEO said, “But Russians deserve a basic right to buy clothing for themselves.” I am glad you are identifying these hotels and raising the question as to exactly why they get a pass.
Oops, Damascus “Four Seasons.”
Yes, because Uniglo wanted to make money, darn it!
Elite Russians relaxing at the Ritz, St. Regis and Four Seasons in Russia while the Russian army brutally murders Ukrainian children and invades Ukraine ….. not great optics for those brands. I suggest they shut them down immediately!
I’ve reached out to both Marriott & Four Seasons with 0 relevant response …. Anyone have any suggestion or direct contact info to share at this companies would be much appreciated.