Lotte Hotel Expands into Russia... Franchise Hotel Operation Contract Signed in Sochi

Aerial view of Lotte Hotel Sochi.

[Asia Economy Reporter Jeon Jinyoung] Lotte Hotel announced on the 16th that it has signed a franchise agreement for hotel operation with the Russian construction company Metropolis Group in Sochi, Russia. As a result, the fifth Lotte Hotel in Russia will open in Sochi, where the Winter Olympics were held, in 2025.

This contract is Lotte Hotel's first franchise agreement. It was signed on the 31st of last month (local time) with the attendance of executives from both companies, including Park Heeyoung, General Manager of Lotte Hotel Vladivostok, who visited the site on behalf of An Sejin, CEO of Lotte Hotel, and Anna Nevzorova, CEO of Metropolis. The hotel will be owned by Metropolis Group, and future management will be handled by Lifprime Group, a local company specializing in hotel and residential service management.

A franchise agreement is a form in which the hotel owner operates the hotel directly but pays a fee to a specific hotel brand and receives the brand and operational standards. This model is mainly adopted by well-known global hotel brands. For hotel brands, it is a business model that allows brand expansion and profit generation without separate investment costs, but it is a strategy that is difficult to attempt without securing brand competitiveness.

Lotte Hotel explained that the contract was possible because its capabilities, having successfully operated four 5-star hotels in key Russian cities such as Moscow, Saint Petersburg, Vladivostok, and Samara, were highly evaluated locally.

Lotte Hotel began its overseas expansion in earnest with the opening of Lotte Hotel Moscow in 2010, the first domestic brand to directly participate in the establishment and management of an overseas hotel. Since then, it has broadened the horizon of domestic hotels by operating hotels under management contracts in Uzbekistan, Myanmar, and even the United States, the birthplace of modern hotels, in the chain hotel business field, which was once considered exclusive to developed countries. With this franchise agreement, which has been recognized for its core competitiveness, Lotte Hotel has come closer to the level of a global leading hotel after more than 10 years of overseas expansion.

Sochi, a rare subtropical climate region in the frozen country of Russia, is located between the Black Sea coast and the Caucasus Mountains, offering various water leisure activities and winter sports, making it the largest resort city in Russia. The Lotte Hotel Sochi, scheduled to open at the end of 2025, will be a five-story, 5-star hotel with 181 premium rooms and a private beach. It boasts an excellent location within a five-minute walk to a large shopping mall, a tourist district, and Sochi's largest amusement park, Riviera Park.

An Sejin, CEO of Lotte Hotel, said, "I am proud that Lotte Hotel has established itself as a brand that commands respect overseas in the hotel sector, which has high entry barriers," and added, "We will achieve successful global market penetration through operational services that enhance management efficiency, such as the franchise model."