'Doing business in Russia is like getting married'

Visitors to Moscow often lament the shortage of economical hotels, as few of them can afford to fork out $150-$200 a night. James Skinner, a British businessman, came to the aid of the city administration by opening Moscow's first private hostel. His main challenge was to explain to Moscow officials the meaning of the word "hostel".
It is an old building in a narrow lane in the very heart of Moscow. Some time ago, such buildings, composed of shared apartments, were the Soviet version of family hostels. Today, most of their former residents have moved out and these apartments now go for hundreds of thousands of dollars. The ground floors are occupied entirely by upscale restaurants and shops. Oddly, this is precisely where Moscow's first hostel was opened.

The first impression is of just an ordinary Moscow entrance hall. But then, on the ground floor landing, you find yourself in a small gallery, with people walking past carrying bundles of bed linen and steaming saucepans. In a small reception room you discover James, the owner of the place. He smiles and says :"Hi, welcome to Godzillas!"

James's favourite pastime is travelling. When he was young, he visited almost 90 countries with a knapsack on his back. Before coming to Moscow, James had worked for eight years in Singapore. Perhaps the curiosity of an accustomed traveller got the upper hand and urged him to come to Russia in 2002.

"My misgivings about Russia proved entirely unfounded," he says. "What I saw was an interesting country and interesting people with an excellent sense of humour." Soon after his arrival, he married a Russian girl. The couple decided to settle in Moscow because James discovered that every time he stayed in England, he began missing Russia. So he came up with the idea of starting up his own business in Russia's capital. It did not take him long to decide what kind of business it would be. It had to be a hostel.

At a time when Russian businessmen were investing millions in building fashionable five-star hotels, James was struck by the brilliant idea of tackling the problem from the other end.

The hardest challenge was to explain to the city administration what it was all about, as no hostel had ever existed in Moscow before 2005. At first, he constantly ran into problems with the migration service in registering foreign visitors of Moscow.

"We were not on top of the registration rules and several times had to pay a fine for breaking them," James admits. "But we learnt our lesson and never made the same mistakes again."

He believes that the best recipe for success is to comply with the law and that foreign businessmen would be spared a lot of trouble if they only learnt more about the Russian regulations. Once he was almost taken in himself. When he was just starting up his business in Russia, James had to urgently procure a tax inspection statement. Frightened by all these stories about terrible Russian red tape, he contacted a company specialising in such problems.

There he was told that his case was extremely complicated and would cost him $5,000. Shocked by the news, James went to another company, where he was offered a "solution to his problem" for $7,000. Desperate, he applied to the tax inspectorate himself and learnt that the statement he needed cost a mere 100 roubles (£2). Ironically, one of those companies was run by a European, not a Russian.

"There will always be people ready to make money out of your fear and ignorance. Take it as a kind of game and do not let them cheat you," says James.

A couple of years ago, he decided to expand his business and started construction of a new hotel in Suzdal, an ancient Russian city near Moscow and a part of the Golden Ring tourist itinerary. He struggled at first to get a building licence from local officials, who kept hinting that the best way to solve the problem was to pay up. But their hints fell on deaf ears. "I am an Englishman and not accustomed to paying kickbacks to anybody."

Fortunately, the city's mayoral elections resolved his problem, as the new head of the city administration, who was interested in foreign investments, immediately authorised the construction. James's new hotel will open its doors to tourists this spring.

As for Godzillas' guests, they are quite a varied set. The hostel receives many tourists from Great Britain, the USA and Australia and, oddly enough, it is very popular with Russians. One of its loyal clients is a businessman from St Petersburg, who often comes to Moscow on business and chooses Godzillas for its advantageous location and, especially, its moderate prices. At 500-725 roubles a night (£10-15), the rate is a giveaway for a room in the centre of Moscow. No wonder all of Godzillas' 86 rooms are fully booked.

Recently, the hostel accommodated a group of British girl student who came to Moscow to attend the Festival of the Schukinsky Theatre School. British rock musicians and Japanese tourists are regular guests. A US lady professor, who signed an employment contract with the Moscow State University, booked a room for a whole month.

"It is always fun to watch the reaction of people in Moscow for the first time," James muses. "As a rule, they fancy that it is a gloomy and dark city inhabited by unfriendly people and are really surprised when their expectations are proved wrong." He thinks that the number of people who want to visit Russia is growing every year. He is more optimistic than alarmed about the looming financial crisis and hopes that clients will flee expensive hotels to stay at Godzillas. In general, the hostel business in Moscow has proved quite lucrative.

James's tip to those who plan to start up a business in Russia is: "It's like getting married. If you are in doubt, don't do it. But if you are sure it is real love, go for it, without fear."

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