Orco Holds Cards Close To Vest

Fledgling property group with deep pockets plans to grow MaMaison brands in Eastern, Central Europe.

-- Hotels, 8/1/2008

PRAGUE—Orco Property Group, Prague, has spent the past 17 years developing the reputation of its MaMaison Hotels & Apartments as one of the few homegrown hospitality companies to watch in eastern and central Europe. About a year ago, Orco established a 50-50 joint venture financial partnership with AIG Global Real Estate, New York, to further expand its extended-stay and luxury boutique brands. Now Orco has hired the man from AIG who orchestrated the joint venture—Keith Lindsay—to run its hospitality group as the new CEO. Lindsay is keenly focused on driving the business forward.

Lindsay, 45, was previously head of Russia for Accor, COO of Envergure Louvre Hotels and served as vice president for Europe investments for IHG. Now he is in position to run a group with deep roots and brands positioned at the higher end of the luxury hotel and serviced apartment segments.

When asked about the extent of Orco’s hotel pipeline, Lindsay chose to play it very close to the vest.

Keith Lindsay is the man behind Orco’s MaMaison Pokrovka Suite Hotel in Moscow.

“When you are in these shallow, pioneering markets, there is obvious danger when talking about a pipeline, so we try not to because the solid opportunities we can bring to the table are few and far between,” says Lindsay, who will oversee operations and asset management of all hotels and new investments. “We are confidential about specific transactions, but Russia is very attractive. Opportunities are still hard to find, but the potential is enormous. As opportunities emerge in former CIS countries, we will look there, as well. But we are not going into specifics about exactly where we are looking.”

MaMaison’s extended-stay and luxury boutique hotels are niche products and, as a result, Lindsay says it is hard to know whether they will add 10 hotels in two or three years. “Because we are asset managers and investors, we prefer to say it doesn’t matter how many we are going to have,” he adds. “We just want to make sure they are as profitable and attractive to investors as possible.”

Currently, under its MaMaison brand, Orco runs Pachtuv Palace in Prague, the Hotel Le Regina in Warsaw, Andrassy Hotel in Budapest and the recently opened Pokrovka Suite Hotel in Moscow. The portfolio also includes nine hotels in Croatia, including the recently renovated Amfora Hotel in Hvar.

Based on the current economic downturn, which appears to be spreading to Western Europe and touching Central Europe as well, the deal pace for Orco could be rather slow for the next 18 months. “It is no secret times are tough, and getting bank financing, which is a key element of anything we do, is tougher,” Lindsay says. “But we see interesting opportunities, just not the same deal flow from two years ago.”

While the focus will be on developing MaMaison hotels, Orco does work with third-party managers like Marriott International, which manages a Courtyard by Marriott in Prague for Orco. “We want to make sure what we develop fits perfectly with our brand positioning,” Lindsay says. “If it is not a fit for MaMaison, we are very open to going with other brands. We are not beholden to use our brands blindly for every opportunity.”

Orco’s boutique brand tends to work best in well located, older buildings—most likely listed properties. “And we think in this part of the world MaMaison has brand power—albeit small,” Lindsay says.

The same applies for the extended-stay brand, which is positioned at the high end of the segment. “We think MaMaison can cover those two segments, but we don’t want to extend it into select-service brands. We already have excellent brand partners doing that,” says Lindsay, who expects to multiply third-party, select-service opportunities, particularly in Russia.

When it comes to sourcing capital today, Orco has the advantage of being linked to a significant equity partner like AIG. On the debt side, “We are going back to traditional European banks that take deposits and lend money. These are relationship banks we have worked with before and they are still open for business.”

Looking further afield, Lindsay does not see Orco expanding beyond central and eastern Europe in the short term. “We have so much to do in our backyard, where we have worked so hard to be seen as local players. We have tremendously talented people who are established locally. We don’t want to take our eye off the ball and look at what others may see as more attractive opportunities elsewhere. It is too steep a learning curve and we could miss so many opportunities created here.”

Direct comments to: jweinstein@reedbusiness.com