MARRIOTT PUSHES ARMENIA ENVELOPE

Soviet architecture can be imposing but clumsy. When the overlay is American entrepreneurship, however, it can be astonishingly fresh. Take the Armenia Marriott Hotel, a 225-unit property on Republic Square in Yerevan, the nation's capital.

Built in the 1950s, the hotel became a Marriott last June following a $42-million restoration by the Boston-based AK Development investment group led by Staples office products chain founder Paul Korian.

Armenia's first internationally branded hotel and largest U.S. investment, the Armenia Marriott posted 30-percent occupancy in January, which General Manager Katrin Hentszel says is good in a country still struggling toward capitalism. Armenia became independent in 1991, two years after an earthquake rendered its infrastructure even more fragile.

In 1997, the Armenian government decided to privatize hospitality, so Korian contacted a friend with lodging experience to explore the possibility. Meanwhile, Merrill Lynch solicited potential investors in the hotel, which was part of the old Soviet Intourist system.

“One of the conditions the government put on bidders is they would have to renovate the property to international standards and bring in an international brand,” Korian says. He and his associates — all of Armenian descent and eager to modernize the land of their roots — talked to Hyatt, Westin and Hilton, finally selecting Marriott because of its history with Korian's lodging-investor friend. AK acquired the hotel in 1998 for $10 million, and two years later, secured $18 million in renovation financing from the Overseas Private Investment Corp. and $5 million from the World Bank's International Finance Corp. AK kicked in the remaining money needed for the project.

Then AK had to acquire contractors. “We were trying to build an American building in a place where there are no materials, no knowhow, no skills,” Korian says. Finally, AK found an Armenian who had built offices and shopping centers in California and “could bridge the gap between understanding western requirements and providing local knowledge and labor.”

During renovation, Marriott put a management team in place to run the hotel, which never closed; ironically, construction delays helped in training staff, all local except for top management.

“Everything we sort of take for granted in the U.S. had to be sourced from somewhere,” Korian says. “We had to outsource a lot of expertise, too.”

Katrin Hentszel, GM at the Armenia for 18 months, trimmed staff from 600 to 200. “The way it worked previously was people came to work and got paid for being there,” she says. The 16-year Marriott veteran notes there are challenges for Armenian hospitality: The Turkish border to the west and the Azerbaijan border to the east are closed, while those to the north and south — Georgia and Iran — remain open.

In addition, it's cold in winter, and “sometimes transports by land don't get through because there is snow in the mountains,” Hentszel says.

Nevertheless, tourists are beginning to patronize the hotel, she says. Most are travelers of Armenian descent. In the summer, when the hotel rolls out its “very, very big coffeehouse, it's really the place to be.”

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