Riga Hotel ripe, but who will pluck it?

  • 2000-03-02
  • Valters Medenis
RIGA - The Riga City Coucil owned, Hotel Riga Viesnica Riga, has a possible interested buyer in world hotel chain owner Mariott. The talks with Hotel Riga's general director Juris Subacs and Mariott is only in the planning stage, but as Mariott is extending their chain of hotels across Eastern Europe, they are very interested Hotel Riga's prime location.

Subacs next step is to have a team of 20 or so Mariott experts do a detailed study of the hotel. After the study is completed, Mariott might then submit an offer.

The big question mark hanging over the proposal is that if an offer is submitted from Mariott to purchase Hotel Riga, will the hotel chain owners submit their offer to the Riga City Council, who are the owners of the real estate, or to the Latvian Privatization Agency. In January, the government won a court case against Riga's City Council where the government became effective owners of one of the two pieces of real estate which Hotel Riga occupies, the building at 22 Aspazijas Blvd.

Subacs said Riga's City Council will be lodging an appeal on the decision.

"The court in January ruled in favor of the state. We are currently in a see-saw battle to try to change ownership of Hotel Riga from the government back to the Council which is pushing for an appeal in May," said Subacs. "The hotel currently has an order on the building, meaning the government can not sell the hotel, and if the appeal fails, the Riga City Council will lodge a submission with the Latvian Constitutional Court to stop the government from owning the hotel."

New management

Subacs was originally brought in by Nils Students, Riga City Council's enterprise director, to do an investigative report into the financial operations of Hotel Riga. After completing his report, Subacs was employed by Students to become the general director of Hotel Riga and implement his report's ideas. Subacs' main objective for Hotel Riga is to change the hotel's infrastructure and sell the services of the hotel to business clients and not solely cater to Latvia's summer tourists.

The changes that Subacs has implemented are a property management system nucleus, a PBX central system, voice mail, call accounting of bills and automatic key locks that are all geared for easier services for businessmen. Since starting his term as hotel general director, Subacs has had to introduce specially trained staff and to retrain staff in running a business-orientated hotel.

The hotel has now placed itself on the Global Distribution System where businessmen can automatically book themselves a room at Hotel Riga along with their airlines ticket through their travel agent.

"The business we are trying to inject into the hotel is to get occupancies from the four leaders of world business: the United States, Germany, France and Japan. Since gearing our vacancies to these businessmen we have seen increases this winter over previous years figures," said Subacs. "A good financial year at a hotel is to see on paper, an increase of 4 percent. We are currently progressing at a percentage increase of around 8 percent to twelve percent."

Corruption a possibility?

With these progressive implementations and increases in winter vacancies, Students is afraid that Hotel Riga will become a victim of corruption and be bought from the Riga City Council for a price lower than market value and then later privatized for a much higher price.

"In 1991 when Latvia became independent, a contract was formed stating that Hotel Riga was a city-owned property. Later, when the Latvian government in 1994 introduced deeds, it superceded the contract that was initiated in 1991," said Students. "What can effectively happen if the government wins the court case in May and takes possession of the other building, they will have first refusal rights on the deed."

"The government will then be able to buy the property at a below market value and then later sell the real estate to a company for its true value. This would effectively be putting money into the government's budget deficit." Students said.

Janis Naglis, of the Latvian Privatization Agency, said the agency has not received any proposal that Hotel Riga be sold by the government.

"For the privatization agency to be involved, we need to receive a proposal. This has not occured. If such a proposal were to be submitted, there is a three month wait on the proposition so opposition to such a submission can be voiced," said Naglis. "I have read about Mariots possible offer, but I can not act on such an offer until a formal submission has been made to this agency from the government."

"Riga's City Council or the governemnt basically have to take the initiative if they want to sell the hotel," he said.

If Mariott does put in a bid for Hotel Riga, the current proprieters and the hotel's general director will have to wait and see what the court decides and whether the government or the Riga City Council will have the right to sell Hotel Riga.