Downturns come and go, but this one feels different. After all, 9/11 and the Great Recession both floored the global hospitality industry, just as local terrorist attacks have intermittently caused chaos from London to Tunis. But when else – since the Second World War, anyway – has the world seen something like this? Hotels across the planet have been shuttered, often by legal fiat.
At one point, 82% of guests claimed that they’d rather stay at home until the pandemic is over. Global travel, the lifeblood of hoteliers everywhere, was practically banned entirely. Spend a bit of time in Elie Younes’s company and the situation quickly feels a little less hopeless. With enough planning, and enough flexibility, hotel companies are not only proving that they can survive the coronavirus onslaught, but can actually boost their position for whenever recovery finally comes. To see what this means in practice, one need only look at what’s happening over at Radisson Hotel Group (RHG). From its EMEA headquarters in Brussels, the hotel company is showing just how much opportunity this pandemic can offer – and, more broadly, how the whole industry might change when a vaccine finally arrives.
Commitment to development and growth
As we begin our conversation, Younes, who is normally based in Belgium, is in the south of France. Lockdown has meant that he’s able to work from anywhere – so why not France – while he continues to lead his team and grow Radisson Hotel Group’s global portfolio of hotels and resorts during these turbulent times.
The statistics, for once, speak for themselves. Since Covid-19 began in earnest – roughly the beginning of March 2020 – hotel revenue in some places has collapsed by over 80%. In the US alone, hotels have already lost more than $46bn in room revenue, while tourist centres like Italy and Spain have sustained comparable losses. Nor does the situation going forward necessarily look better. According to work by Cushman & Wakefield research, 30% of industry insiders think that up to 15% of hotels wouldn’t survive the pandemic. Work by McKinsey, for its part, suggests that the industry won’t recover to 2019 levels until 2023 at the earliest.
Younes is surprisingly serene in the face of these challenges. Of course, he says, there are major issues – from keeping returning customers safe and comfortable to the wildly different lockdown rules across borders. For these reasons, among others, he suggests that the hotel industry’s recovery “may take longer” than he and his colleagues initially realised. But when it comes down to it, Younes is an optimist at heart: “I am somebody who believes that adversity brings opportunities – to learn, to grow and to expand.”
It surely helps that Younes’s hotel group enjoyed a long run of success before coronavirus hit. In early 2018, his company rebranded as the Radisson Hotel Group. Indicative of closer cooperation across brands, it allowed Younes and his team to pool management efficiencies and grow their portfolio. Indeed, at its last annual report, RHG boasted 387 hotels in operation, with another 125 under construction in EMEA. Combined with 2018’s $200m overhaul, where RHG streamlined some brands and updated others, it’s probably unsurprising that the company feels less need to change course than its competitors. “We remain committed to our development plan,” says Younes, “committed to the industry and committed to staying relevant to our owners and guests.”
Value for Mali
Scheduled to open in late 2020, the Radisson Collection Hotel will be one of Bamako’s finest. Offering luxury hospitality to business and leisure travellers alike, it’ll boast 200 rooms, five restaurants and bars, a ballroom and seven conference spaces. Nothing unusual, then, except for two crucial points. If one knows their Sahal geography, they’ll know that Bamako is in Mali, hardly the most popular hotel destination over recent decades. And if one knows anything about the state of the global economy, they’ll understand how surprising the Bamako announcement, made in pandemicstricken July, really is.
Even more remarkably, the Bamako venture is far from RHG’s only announcement of late. All told, Younes and his team have unveiled nearly 20 new planned openings, spanning all the way from Vienna to Durban to the Russian town of Saransk. Given what is known about the state of the economy, how can Younes possibly explain it? Once again, his answer is basically optimistic. “We believe that the fundamentals of this industry are strong. Why? Because there is a need in all of us to expand as human beings. That means that everyone, sooner or later, is going to travel again,” says Younes. “We must remember and always look long term. A signing today is a positive sign and looks forward beyond the current circumstances.”
A fair point, especially if where these hotels are actually located are examined. Like the Bamako property, many are in developing countries, including Ethiopia and Nigeria. Looking at the GDP of these economies – even with coronavirus, economists predict they’ll still manage growth of around 4% this year – that probably makes sense. Investments in Europe reflect this long-term thinking too.
Due to co-host the Winter Olympics in 2026 with Milan, for example, the Italian ski resort of Cortina d’Ampezzo is getting a pair of new hotels, including a property with 45 apartments. “The challenges caused by the virus will also bring new opportunities as some real estate prices may drop, making further growth even more possible and attractive to investors and hotel owners,” Younes adds.
All the same, it’d be wrong to imply that this galloping growth is proof that RHG is happy to let things tick over unchanged. For one thing, the pandemic is forcing the company to tweak its operating model. For example, Younes explains how new lease contracts will have to account for increased uncertainty. Where older models may have tolerated a 10% drop in the market, recent deals are being underwritten so that they still make business sense even with a 25% drop in demand. Transparency is key, so we must speak openly with our partners about the possible outcome if we face a similar scenario. More broadly, RHG seems open to changing its ownership model too. Though it’s traditionally blended leased and managed hotels with franchises, Younes is clear that he’s prepared to reassess if it means staying engaged with owners. “We realise that we need to continue evolving and do some things differently to stay relevant.”
At the same time, Younes is thinking about what types of hotels he opens. As he points out, lockdown and its consequences probably mean a drop in the number of new builds – so RHG likely has to change its focus to conversions. A case in point is the Radisson Hotel & Convention Centre in Johannesburg O.R. Tambo, South Africa, which, along with 248 new rooms, will also include 41 conversions from an existing hotel. Another African hotel, this time in Ghana, tells a similar tale. Due to open in 2023, Radisson Hotel & Apartments Accra will be centred around the refurbishment of 121 old rooms. Other hotels include the Radisson Blu Resort in Santorini, Radisson Collection Hotel, Grand Place Brussels and the Radisson Collection and Residences in Cortina d’Ampezzo, Italy.
Then there’s the question of branding. Younes is clear that there needs to be a balance between investment and return, and that brand standards will have to evolve to become “less narrow” than before. Does this mean Radisson Collection hotels offering special deals for more parsimonious customers, or middle-market Park Inn properties luring guests with discounted meals and services? Younes doesn’t say – but clearly understands the overall aim. “It is not about and/or, it is about and/and. We must deliver the brand promise to the guest in such a way that it is affordable to the investor.”
Contagiously happy
It seems clear, then, that Younes and his colleagues at RHG have taken the opportunity lockdown has afforded to comprehensively think through every aspect of the business, something he says is symptomatic of their teamwork and dedication. Securing new deals via conference calls isn’t ideal, of course, but the way his team has adjusted to the new reality is “probably what I’m most proud of”. Interestingly, Younes makes a similar point about the hotel industry at large. Even in such a competitive market, he describes how RHG has worked together with its competitors, and the World Travel and Tourism Council, to secure new cleanliness and safety protocols: “Competitors have come together as one industry to support one another.”
Indeed, Younes argues that – whether it’s because everyone’s had time to reflect or they’re simply more relaxed from not commuting – coronavirus has actually made the hotel industry a happier place to work. “People have become nicer,” he says. “They’re more genuine.” Certainly, if the industry at large finishes up even half as enthusiastic as Elie Younes, that’d be great.
