Slowly Steadily Strategically
Carlson Rezidor Hotel Group owes growth to a well-planned, multi-pronged strategy
TravelScapes in an indepth discussion with the charismatic Raj Rana, CEO South Asia, Carlson Rezidor, Hotel Group, finds out the strategy that has led to the growth of the company in India, making it the largest foreign hospitality chain in the country and also why it is the first partnership choice for hotel owners.
Ts Gurpreet K Sekhon
Please give me an overview of the Carlson Group and the philosophy that it operates under.
Carlson Hotels is a world-wide company with over 1400 hotels globally, including those in the pipeline. According to the last count, we are present in 115 countries with over 230,000 rooms, which makes the group one of the larger global players in the hospitality space. It has been a private company and even after the acquisition by HNA, it remains so. This brings some strengths to the table as we have a flatter structure in terms of hierarchy, there are not too many levels. If we look at our India structure, we have an intimate relationship with our owners. We all work on mobile phones and there are no IVRs to negotiate in case there is a problem. They can reach us directly.
We have an early entrant advantage in the India market. We entered India with a long-term vision and not with a view to test the markets. Our vision was that India is a promising market and our brands shall make a position for themselves. We have stuck to it. This has led us to being the number one International chain by the number of hotels. We are proud, yet not arrogant enough to think that competition is not coming. Competition is all around even more so than when we started and we are cognizant of the fact.
How many hotels do you have in India? How important is the India market to the group? What is your growth plans and what brands are you focusing on?
In India we currently have 85 operational hotels and a 140 under development or under construction. India and China have been two of the most important markets for the group, not only in the region but also globally. This is where we see the consumption is more. One of the apparent reasons is simply the population factor. Also, the markets are under developed, there is a lot of potential.
India has 130,000 rooms while the requirement is much more, given the population, leading to a lot of pent up demand. There is also a change in social behaviour. Earlier people would go to a religious place for a vacation or stay with friends and relatives; all that has changed. People prefer staying in hotels for reasons such as privacy and comfort. This is driving demand.
Corporate houses are also realising that the work force wants to stay in branded hotels. It is a part of their career experience. They want to stay in nice quality branded hotels, which are clean, secure and the set of expectations is clear; it adds to their productivity. All this has created the right environment for the growth of the Indian hotel industry. There are macro factors as well, such as improvement in economics of the country, eVisa on arrival and improving connectivity.
I feel road trips are going to become more common, given the improved connectivity. However, there is a gap in terms of roadside facilities and hubs similar to those in the western countries, though I believe they are in the planning. I believe in this planning and not just petrol pumps or convenience shops and rest rooms but also hotels and motels. Country Suites & Inns, which has over 450 properties in North America primarily, grew with this concept and we believe in India too it is the largest mid scale brand and shall grow as the infrastructure grows.
So which is your strongest brand?
Our mothership brand in India is Radisson. We have the Radisson Blu, which is the upper upscale brand, Radisson which is our core brand and Radisson Red which is a brand for the millennial population. While it offers the upscale experience in guest rooms, it does not have extensive F&B outlets which today’s customer does not really want. Today’s customer wants to go and experience the restaurants and pubs outside the hotel also. We have the Park Plaza, which is an easy conversion brand in the upscale segment and the Park Inn by Radisson, which is a lower cost to bill, in the mid-scale segment and a very colourful, bright, make a difference brand. So currently we have six brands in India (including Country Suites & Inns).
What is your expansion strategy in a given location?
Our strategy is to go after state capitals and preferably be the first ones to enter. It gives us an opportunity to build a hotel of quality.This automatically becomes a barrier for new competition to come in. This allows for a stabilised ramp-up in a shorter period and that has helped us protect our position. We have done this repeatedly for example in Guwahati, which is the gateway to the North East, we opened a Radisson Blu and the hotel is doing extremely well. This has generated an interest from other hotels in the region. So we go to a state capital and form a hub and then we get into the spokes. We started with Bengaluru and got into Mysore,
Coimbatore then Salem and are looking at Ooty and so on. So when we get into the hub, in a state capital, we expand our footprint within a three to four hours driving distance in the area. Hence when a guest is on a journey; he has an offering from within our brands to complete that itinerary. That is one of the core ways we look at expanding the brand.
Another strength that we have is that we have never lost a hotel whenever the contract has come up for renewal, in spite of the number of options available to the owners with a variety of brands having come in. To me that is the litmus test. If after 15 years, the owner wants to stay with you, that means you have delivered value in that equation and you have also earned value. Nothing is more important than that.It means that the relationship, in spite of the ups and downs that form a part of every relationship, has endured the test of time and that is the strength of the brands. They are also our brand ambassadors; they not only have multiple properties with us but also refer friends and associates to sign up with us. This is how we have grown, hotel by hotel – organically.
What about strategic growth?
We are also looking at strategic growth, whether it is by acquisition to accelerate the momentum or by joining hands with strategic partners. With Bestech, where the core competition is commercial and residential real estate, we joined hands three years ago to develop 49 Park Inns by Radisson and Radisson Red in North and Cenrtal India. We have started to build our flagship Radisson Red in Mohali and plan to start another Radisson Red in Gurugram and are equally focussed on them.
While we are all for organic growth, we are essentially a management company and follow the management model, where someone else owns the hotel. In case someone wants to build a hotel, we help them in building the hotel through our expertise and guidance. We do not bring in the equity but help them manage the same.
Secondly, 45 per cent of our hotels are purely on the franchise model, which means somebody else or the owner himself is managing the hotel because we feel there are enough owners today who have had years of experience. They have their second or third generations, who have studied in hotel management schools and and have the acumen to be able to self-manage hotels; especially mid-scale brands. So we are open to licensing and purely franchising those hotels as well.
Another very important model is the conversion model. As Indian hospitality for international brands is now 10-15 years old and most first agreements have a lifespan of 10-15 years; they come up for renewal and renewals present opportunities for conversion.This means you do not have to wait for a hotel to be built, these are hotels that had another flag and the owners wants to exit a brand and are looking to partner with another for any number of reasons and that creates conversion opportunities for the likes of us.
Conversion is very quick to market, so we are very eagerly focussed on that part. This also happens when an owner chooses to opt out of an indigenous brand and opt for an international brand, due to the loyalty program, the global reach and high awareness and the value proposition of their loyalty program is much bigger. Also the global reach as well as global virtual reach ensures that owners sign with us. We also have a 24x7 toll-free call centre and nine regional sales offices, bringing in business. This kind of a structure and more than the structure and process; the relationship that we have with the people, has helped us understand that we offer a good value to the owners that join hands with us.
Does the franchise model not lead to brand dilution?
It is selective franchise. Firstly there is a very stringent audit to ensure that brand standards are followed and in case they are not; there are consequences. More importantly, before we even come to that, we are careful in choosing who we allow to franchise. They have to have relevant experience, the hotel has to be the right size; the complexity has to be considerable as well. For mid-scale brands especially in secondary and tertiary cities with smaller inventories; we are finding out that it is an excellent model.
We provide all the training support as well as technology and branding support; but we are comfortable with them managing our hotels. We are humble enough to realise that there are other people who can manage as well and would not want to miss out on that opportunity. We recognise that we can entrust them with our brand.
How do you differentiate yourself from the brand clutter?
What we try and think of is that we have two consumers, one is the end customer who sleeps in those beds and the hotel that provides those beds. Hence, whenever we think of differentiation, we think of differentiation on those two constituents.
To focus on the differentiation to the guest is important as there is a value relationship to that differentiation. For an x price, there are a a host of amenities, which may vary with the price. With us, that differentiation is clearer. In India, as in other Asian countries, it is a challenge as all brands have some amenity creep which is not there in other parts of the world. Valets and bellmen are even the norm in mid-scale hotels while they should not be as is room service. However, customers today are becoming aware of the value relationship and brands are also able to pull back this amenity bleed from one hotel to another. A brand cannot do this in isolation and it is changing across brands.
The second differentiation is with the owner and that is very important as to why an owner would choose to fly our flag rather than that of the competition. That needs to be very well answered and understood by the owner as it is a long term relationship. You are building a hotel according to brand standards and brand peculiarities, these are investments and not easily undoable. How to compare our brand to other brands and diffrentiation is important to understand within our brand also compare to the others. For example if you are building a Radisson, there is a lower cost that goes into it, than a Radission Blu.
The rooms are slightly smaller, the carpet may be a different grade ans so on. So we educate the owners so that they do not over spend, it is a return on your equity or investment not on your ego. So to keep this ROI or ROE needs to be kept intact is very important. Once the job opens and operates, there will be a return expected and if we are that operator; we have committed to giving that return. So the differentiation to that stage is very important.
These are the reasons we are different. Also we are here, we are not operating remotely and are well established with a very competent team here. It is a huge comfort for owners for whom not only are we accessible but have an extended personal relationship.