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renovation

Moscow's Pekin Hotel, left, and the Copley Plaza in Boston. Both are being renovated by Fairmont Hotels.

The location of Moscow's Pekin Hotel couldn't be better. Finished in 1955 to designs by Soviet architect Dmitry Chechulin, its Russian Baroque facade overlooks Triumfalnaya Square and central Tverskaya Street, which leads to Red Square and the Tchaikovsky Concert Hall.

Over the years, the hotel has been neglected; offices of the KGB occupy part of the building. But a new partnership with Toronto's Fairmont Hotels & Resorts Inc. promises to return the Pekin to its former charm.

Since 2006, Fairmont has brought building restoration, synonymous with the brand in Canada, to some of the world's most historic and luxurious hotels. Twinned with the company's move to an asset-light strategy, the projects have helped cement it as a leading international brand.

"The mere fact that we've been through it all before in similar restorations at the Banff Springs Hotel, Château Frontenac and Chateau Lake Louise means we're well positioned to take on these projects," says George Lagusis, Fairmont's senior vice-president of design and construction.

"In major centres, such as London or Paris, you often have to deal with an iconic property if you want to be in a prominent location," he says. "There just isn't enough vacant land."

Having helped oversee the nearly $350-million restoration of the Savoy in London, completed in 2010, and similar renovations at the Plaza in New York and Peace Hotel in Shanghai, Mr. Lagusis sees a lot of potential in the Pekin.

"It's a very attractive hotel," he says. "The Chinese gave it to the Russians, and you can see that influence in its interior design." Working with the building's owners, Russia's HALS-Development, renovations will highlight the Chinese motifs and update the building's infrastructure, Mr. Lagusis says.

Renovations will start in 2013, and the finished project will sport a new 7- or 8-storey addition, a spa, 236 guestrooms and 950 square metres of meeting space.

Fairmont chief executive officer William Fatt sees Moscow as a logical next step for Fairmont. "I don't think most people realize how large this city of more than 10 million people is," he says. "Increasingly, it's a tourism destination. Russia's economy is weighted to oil, gas and other natural resources. So there's stability there."

As plans for the Pekin get under way, another Fairmont restoration project is just winding down. Rooms at the Copley Plaza in Boston are being updated along with the hotel's notable wood-panelled Oak Room restaurant and bar. It will open in time for its centennial this summer.

"We've combined the bar and restaurant, and opening up the space has contemporized it," says Mr. Lagusis.

None of these projects has been easy, he says. "You have a budget and schedule, but once you start looking at the infrastructure behind those old walls it's completely different."

The $20-million restoration of Copley Plaza, however, is small potatoes compared with the $100-million the company expects to be spent to restore the Pekin, or, say, the cost of refurbishing the Savoy. Fairmont has fronted only a small fraction of the cost of each project, says Mr. Fatt, with each property's owners putting up the bulk.

"Mid-decade there was a realization that owning hotels, the actual bricks and mortar, would be difficult for us to do if we wanted to expand internationally," he says.

So the company began selling off its assets, such as Chateau Lake Louise and Banff Springs, and focused on hotel management. "The world is a smaller place these days and the likelihood that we could remain just in Canada and grow our profitability wasn't happening," he says.

Fairmont approached the owners of celebrated, internationally known hotels and began forging management contracts of 30 to 50 years.

"Owners of these icons don't have the same feel and focus on what it takes to maintain these properties over the long-term," says Mr. Fatt. "So we work closely with them on restoration projects to make sure they reflect the quality of our brand."

Fairmont took up this strategy at the right time. "The financial crisis was very hard on the hotel industry, with a 25 per cent drop in revenue," says Mr. Fatt. "But we now have a broader economic base."

Fairmont has done a superb job developing this long-term strategy, says Bill Stone, executive vice-president of the property development consultant CBRE Hotels Canada. "These long-term management agreements are taking a lot of real estate off the balance sheet," he says. "The asset side of hotels is very capital intensive and I think the strategy allows management to focus on operations of the company."

Mr. Fatt says Fairmont is looking to fast growing regions such as Asia and the Middle East for its next opportunities.

But despite the complexity of restoration projects and the years it takes to complete them, historic properties will continue to be an essential strand of the company's DNA.

"They bring to guests the romance of the old," says Mr. Lagusis. "And while they may not be wonders of the world, we get lots of visitors coming in just to admire them."

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