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EBRD to join forces with Hyatt International in Kyrgyzstan to fund first privately financed, international standard hotel in Central Asia
new international-standard hotel will open its doors in late 1998 in Kyrgyzstan following the signing of a US$ 8 million (ECU 7.3 million) loan from the European Bank for Reconstruction and Development (EBRD) to a Kyrgyz private sector company, Italkyr. Responding to growing private investment interest and tourism demand in the picturesque country, the loan will be used to convert the former Hotel Kyrgyzstan into the Hyatt Regency Bishkek, the first privately financed hotel of its type in Central Asia.
Located in the historic centre of Kyrgyzstan's capital, Bishkek, at the foot of the Tien Shan mountains, the Hyatt Regency Bishkek will be a partnership between Hyatt International Corporation, a private operator of high-quality international hotels, and C.A.V. Ital, an Italian consortium. The project will represent the first major hotel financing in Central Asia to be launched without a sovereign guarantee, establishing a crucial precedent for future hotel development in the region.
The Kyrgyz Government has assured the EBRD that they are committed to a private sector model of development in the hotel sector in Bishkek, and will not, in the future, provide government guarantees to finance hotel projects in the city. Disbursement of the EBRD's loan to complete construction of the Hyatt Regency Bishkek is conditional upon execution by the Kyrgyz Government of an undertaking agreement confirming this position.
"The most important issue in the hotel industry in Central Asia today, indeed in all of central and eastern Europe, is the preponderance of government guarantees to finance new hotel projects," said Marc Mogull, Director of the EBRD's Property and Tourism Team. "Sovereign guarantees for deluxe hotels constitute an inappropriate use of developing countries' limited guarantee capacity, and can become a significant strain on government finances."
"Moreover," Mogull continued, "By issuing commercial guarantees for traditionally private sector projects such as hotels, governments distort markets, and dampen the confidence of genuine, well-motivated investors. The Hyatt Regency Bishkek project breaks new ground by offering a 'best practice' model for hotel financing in the region, and demonstrates that the market system can work even in seemingly challenging locations."
The redevelopment of the former Hotel Kyrgyzstan, which has been closed since 1991, will be undertaken by Italkyr, which will be re-registered before year-end as a closed joint-stock company. Italkyr's shareholders will include C.A.V. Ital, the municipality of Bishkek (through a wholly owned company), Hyatt and several smaller shareholders.
Following its refurbishment, the hotel will comprise 186 deluxe guest rooms, including serviced apartments, several restaurants and bars, a business centre and a retail area. Consistent with its strategy elsewhere in the region, Hyatt will hire local staff, who will be trained in customer service, marketing, hospitality and catering management. Development of these skills will allow the Hyatt Regency Bishkek to be staffed substantially by local employees after an initial transition period.
Officiating at the signing ceremony at the Bishkek Municipality, Mr. Boris Silaev, Mayor of Bishkek, said, "We support the initiative of the EBRD to finance the Hyatt Regency Bishkek without a government guarantee, and believe the hotel will play a large role in attracting more investors and tourists to our capital city."
Bernd Chorengel, President of Hyatt International Corporation, stated that "Hyatt International is delighted to continue building its track record in the former Soviet Union following the opening of the Hyatt Regency Baku in 1995 and the Hyatt Regency Almaty in 1996. We are developing a strong presence in Central Asia, where we have identified an existing high level of demand by international business clientele. We believe that there is also the potential for a substantial increase in future growth, both in the regional economy and through the continuing development of the tourism sector."
This is the seventh EBRD project in the hotel sector, comprising total EBRD investment of US$ 65 million, and a total project value of over US$ 200 million. Other hotel projects financed by the EBRD include the Radisson SAS Daugava Hotel in Riga, Latvia, and the Hilton Athenee Palace in Bucharest, Romania.
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