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.
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?