Don’t go there without this Moscow attorney

Written by editor

There are dozens of reasons for hotel, travel and tourism investors, tour operators, and travel agents to look to Russia and other Eastern European countries for growth and expansion opportunities.

There are dozens of reasons for hotel, travel and tourism investors, tour operators, and travel agents to look to Russia and other Eastern European countries for growth and expansion opportunities. This strategically important but complex marketplace has never been easy to navigate, and without an experienced attorney acting as tour guide, hand holder, negotiator, legal and tax guru, new investors are likely to sink rather than swim, spending their twilight years in a Siberian gulag.

The Go To Attorney. Scott Antel.

Antel was in New York City earlier this week, and I caught up with him between coming/going to airports and meetings with his law firm, DLA Piper. He is the type of lawyer smart executives bring onboard as soon as visions of Russian vodka, caviar, and Rubles begin to dominate daytime dreams.

What does Antel bring to the table that other lawyers practicing in Moscow do not? The first OMG is his rock-star looks! He appears to be a lean mean fighting machine, and if Antel decides to leave the law, I am certain he would find a lucrative career doing television crime/spy shows, and centerfolds for GQ magazine.

Born in the USA and educated domestically and internationally, he has worked for American and European accounting and law firms, bringing a wealth of international knowledge and experience to the table. He also is multi-cultural and multi-lingual. Having lived in a variety of countries, he has developed a global network of business and personal friends and appears as comfortable romancing Russian women as he is negotiating with Soviet hotel property owners.

Leadership Award.

Antel was recently presented with The Leadership Award by the Russia & CIS Hotel Investment Conference. The award is designed to celebrate an “…individual who has made a significant contribution to the development of the hospitality industry, leisure and tourism sectors within Russia and the CIS,” said Jonathan Worsley, Bench Events Chairman, and Co-organizer of the RHIC, “Scott is extremely well qualified as this year’s award winner, and his contributions over the years have truly made a difference to the professionalism of the hospitality industry in the region.” The winner is selected by the RHIC Advisory Board, which includes key hotel industry leaders with vast hospitality experience from the region.

Currently, Antel is a partner in DLA Piper’s Moscow office and heads the Hospitality practice for Russia, the CIS, and Turkey. He is also a legal advisor to more than 25 Sochi-related hotel and Olympic facility projects. He is recommended by the Chambers Europe, Legal 500, and appears in the 2010 Who’s Who Legal Directory. His name is also found on the Best Lawyers list for Russia (2010, 2011).

Antel obtained his BA in English at St. Olaf College in Minnesota, did graduate work at Manchester College (Oxford, UK), obtained his JD from Case Western Reserve University (Cleveland, Ohio), and holds a Masters in Taxation and Trade from Fordham University (New York, New York). He is a member of the New York State Bar, the Ohio State Bar, and the Law Society of England and Wales.

Russia is Risky.

As an experienced international attorney, Antel quickly acknowledges that Russia can be hazardous to one’s financial health and not for the faint of heart. Since he has been doing business in Russia for over 19 years, there is not much that he has not seen or experienced. As honest as he is charming, he warns investors that Russian hotel transactions are not like any other deals. Compared to other business executives, Antel finds that Russian sellers are unsophisticated, making it easy for international transactions to go awry. Secrets and mistrust dominate boardrooms and it takes patience and persistence to develop transactions that will remain viable and lead to a done deal.

Antel suggests that business executives and accountants forget clear title without tax consequences, forget universal bookkeeping standards, do not even think about inventory lists, and don’t waste time looking for past operational performance information – the data does not exist. To make transactions even more convoluted, Antel notes that the hotel properties are likely to be held by one or more levels of offshore holding vehicles (typically Cyprus).

Shares rather than asset transactions are standard as the tax treatment may allow for a tax-free sale of the shares in the Russian company. Antel cautions that not every Russian wants to evade taxes as the tax authorizes are becoming more professional; however, it is likely to be a waste of time to look for contractual documents that include ordinary levels or warranties, holdbacks, and other buyer protection contingencies. There may, in fact, be no warranties at all. Frequently the seller will use the buyers “due diligence” assessment to support their no-warranty position.

Recommending turnkey transactions, Antel maintains that it is the seller who should be held responsible for delivering the property and company along with operating licenses, property ownership permits, or leasehold extensions and other government approvals prior to closing or as a part the purchase price holdback provision. He has found that the Russian seller usually understands the local system and the political process – so this is an asset better left in the hands of the seller. Once the paperwork is in place, buyers have to move quickly; it is likely that there are many potential buyers waiting in the wings who are willing to pay a higher price with fewer conditions.

Winter Olympics Russian Style.

Antel represents many interests developing the 2014 summer games in Sochi, located on the Black Sea. Not only is the destination attractive in the summer, it has great appeal for winter athletes as well; the weather is sub-tropical on the coast, and the mountain resort venues of Krasnaya Ployana are attractive for winter sports.

Antel’s quick take on the Sochi destination as “shabby” leaves investors and developers with a visual that could be either attractive or depressing. The perspective is influenced on whether there is a post-Olympic life for the destination. If the tourist boards direct their budgets to inviting tour operators and MICE markets to Russia instead of using funds for shopping in Cannes or during ITB, Antel thinks that a future for Sochi is possible. He also sees Sochi as a good destination for national sports centers, national team training facilities, as well as for gaming and themed amusement parks.

In order to enhance the attractiveness of Sochi, Antel recommends that the government either relax or remove visa restrictions. He finds that the Russian system’s costly and the archaic bureaucratic visa process damages Russian tourism. He also encourages improved transportation to Sochi – increasing the frequency of flights, while lowering the cost. He also hopes that the routes from European cities to Sochi will attract budget airlines to add flights and frequency.

If Sochi is to become all that it could be, hotel, travel, and tourism employees will have to be educated and trained to work in this industry, and be paid salaries that will enable them to live in decent housing. At this time, there are no hospitality academic programs, and Antel recommends that academic joint ventures with Western and American colleges would make good business sense.

There is an estimated need for 5,000 new hotel rooms in Sochi, and according to David Jenkins, Director of Horwath HTL, “It is definitely a boom time in Sochi, which will also help develop other Russian Black Sea resorts such as Anapa and Gelendzhik. There is no turning back now.”

Take Away.

Russia currently attracts approximately 22,281,000 (2010) visitors with approximately 4.1 million (2010) visiting Moscow. Most tourists arrive from Germany, France, Italy, Spain, Britain, the United States, and China. By contrast, London attracts 18 million tourists, Berlin – 3.2 million, and Vienna records 2.8 million visitors. The Former Soviet Union is expected to be among the top 10 most visited destinations by 2020, attracting 3 percent of the world’s tourist market.

The country currently has numerous high-end hotel representation that includes global brands such as the Ritz Carlton, Marriott, Hyatt, Swissotel, Radisson, and Kempinski; however, the Aginsky Consulting Group suggests that there is unfulfilled demand for quality three-star and economy hotels throughout the country. There is also a need for long term-residence accommodations with approximately 250,000 foreign business people permanently working or on extended stays in Moscow (2004).

Having lived and worked in Moscow, visiting the Golden Ring and investigating hotel opportunities in Moscow and Sochi, it is clear that the locale will be developed for tourism. The only remaining decision is when (not whether) to contact Scott Antel ([email protected]) to get the deals started and successfully completed.

About the author


Editor in chief for eTurboNew is Linda Hohnholz. She is based in the eTN HQ in Honolulu, Hawaii.