Russian billionaire and “traitor of Kuzbass” buys hotel in Germany

Entrepreneur Vladimir Melnichenko, who previously engaged in the coal business in Kuzbass, acquired a five-star hotel Louis C. Jacob for 40 million euros in an elite district of Hamburg (Germany).

According to German realtors, the purchase price of the old hotel turned out to be lower than in the early 1990s when the cost of reconstruction and renovation was estimated at more than 100 million German marks (the estimate was conducted before the introduction of a single currency in the European Union).

Vladimir Melnichenko acquired the hotel back in 2015, but this has only become known now. A non-disclosure agreement was concluded between the parties to the transaction. Direct participants were also obliged to maintain confidentiality.

— Not only management, but also ordinary employees were aware of the change in ownership, — confirmed a former employee. According to her, Melnichenko visited the hotel several times with his family and a friend. A diploma engineer with gray hair and mustache and noticeable eyebrows conducted himself nobly.

Employees who saw him describe Melnichenko as a pleasant and modest person. They say that the Russian found pleasure in the hotel and therefore manages it.

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Since the acquisition, the businessman has already invested certain funds into the hotel.

In particular, 25% of 85 rooms (21 suites and 64 regular), the living room, bar, and restaurant have been renovated, new furniture purchased. The kitchen will be renovated in the future.

— Investments for the renovation of the remaining rooms and adjoining areas are planned. The money will also go towards the purchase and development of a network of computers and software, — said a representative of the managing company DSR Hotel Holding.

He did not specify how much money has already been invested in the renovation and modernization by the new owner.

The rent for managing the hotel is 1 million euros per year.

The cost of staying at Louis C. Jacob starts at 330 euros per day for a single-room size of 27 square meters, and in luxury rooms ranging from 60 to 100 sq. meters with views of the Elbe River, the historic part of the city or the park, the price ranges from 885 to 1635 euros per day.

Previously, the hotel belonged to the Horst Rahe company. However, due to the crisis, the creditor bank asked the company to repay the loan taken to acquire the hotel early. The loan was repaid, and the hotel became the property of the offshore Jacob 1 Limited in Malta, which is controlled by Vladimir Melnichenko.

According to Hotelier.PRO chief editor Andrey Ryabov, the hotel will not pay off before 2025.

— Hotels worldwide do not pay off as quickly as offices or housing. A good term for a stable economy is considered to be 7-8 years. In Russia, it is not less than 10-15. Germany is a country with an established hotel infrastructure; moreover, the country’s hotel market is on the rise, — Andrey Ryabov told Life.

According to him, in all of Western Europe over the first seven months of 2017, there is an increase in occupancy, room rates, and, as a consequence, an increase in profitability from each room.

The competitive advantages of the hotel include its advantageous location.

Louis C. Jacob is a historic hotel that is more than 200 years old. It is part of the luxury collection, Leading Hotels of the World, which gives it additional marketing advantages in terms of attracting guests. The hotel is small even by Western standards (85 rooms). Guests rate its service at quite a high level. Ratings on Booking.com are 9.0. The average rating in Hamburg is 7.4. The hotel’s competitive environment is good; there are no large chain hotels nearby.

— The payback period of the hotel will depend on what kind of work the Russian entrepreneur intends to conduct in it and how much money to invest. Judging by everything, the hotel’s room stock and infrastructure are worn out — this is indicated by the renovations already carried out and plans for new repair work. Moreover, renovating a historic hotel is a costly process, during the repair, rooms do not generate income. The kitchen renovation raises concern about the hotel’s operation in the previous format, — added the chief editor of Hotelier.PRO.

By the end of 2016, Vladimir Melnichenko occupied the 179th place in the Russian list of billionaires by Forbes; his fortune was estimated at $450 million.

Vladimir Melnichenko is known as the founder and former co-owner of one of the largest producers of coking coal in Russia — the holding "Sibuglemet". Mr. Melnichenko sold his stake in "Sibuglemet" in 2013, the amount was not disclosed. But almost a year later in his public speech, the governor of the Kemerovo region Aman Tuleyev stated that Mr. Melnichenko earned $700 million on this deal.

At the same time, having changed his place of residence, the businessman paid income tax to the budget of the Moscow region, due to which the Kuzbass budget did not receive more than 2.1 billion rubles, which caused outrage in the region’s political establishment.

Governor Aman Tuleyev called Vladimir Melnichenko a "traitor to the interests of Kuzbass", characterizing his act as immoral, inhuman, and amoral.

— It was in Kuzbass that Melnichenko became one of the richest people in Russia, using the hard labor of miners, causing irreparable damage to the region’s ecology. In fact, he betrayed his fellow countrymen, — said Aman Tuleyev.