BISNIS Interview

Advocacy Center Helps U.S. Companies Compete Globally

The U.S. Department of Commerce's Advocacy Center (www.export.gov/advocacy) coordinates U.S. Government resources and authorities in order to level the playing field on behalf of U.S. business interests as they compete against foreign firms for specific international contracts or other U.S. export opportunities. Daniel Bloom, who has been director of the Advocacy Center since 2002, has had a long and distinguished career in international banking, international trade and project finance consulting, and government service.

How does the Center help U.S. companies, especially small and medium-sized enterprises (SMEs)?

The Advocacy Center was established more than a decade ago to - as you say - level the playing field for any eligible U.S. commercial interests competing for export opportunities in the international marketplace. That assistance is most frequently provided by senior U.S. Government (USG) officials urging their foreign counterparts at appropriate opportunities to manage open and transparent commercial competitions, to evaluate all proposals fully and fairly, and to award contracts based solely on the technical and commercial merits of competing offers.

At any given time, the Center's regional project managers are coordinating approximately 250-300 pending advocacy requests worldwide. Although many requests are filed by large U.S. commercial interests, approximately 25-30 percent are submitted by SMEs. Indeed, the universe of SMEs is the target audience of the Advocacy Center's ongoing outreach efforts. In addition, because most SMEs lack the human and financial resources available to their larger commercial counterparts, the Center launched several new initiatives in the last couple of years to assist SMEs as they compete for specific export transactions overseas. Our primary objective was to leverage USG export promotion programs on behalf of SME clients as soon as they contacted the Advocacy Center requesting traditional trade advocacy support.

One recent example involves a small U.S. architectural firm that was competing to design the expansion of Beijing's International Airport complex. On receipt of the company's USG advocacy request, the Center forwarded the application to U.S. Export-Import Bank (Ex-Im Bank) so that agency could issue a concurrent and timely financing letter of interest, demonstrating to Chinese decision-makers that the U.S. competitor was already identifying sources of financing for the project. In conjunction with that referral, the Center also consulted with colleagues at the U.S. Trade and Development Agency (TDA) to arrange for a training grant that would be issued contingent on Beijing's selection of the U.S. firm's design. While the U.S. competitor came in second (winning a large financial prize from the Chinese in the process), the near-win gave the firm the confidence to pursue a separate design competition for the terminal complex at the new Shanghai-Pudong Airport. Once again, the Advocacy Center coordinated a similar package of USG support and, happily, the SME was awarded that contract. A similar scenario involving Advocacy Center assistance could be played out with U.S. companies interested in pursuing contracts in Eurasian countries, as long as those countries are eligible for Ex-Im Bank financing.

Tell us about your initiative with Ex-Im Bank and other new initiatives that assist U.S. companies.

As suggested in the example above, the Advocacy Center and Ex-Im Bank co-signed a Memorandum of Understanding (MOU) covering joint export promotion efforts in February 2003.  Under the MOU, each organization assists its SME applicants by referring them to the other organization for either advocacy or financing services, thereby leveraging USG export promotion efforts on behalf of SME clients.

This effort dovetails with others we've undertaken with partner agencies at the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, and the Private Export Financing Company (PEFCO), collectively identified as Early Project Development initiatives. Our motivation in designing and launching these initiatives was to front-load USG trade promotion services - whether technical or financial - on behalf of current and potential U.S. commercial interests, providing them with the resources to compete most effectively against corresponding foreign commercial interests in the international arena. As you might imagine, many of those companies are based in countries that devote far more of their national resources to support their locally based exporting enterprises.

In addition to Early Project Development, the Advocacy Center also created and launched several other new initiatives in the past 24 months. Among them are the Caspian Basin Initiative, which promotes to U.S. exporters the growth in energy sector marketing opportunities in Central and Southwest Asia - particularly in connection with the exploration for, recovery and transport of, oil and gas natural resources; and, as I mentioned earlier, the SME Advocate Initiative which formalized the Center's long-standing outreach efforts to that business community by naming a senior staff member as the primary point-of-contact within the Center for SME advocacy issues.

The Advocacy Center recently added the U.S. Commercial Liaison function at the Multilateral Development Banks (MDBs) to its portfolio of activities.  How has that expanded your mission and abilities?

Given that each of the U.S. Commercial Liaisons at the MDBs is charged with providing financing for development projects in targeted countries and geographic regions, the U.S. Commercial Liaisons maintain important information about future marketing opportunities of interest to a broad cross-section of U.S. commercial enterprises, particularly to the SME business community. Posting the publicly available information about these opportunities on appropriate Advocacy Center and Commercial Service Web sites certainly enhances the chances that U.S. companies will be able to compete for the specific transactions and projects financed by these institutions.

Re-assigning the U.S. Commercial Liaisons to the Advocacy Center clearly expanded our mission beyond that of simply leveling the playing field on behalf of U.S. commercial interests competing for overseas business transactions. It has provided us with the ability to expand the services we offer to current and future client companies, and it has challenged us to think and act "out of the box" as we integrate these program functions and promote the new services to our stakeholders. As you know, the most recent of these efforts was the April 2005 Open the Banks event we hosted at Commerce headquarters (see inset box).

Business Traveler Beware:
Moscow Facing a Shortage of Quality Hotel Rooms
by Alla Mavrina

Moscow's hotel services sector has grown dramatically over the last five years, but demand for Western-standard accommodations still far exceeds supply. The recent demolition of several major Moscow hotels and the busy summer tourist season are expected to exacerbate the shortage of quality hotel rooms in the city in the short-term. Although the situation with hotel room availability is expected to improve in the long-term, U.S. and foreign companies planning events or travel to Moscow should plan their trips carefully, reserving hotel rooms and conference facilities well in advance. 

Moscow Hotels Overview

The vast majority of hotel infrastructure development projects implemented in Russia in the past five years have taken place in Moscow, which attracts over 2.5 million tourists annually. However, the Moscow hotel market is still not able to accommodate the growing number of business guests and tourists. Moscow has some 170 hotels that can accommodate about 70,000 guests. Currently, only about 5,000 Western-standard hotel rooms are available in Russia's capital city, compared with more than 37,000 in London and 11,000 in Paris. 

The Moscow hotel market can be generally divided into two groups: Western-style and Soviet-style hotels. Some world-renowned hotel brands have entered the market and represent the upper-tier hotel niche. This includes the Ararat Park Hyatt, National Hotel, Baltschug-Kempinski, Marriott Grand Hotel, Marriott Aurora Royal, Renaissance, Metropol, Radisson-Slavyanskaya, and Sheraton Palace. The mid-tier niche is represented by such hotels as Savoy, Marriott-Tverskaya, Novotel, President Hotel, Marco-Polo Presnya, Golden Ring, Mezhdunarodnaya, Holiday Inn, and Katerina.  There are also about a dozen decent hotels that represent economy or budget hotels. The remaining properties fall into the category of Soviet-style hotels and cannot be recommended for business travelers. 

Major four and five-star properties are located in the center of Moscow. Within the last three years, the rates for international quality hotel rooms have risen by about 30 percent. The average cost is now just under $200 per night. The occupancy rates in Moscow have risen as well from 57 percent to nearly 78 percent - one of the highest rates in the world. Hotels in Moscow now have the benefit of high demand in setting prices.

Recent Hotel Development

The potential of this industry in Moscow has caught the attention of investors, and a number of new projects were recently launched. Although the construction of four and five-star hotels in the central part of the city continues, the highest level of demand is for quality three-star and economy hotels, which can be equally distributed throughout other city districts.

The most recently implemented project is the opening of a 12-story Holiday Inn (Moscow Lesnaya) near Belorussky Station in central Moscow that took place in March 2005. It features 301 rooms, including 17 suites, and large conference facilities. It became the second Holiday Inn in Moscow (Holiday Inn Vinogradovo Hotel is located five kilometers north of Moscow). The new hotel was opened under a franchise agreement with a Russian company.

The Holiday Inn Moscow Lesnaya is the largest hotel to appear in the city since the opening of the 386-room Marriott Grand nearly a decade ago. The Swissôtel, another top-end hotel brand, plans to open a 34-story facility in June 2005. It will be located in the heart of the booming business district around Paveletskaya metro station in central Moscow. The 140-meter hotel will be a part of the Riverside Towers complex that encompasses 52,000 square meters of office space. The Swissôtel will mainly target businesspeople. However, the opening of these new hotels will not satiate the growing demand for quality accommodations nor resolve the current hospitality crisis in Moscow.

During the last two years, Moscow's two largest hotels, Intourist and Moscow, were razed but have not yet been replaced. The three-star hotel Rossiya, with a capacity of 2,700 rooms, is scheduled for destruction in 2006. It will provide room for a new multifunctional complex that should include 2,000 rooms when it is completed. The demolition of this hotel is very critical in terms of overall room capacity in Moscow since it accounts for a large percentage of Moscow's tour group business.  Other Soviet-era properties scheduled for demolition or reconstruction include Mir, Minsk, Peking, Tsentralnaya, and Kievskaya.

In August 2004, Aerostar Hotel was closed due to a management dispute and is currently not in operation. Savoy Hotel, which has been operating in Moscow since 1913, is under reconstruction to upgrade its facilities. Previously a four-star property, it will now become a deluxe, five-star-plus exclusive hotel. The rooms are being renovated and enlarged and the building infrastructure is being modernized. The renovation is scheduled for completion by May 2005, and the hotel will have 70 rooms instead of the 84 it had previously. In total, due to demolition or reconstruction works, Moscow will lose about 6,000 hotel rooms, which is about 10 percent of total capacity. 

On the Horizon

The long-term plans for the development of the hotel industry in Moscow forecast new hotels and additional hotel rooms to meet demand. However, as a result of the recent closure of several large hotels, and factoring in the upcoming busy summer season, there is currently a shortage of hotel rooms in Moscow. May and June are very hectic months due to multiple conferences and trade events, as well as official and business visits taking place in the city. All U.S. and foreign companies and businesspeople traveling to Moscow are highly advised to take care of travel logistics as early as possible. Moreover, the situation of low availability of hotel rooms is expected to continue through late Fall.

Alla Mavrina is the BISNIS Representative in Moscow.