Louvre Hotels Group has engaged in an ambitious expansion plan to grow outside of France throughout the rest of Europe (such as in Russia with the Tulip Inn Rosa Khutor, picture here) and emerging markets such as India and China.
PARIS—When Starwood Capital Group acquired Louvre Hôtels in 2005 and four years later Golden Tulip, the directive was clear: Grow, grow, grow.
Having since combined into Louvre Hotels Group, the company has put that instruction into action with the opening of 39 hotels representing 5,200 rooms during the first half of the year in its home country of France as well as throughout the rest of Europe, Brazil, India and China. This after it opened 62 hotels during 2011.
Louvre, which owns, operates and franchises its seven brands, aims to have 1,100 hotels comprising 85,000 rooms in its portfolio by year-end 2012, of which more than a third are outside France.
Matthieu Evrard, who has overseen that expansion as chief development officer, said development is absolutely critical to the success of any global hotel group.
“You can have good brands, good distribution … but if you don’t develop it, you are decreasing the number of guests time by time,” he said.
Louvre Hotels Group
That is especially true in emerging markets, where Evrard said Louvre has “tremendous potential.”
“In France, we are very big,” he said. “(But) development in terms of percentage in France is very limited compared to the potential which is outside France.”
Growth by region
In Europe, Louvre is pushing mainly its budget brands, Premiere Classe and Campanile, as well as its 4-star Golden Tulip. The focus on lower-tier brands reflects downward shifts in corporate spending amid the euro crisis, Evrard said. As companies look to cut budgets, they’re seeking strong, consistent budget brands.
Premiere Classe is seeing particularly strong growth in Germany. Louvre plans to open 35 hotels in the country’s major cities during the next five years.
“Outside of Europe, we’re looking on the big emerging markets and countries,” Evrard said.
In South America, “Brazil is key for us,” he said, noting the company’s other expansion targets on the continent include Colombia, Venezuela, Chile and Argentina.
China has emerged as an important market as well, Evrard said. Louvre employs a two-pronged approach to development in the country. The first comes via direct management of its 4- and 5-star Golden Tulip and Royal Tulip brands to appease the Chinese’s growing appetite for upper-tier accommodations.
The second comes via distribution partnerships with local budget hotel chains. In November 2011, for example, Louvre signed a partnership with Shanghai-based Jin Jiang Inn Company Limited, which allowed Jin Jiang Inn customers to reserve rooms in Campanile hotels in France and Campanile customers to reserve rooms in Jin Jiang Inn hotels in China. The reservations process is facilitated by an alliance of the websites of the two trade names and the sharing of reservation channels.
“We are very flexible. The main point is the brand and distribution. This is what we are looking at placing first in the (Jin Jiang) partnership,” Evrard said.
“In order to grow faster, of course we are looking at leveraging with local partners. It could be real-estate partner or investment partner or operations partner,” he added.
India is also high on Louvre’s list of high-potential growth targets.
“India is one of the biggest markets for us in terms of potential in all market segments,” Evrard said. There’s still plenty of room for new supply, which Louvre hopes to fill with its mid-market offerings as American chains focus more on the upper end of the market, he added.
Louvre operates 12 hotels in India under the Golden Tulip trade name and plans to open five to 10 new hotels a year over the next five years. Last month, the group signed contracts for four new hotels and plans to open its first Royal Tulip in Mumbai this summer.
The U.S. is conspicuously absent from Louvre’s radar—a fact Evrard attributes to the country’s mature market and abundance of supply.
Golden Tulip is Louvre’s primary growth driver outside France, Evrard said. It is the most well-known internationally and thus provides a strong entrant into emerging markets.
Once the group hits critical mass, Louvre begins to develop one of its other six brands, which range from 1 to 5 stars: Premiere Classe, Campanile, Kyriad, Kyriad Prestige, Tulip Inn and Royal Tulip.
Of those, Campanile has received particular attention in recent years as Louvre embarks on a multi-million euro refurbishment program designed to update the more than 40-year-old brand.
“There was a need of repositioning. Some of the hotels were very old. We wanted to refocus the brand on the core budget business,” Evrard said.
Louvre began by revamping food-and-beverage outlets and operations within the portfolio. The group has spent nearly €30 million ($36.7 million) and has made its way through 80% of its owned portfolio. It then raised an additional €50 million ($61.2 million) as part of its CAP 50 program and is now targeting rooms in addition to the remaining few food-and-beverage projects.
Six Campanile hotels are under refurbishment at present, Evrard said; 25 are completely finished.
Louvre plans to renovate 50 of its owned hotels by year end 2013.
Franchisees and third-parties are responsible for investing or raising their own funds to refurbish Campanile hotels within their respective portfolios.
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