In today’s global hospitality sector, size matters. At a time when individual operators can boast upward of 30 brands and property portfolios calculated in multiples of thousands, it’s difficult not to become numb to the endless pronouncements of staggering growth projections across far-flung markets. Such focus on numbers leaves little space for nuance.
Not so long ago, 180,000 rooms and a development pipeline of over 270 hotels would have placed one far higher than 11th in terms of international footprint. And when said organisation declares its ambition to be “one of the top three hotel companies in the world”, the instinctive reaction for a jaded industry-watcher is to write off such a claim as more of the same bullish grandstanding expected of any ambitious multinational operator.
At the International Hotel Investment Forum in early March, Carlson Rezidor Hotel Group formally announced its rebranding to Radisson Hotel Group, the headline component of an ambitious five-year operating plan. In the driving seat is Federico J González, who joined the Rezidor Hotel Group (which is soon to become Radisson Hospitality AB, subject to the board of directors’ approval on 26 April 2018) as president and CEO in May 2017. He previously served as CEO of Carlson Hotels (now Radisson Hospitality, Inc) in the US. González also chairs the recently formed global steering committee, a body that seeks to ensure strategic alignment, and forge a deeper level of collaboration and communication between the two leadership teams.
“Top three” should not necessarily be interpreted as a numbers game, he insists, when we meet at the May Fair Hotel in London’s West End. “It’s much more a question of mindset. We’re not talking about rooms; it’s that if any guest, talent or investor is asked to name a hotel company they’d like to be in business with, Radisson Hotel Group is the first name they think of. The idea is to create a vision that is challenging and aspirational, yes, but at the same time achievable. It’s a question of legacy: when you finish here, what do you want to leave behind? That must be about more than figures.”
Name of the game
Recognition is a lot easier to come by when people know what to call you and it’s somewhat surprising that more of an effort has not been made to leverage the power of the Radisson brand group-wide until now. This can partially be put down to some uncertainty at the top. While the strategic partnership was launched in 2012, in December 2016, Carlson Hotels was purchased by Chinese conglomerate HNA Tourism Group and, with it, Carlson’s 51.3% stake in Rezidor. An additional 19.1% was acquired by HNA in October 2017, lifting HNA’s overall stake to 70.4% and laying the groundwork for far closer strategic alignment.
“When I arrived, it was clear from day one that the only way for Carlson Hotels and Rezidor to execute true, meaningful change was through a deep diagnostic of the two companies, on similar principles and framework,” explains González. “Historically, the two cultures have been quite different and there are some differences that we don’t necessarily need to change. But our brands, the IT strategy, revenue management, the marketing, sales, membership programme, these are all things that can and should be brought together. From a communications point of view, we’re one company, not Carlson or Rezidor; it’s Radisson Hotel Group.”
For a new chief executive, delivering real change is never easy and gaining full commitment from across one’s leadership teams is a particular challenge. While the Rezidor Hotel Group had undergone dramatic growth over the past few decades, it’s easy to forget that, upon his appointment, González was only the company’s third CEO in almost 30 years.
“The initial period is a learning process, during which you come across good and bad surprises,” he says. “But you can’t act alone and must involve people. It needs to be made clear that this is not a question of any individual being judged; it’s not personal. We’re looking at where the company is, where we want it to be and what needs to change to get there.
“One of the great surprises has been the willingness among our teams to embrace the process. They can see that this is not political or change for change’s sake; we’re not just saying what we think people want to hear. We must be realistic as well as ambitious. When you develop a mindset of honesty, it makes talking about change so much easier.”
Growth plan
The plan itself consists of 25 business initiatives predominantly focused around revenue growth, operating margins, enablers and scale. It incorporates new brand architecture, including the retagging of luxury offering Quorvus Collection as Radisson Collection – the May Fair Hotel is a flagship property – and re-establishing the upscWWale Radisson brand in EMEA – the focus in recent years has been primarily on the upper upscale Radisson Blu.
Across the region, 13,000 new rooms have been targeted and the emphasis has moved from asset light to ‘asset right’ organic growth, with the operator renewing its focus on entering lease agreements in mature markets. The ambition is for 6–7% annual revenue growth between now and 2022, 13–15% margin EBITDA and 6–7% margin net profit by the end of the same time frame. Phase one of the plan runs between now and 2020, and focuses on laying the foundations. Phase two, labelled ‘exponential growth’, is where González and his team will look to drive revenues and margin gains above historic rates.
‘Every Moment Matters’ is now the signature service philosophy across all areas of operations and strategy of Radisson Hotel Group and one wonders the extent to which Radisson’s elevation to umbrella brand status necessitates a fundamental shift in its meaning. González acknowledges that Radisson must carry more weight, but counters that the process has refined rather than redefined.
“One of our key obsessions during this process has been asking ourselves what Radisson stands for as a company culture,” he explains. “Capturing that is very difficult. Finding a sentence that speaks to everyone, says what we want to be and marks what makes us different. We instantly saw the potential of that line, ‘Every Moment Matters’, as a driving principle across the group. I was obsessed about finding things that needed to change, yes, but I was also committed to celebrating and elevating the positive things that perhaps weren’t being used to their fullest extent.”
Partnership and collaboration
Existing guests, colleagues and owners must be brought along on this journey, but the latter group can be particularly reluctant to change, and González acknowledges that talk of reform and investment often elicits suspicion. The evening prior to our conversation, he was meeting with an owner elsewhere in central London and was running out the door for another têteà- tête as soon as we were done.
“You tell your owners that you’re looking to become top three in the world, that you’re going to emphasise marketing and revenue generation, controlling costs; they can certainly see the benefits in all of these things. Then it’s a question of convincing them you can deliver,” he says. “But this is a partnership, and they need to see that my door’s always open and I value their input. Ultimately, it will be the teams that deliver 99% of the solutions, but if they need to speak to me, they have my number.”
This is not hyperbole – unlike many chief executives, González’s business card includes his direct line – and communication will be particularly important during the initial phase of the strategy as investments are made and foundations laid. “The first three years [are] where we need to make the revenue management and IT system right, put the teams in place, change the mindset in commercial and sales, get the branding right, define the room types. It’s a long list and there’s a lot to do,” he explains.
“We have to be honest about the short term impacts of investing and have a full understanding of where the results are going to come from; when and what we are building towards. It’s all very well to make projections over the next five years, but too often one doesn’t see concrete things being done in marketing, sales, pricing, systems and so on to make those predictions a reality. A five-year plan needs to lead with definable actions, not numbers. The numbers are a result of the actions you take.”
Defining the group’s “owner value proposition” as an ability to be “the best in service, cost and service-cost ratio” is a major component of the overall piece, but the leadership team has also identified 40–45 “brand-damaging” properties that it will exit, some of which, González acknowledges, are the result of owners unwilling to make the requisite investments to bring their properties up to the new standards. “We need to be much more disciplined about what does and doesn’t belong,” he says.
In terms of guest experience, a lot of focus is being put into what he calls “the brilliant basics”, reviewing and refining touch point amenities across all brands and properties, and hotels better leveraging the locales in which they sit.
Back to basics
Having been in the vanguard of operators seeking asset-light growth in fast-growing economies, there is also something of a back-to-basics approach when it comes to the sorts of development deals González and his team are pursuing. “When we made the diagnosis, it was clear [that] opportunities in key markets had been missed because of a lack of flexibility,” he explains. “Looking around Europe, there are so many destinations where we could and should be bigger. When you don’t have a track record in a market, the right management contracts and franchise agreements can be tougher to come by and this, again, is where a change in mindset is necessary. It’s not always about the number of hotels, but understanding the value of individual properties. A successful lease is a lot more profitable than multiple management or franchise contracts.”
González insists that this is not a rejection of previous strategy, but building upon what has gone before. Emerging market growth will continue in Eastern Europe and MEA through the asset-light model. In Western Europe, Germany, the UK and Italy are of particular interest, along with a willingness to invest in identified target cities. The overall balance will see a little over half the portfolio under management contract, with the remaining properties evenly split between lease and franchise.
Looking at the revised brand architecture, most bases are covered, but a noticeable gap remains in the mid-scale segment. Might we see the launch of something new in the foreseeable future? “It has been discussed, but nothing should happen until we’re truly ready and I see so much opportunity in the segments we already operate,” González answers.
“The big players have so many brands, it can be difficult to articulate their true essence. We need to ensure that any brands we operate have a clear and tangible identity. Get that right and we can be the operator that’s closest to the consumer.”
The formation of Radisson Hotel Group is clearly a major component in that move, but brand awareness is only valuable if people are talking about you for the right reasons. González appreciates this nuance, and it is his passion for reforming the systems, processes and mindset underpinning it all that’s particularly striking. There’s a lot that needs to be done in order to get there, but here is a chief executive clearly committed to making every moment matter.
