Accor hotel chain loses ground in Baltics

Teh Baltic Times, TALLINN
Jun 08, 2000
By Kairi Kurm

 Estonian-Austrian businessman Alexander Kofkin, the owner of the previous Grand Hotel Mercure in Tallinn, terminated the contract with the French operating company Accor on June 1, and has started to run the hotel on his own under the name Grand Hotel Tallinn.

The two companies ended their cooperation with a conflict between the two parties in which the operating team blamed the owner for not paying for work. Kofkin in turn did not want to pay as long as he did not see the results the operator had promised in his budget, said an Accor spokesman.

Today the total unpaid invoices to the operator amount to 4.7 million kroons ($300,000), said Barre. On May 18, Accor informed Kofkin it would continue the contract on the condition it receive the full payment of its dues, but Kofkin rejected the offer and terminated the contract without notice.

“In this way he wanted to show to everybody that he decided to fire a huge company, and not that he was fired because he didn’t fulfill his commitment,” said Herve Barre, general manager from Accor’s hotel in Moscow, who was sent to Estonia in order to solve the conflict.

Kofkin was not able to participate in the opening of Grand Hotel Tallinn on June 1 when the flags of Estonia, Austria, Finland and the flag of the new hotel were hoisted at sunset. His substitute, a young sales director at Grand Hotel Tallinn Edvard Mihkelsaar, prohibited the press to talk to anyone else besides himself about the changes in the hotel.

The explanation given to the guests by Peedu Zeiger, chairman of the board of Irnesse Kapital, was very short and confusing.

“Mercure is the messenger of God. As a planet it is 62 million kilometers away from Earth. It is clear that a messenger has problems with coming from so far. We found that it is better to leave messengers aside and start communicating with God directly,” said Zeiger.

“The way the hotel was operated is the reason behind the termination of the contract,” said Mihkelsaar. “Their job was not successful. Mr. Kofkin started cooperation with them because they were most attractive operators. Their predictions and offers were very positive, but they could not follow it.”

Accor management said that their involvement in the project helped the Grand Hotel Tallinn to launch its operations despite its less than attractive location in Tallinn and fierce competition. As a result, occupancy rates forecast for this summer look good.The hotel is expecting to steadily make big profit this year, the management of Accor Group announced.

Problems emerged before the opening of the hotel

The cooperation between the two parties started in 1998, when the representative of the hotel chain signed a management contract with Kofkin for the renovated Hotel Tallinn. The opening of the hotel was planned on September 15, 1998 but occurred four months later in January 1999.

Kofkin refused to pay for the additional costs that the operator had done due to the subsequent opening of the hotel, said Barre. The management was obliged to squeeze on expenses to cope with the situation and was thus not able to launch a good advertising campaign for the promotion of the hotel.

The contract with Kofkin’s Irnesse Kapital stipulated that the operator should receive a percentage from the income of the hotel in order to pay management fees and from the results in order to cover incentive fees. According to Accor Group these have not been paid since February 1999.

“Kofkin also refused to recruit more than two expatriate Executives,” said Barre.

“They were obliged to train the local personnel, which they did very passively. They invested here only two people hoping that the rest would be done on behalf of them,” Mihkelsaar responded.

“You can not expect two people to be responsible for the training of 120 persons. We can see it today that our chef had done a very good training. He has been away for more than a month but the quality of food is the same,” said Barre.

The operator did not follow the budget

Barre said that the operator was unable to follow the estimated 10 years budget because there were some things they could not possibly foresee. “The years 1996 and 1997 were very good but in 1998 our business dropped a little bit because of the Russian crisis. We did not make as much profit as we planned 4 years ago but we still made profit in 1999 and we would have made it this year too,” said Barre. According to the press most of the hotels in Tallinn have been booked for the whole summer.

“A professional hotel operator should always do the right plans,” said Mihkelsaar. “The share of Russian tourists is only five percent in Estonia and this should not have had any impact on the budgeting in the travel industry. The operators should have focused on the local traditions and seasonal peculiarities instead.”

“This forecast budget does not mean that he should not pay us every month what he owes us,” said Barre. “Mr Kofkin is not patient,” said Barre.

“The owners never pay for the services that they have not received. It was a bilateral agreement,” said Mihkelsaar.

“We took along everything good from what Accor had given us and left everything bad that they had left us,” said Mihkelsaar. He added that the hotel would resort to help from international booking chains, which are more requisite and less costly.

Barre on the other hand revealed that Accor is planning to come back and find the right partner next time. Tallinn was the only place in the Baltic countries where Accor was present.�

Source: http://www.baltictimes.com/news/articles/1424/

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