With Jin Jiang deal pending, Radisson focuses on Europe
 
With Jin Jiang deal pending, Radisson focuses on Europe
12 NOVEMBER 2018 9:09 AM

Radisson Hospitality is on a mission to grow organically through leverage of its brands, cost efficiencies and—through soon-to-be owner Jin Jiang International—be a real presence on the European landscape.

LONDON—The ink on Jin Jiang International Holdings’ acquisition of Radisson Holdings is not fully dried, but executives at Radisson Hospitality AB are already pursuing ambitious development goals in Europe.

In August, Jin Jiang agreed to buy 100% of Radisson Holdings and 51.5% of the outstanding shares of Radisson Hospitality AB.

Elie Younes, EVP and chief development officer at Radisson Hotel Group, said the takeover hopefully will be finalized by the end of the year, at which point Radisson Hospitality can concentrate on continuing its increasing market position in Europe and strengthen itself in mature markets.

“(Radisson) means business, and we’re delivering on all levels. … We plan on altering the skyline,” he said.

That new direction created earlier this year produced umbrella Radisson Hotel Group, which Younes believes will further promote awareness of its eight brands and leverage new development and ownership. The overall Radisson brand will also revitalize its loyalty program, he added.

The firm’s new strategy began with its previous owner HNA Group, he said. Both HNA and Jin Jiang are based in China.

Younes said Radisson Hospitality’s President and CEO Federico J. González now chairs the firm’s global steering committee. One decision the company needs to make by the end of next year is what to do with its Prizeotel brand, of which Radisson owns 49%.

The Brussels-based company will focus mostly on growing its current portfolio, he said.

Radisson now is the eighth-largest hotel group in Europe by room count, he said, and the largest in the upper-upscale sector, notably its Radisson Blu brand, and that when Jin Jiang takes full ownership, the Chinese firm will become the second-largest hotel chain by hotel and room count in Europe, behind AccorHotels.

Organic mechanics
Defining owners’ value propositions for each brand is a key focus for Younes and his team.

“Growth will be organic and not be reliant on its new owners,” he said. “Organic is cleanest.”

The firm has approximately 1,160 hotels and 179,000 rooms in operation, with a pipeline of 280 or so hotels comprising 48,000 rooms. In the upper-upscale segment, he said Radisson Blu combined open and pipeline includes 186 assets with approximately 44,800 rooms.

“Radisson Blu has been a success, among other reasons, due to extreme value engineering, and we have big plans for (Radisson) Red in the United Kingdom, big, big ambitions,” he said.

Younes said the Radisson hotel brand is being relaunched in the Europe, Middle East and Africa region, with a current pipeline of 1,970 rooms in eight hotels. Radisson Hotel Group is the master franchisor in Europe of the Radisson brand.

“We look on (revitalizing hotel brand Radisson) as a leverage on Blu,” he said, adding that revitalizing brands in the eyes of consumers is easier with having only eight brands.

He said Radisson plans on developing its Radisson Red brand in 10 to 15 cities in the U.K. Budget brand Prizeotel’s next splash also will be in the U.K., he said, as will adding serviced-apartment extensions to its Blu, Red and Park Inn-branded hotels.

In Europe, Radisson has signed 32 assets and 5,691 rooms year to date. Over the same period, the company has opened 16 hotels with a total of 3,133 rooms, including 476-key flagship hotel Park Inn by Radisson Amsterdam City West, which opened in July.

In the U.K., the firm has 45 hotels in operation with 9,610 rooms. In development is the 202-room Radisson Red Liverpool, which will open in the second quarter of 2020. Radisson Blu makes up the lion’s share of properties in the market.

Radisson has also considered leases in Europe and the Middle East and Africa regions, Younes said.

“Our move to asset-light is behind that,” he said. “We have 23% (of our EMEA hotels) as leases, and we’ve never had that before. That will accelerate growth.”

Development in the EMEA region is focused on eight markets—Germany, Italy, Poland, Russia, Saudi Arabia, South Africa, United Arab Emirates and the U.K.—and 60 key target cities, 19 of which will be gateway cities.

Younes said the restructuring of much of the Radisson portfolio has been done for three reasons:

  • to be tailored to be more resilient to cycles;
  • to be smartly diversified between being asset-right and asset-light in mature and emerging markets; and
  • to have a targeted approach with commitment in key, primary, mature markets.

Skin in the game
Younes said Radisson funds its own initiatives.

Radisson has spent €300 million ($339.9 million) in capital expenditures over the last few years, more than €140 million ($158.6 million) in marketing over the last five years and €45 million ($50.9 million) in information technology spend, he said.

“We’re willing to put our own money into this,” he said, adding that growth will have both guests and owners firmly in mind. “This industry has two customers—guests and owners—and unless you understand that, you will never succeed.”

A new online digital platform, with one single touchpoint for all its brands, will be fully operational within the first quarter of 2019, he said.

“We were sick and tired of asking permission from third-party (information technology) suppliers,” he said.

Radisson Hotel Group’s third-quarter earnings numbers posted a 5.6% increase in reported revenue per available room, Younes said, despite a 4% RevPAR decline caused by hotels either opening or exiting the portfolio in that time period.

Like-for-like RevPAR for the period grew 8.9%, which he said was driven by good performance in the Nordics, the implementation of revenue-management strategies and cutting less-profitable assets.

Revenue guidance for full-year 2018 is expected to increase between 4% and 4.5% with a margin of earnings before interest, tax, depreciation and amortization of approximately 11%, Younes said.

“(Radisson) had the best third-quarter (earnings before interest, tax, depreciation and amortization) in our history, up 15.9% due to strong like-for-like revenue numbers and cost discipline,” he said. “We’ve spent a lot of capital on every aspect of revenue.”

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