State Support for Modular Hotels: Laws and Regulations in 2023

Subsidizing modular construction is a federal program launched in Russia back in 2019. Later, during the pandemic period, it saw extensive development. According to the government resolution of April 14, 2020, No. 480, subjects of the Russian Federation could receive compensation for up to 100% of the costs for creating and operating modular hotels for accommodating citizens in self-isolation and treatment for COVID-19. Moreover, the state provided subsidies for the construction and commissioning of modular hotels within the framework of implementing socially significant projects.

My name is Anton Basin,

• I am a Hotel Developer, I create Concepts, design, and open hotels. I have more than 200 projects in my portfolio.
• I've been in the hotel business for 15 years. I worked in the Azimut hotel chain as the Deputy General Manager for development, built and opened the famous Lepota hotel near Moscow.
• I created the Association of Country Hotels, where I am currently the President.
• I am the Owner of BASINN Hotel Development Company.

The current program has been updated and expanded. Today it is used for the development of tourism and temporary accommodation of tourists. For example, in Moscow and St. Petersburg, there is a regulation on state support for small hotels, which includes certain subsidies for construction and repairs. All the information provided below is based on legislation and is dictated by the policy of the resolution of the Government of the Russian Federation dated 24.12.2021.

Main theses of modular construction subsidization

• The government has allocated over 4 billion rubles for financing in general calculations. The amount is large, but considering the number of applicants for subsidization, it is not enough for everyone. Accordingly, financing is carried out on a competitive basis.
• Loans are intended only for fast-erecting hotels and modular-type hotels. Preference is given to applicants who already own a hotel business and plan to expand it. In general, to gain an advantage in the application review process, the number of planned construction objects should exceed 50 rooms.
• Financing is provided on the principle of co-financing – at least 50% of the total expenditure on the construction of the tourist complex must be invested by the business itself, and another 50% can be requested from the government. At the same time, no more than 1.5 million rubles are allocated per hotel room.
• If in 2020 subsidization was only available in 19 significant regions of the country, the program for 2023-2024 aims to provide financial assistance to 44 regions. Priority consideration is given to applications from accommodation facilities located in tourist-recreational special economic zones (SEZ).
• According to forecasts of the Ministry of Economic Development, in 2023, the country should have 3,229 hotel rooms built with the help of the federal investment budget. The plans for the period 23-24 are much broader.
• In 2023, a nationwide competition will be held to select candidates for subsidization. Investment projects will be financed from both the state treasury and with the involvement of private patrons.

Who and how much will receive support under the government program in 2023-2024

If previously subsidies were directed exclusively to the construction, repair, redesign, restoration, and equipment of hotel rooms and hotel buildings themselves. Today, funds can be spent on improving the areas near tourist accommodation or areas preferred by visitors for recreation.

This year, 3.1 billion rubles have been allocated from the budget for the formation, improvement, and further development of coastal recreation areas. Part of the funds will be used to create tourist routes for foreign tourists and visitors to explore Russia’s natural and archaeological treasures. 44 regions of the country can expect subsidies from the specified amount. Approximately 375 facilities will be located in:

• Republics of Altai, Dagestan, Buryatia, Crimea, Mordovia;
• Krasnodar, Perm, Arkhangelsk, Stavropol Krai;
• Belgorod, Novgorod, Kaluga, Tomsk regions, and other regions.

An additional 700 million will be allocated for the formation of camping and auto-camping zones. These funds are intended for:

• Bashkortostan, Ingushetia, Buryatia, and Dagestan;
• Perm Krai;
• Ulyanovsk, Sverdlovsk, Samara, Novgorod regions, as well as the suburbs of St. Petersburg.

An additional 1.55 billion rubles are planned to be spent on subsidizing electronic guides, tourism equipment and rental points, creating new tourism routes, and providing comfortable conditions for people with disabilities. More than 500 projects are planned to be implemented in all the geographical regions listed above.

What documents are needed to apply for government support

Almost every entrepreneur engaged in the hotel or tourism industry in Russia can participate in the selection. The advantages for recipients are mentioned above. If the applicant does not meet the criteria, the collection and submission of documentation will help understand what needs to be done for their development. In the future, this will help participate in similar federal business and tourism support programs.

• Official application to participate in the competition. It is drawn up in any form on a regular or letterhead. It contains the essence of the appeal, the loan amount, justification of the amount, stamps, and signatures.
• Justification of the requested amount. The project estimate is attached, taking into account all the nuances and possible force majeure in the construction of facilities.
• Business plan for the implementation of the investment project. It includes general information about rooms and infrastructure facilities, their cost and profitability, completion date, and more.
• Conclusion on the absence of arrears by the applicant to the Russian budget. Before applying for the competition, it is important to ensure that the businessman has no financial problems with the tax authorities, banks, and other organizations.
• Approval of the location and number of construction objects by authorized bodies. Usually, a permit from the urban planning complex is used. If the facilities are being built in an environmentally significant area or reserve, a document from the authorized PSD authority in the region is requested.
• Economic plan with calculations. The estimate should indicate the expected income from putting the subsidized facility into operation.

The submission of applications will last until May 10, 2023, and the tender results will be announced to the participants no later than May 23. Within a month from this date, contracts will be concluded with the selected candidates, and the promised funds from the budget will be allocated.