Recently two foreign-managed Moscow hotels celebrated their first decade in business. Renaissance Hotel Moscow, managed by the Marriott Group, was among the first foreign-managed hotels in town. But this hasn't saved it from coming almost to bankruptcy. Losses have been mounting, along with the frustration of the Moscow government, which has decided to sell the hotel in the third quarter of 2002. The hotel's debts have been increasing, though no specific figures are available. After bailing the hotel out and re-scheduling its debts, the Moscow City Department of Municipal Properties decided it was best to get rid of the hotel.

The hotel was a hit 10 years ago with expatriates in Moscow, but its fortunes started declining with the arrival of competition. Moscow's northern districts, with the Olympic indoor stadium close by, did not attract as much new business-center and real-estate development as more central areas of Moscow.

"The hotel management did not rise to the challenge and lost its leading position in the market," said a senior Moscow city official who did not wish to be named. "Though the hotel is managed by managers invited from Marriott, the property (Renaissance Hotel) has not performed. This also shows that foreign managers are not always successful," the official said.

The hotel will likely be put on the block along with a dozen other Moscow hotels in 2002. But it is perhaps the only hotel in which the Moscow city authorities will sell a controlling share, which points to lack of confidence in its future prospects.

The other hotel to be relegated to the backwaters is the Aeroflot-owned Aerostar hotel. Its image was tarnished by the bitter dispute between its original promoters, IMP of Canada, and Aeroflot, that dragged on for many years.

The dispute was a test case for Russia, and one of the first instances when foreign investors being forced out of a joint venture fought back. The Canadian investors were, in a way fortunate in their choice of partners. The decision to keep Aeroflot in with a 25 percent equity stake forced the parties to a compromise that also kept the Canadian investors in and, some believe, led to an improved working relationship where the two sides could focus on developing and running competitive hotel operation.

The dispute began in the mid-'90s. By that time, the foreign investors and management (hotel General Manager Andrew Ivanyi survived the carnage through the years) had made the hotel successful, but then the local partners tried to force them out. The dispute took on a bitter and at times ugly turn, with all manner of official inspections and intimidation tactics used against supervisory and management staff. In the end, the foreign partners took the case to international arbitration in Stockholm and won four decisions, all supporting them. But the Russian side simply opted to ignore decisions.

One of the Stockholm decisions ordered Aeroflot to pay a certain sum of money. After failing to execute the decision in Russia, lawyers for the Canadian company IMP tried other jurisdictions such as New York and Montreal that were signatories to the Stockholm Convention on Arbitration. In 1998, IMP launched legal action in New York and Montreal to seize an Aeroflot plane. Canadian Mounties in Montreal seized some equipment from an Aeroflot plane at Dorval airport, leaving it unfit to fly. The inconvenience prompted Aeroflot to resume negotiations and agree to pay the money quickly.

On that note, the two sides patched their relationship back up and looked set to cooperate better, but the public nature of the lengthy dispute turned out to have dealt the hotel's reputation a severe blow. The crisis of August 1998 only added to the hotel's problems. Experts say that Aerostar, despite its experienced management, has not really succeeded in overcoming its past problems and the consequences of the 1998 crisis.