SAN DIEGO—For a Spain-based hotel company, Central and South America provide natural locations to transplant a business.
Spain is a normal trade partner with South American countries, said Gabriele Burgio, chairman & CEO of NH Hoteles, a company that owns, operates and manages 399 hotels with 61,155 rooms in 24 countries.
“If you look at the banking system, the energy, telephone—a massive presence; it’s not something surprising to have a Spanish hotel company install itself in the South American countries or Central American countries,” he said. “So that is an area we have a natural advantage over other multinational corporations.”
NH Hoteles has projects in Panama and Colombia, and there are more opportunities for companies willing to take risks, Burgio added. NH currently has 45 projects in its pipeline.
“… It’s difficult to plan, to go to another country and try to establish yourself,” Burgio said. “In our business today, it’s very difficult to do a business plan and try to develop it. We have a general business plan and we try to fit opportunity in it.”
Occupancy is less of a problem in locations such as Panama and Colombia, which justifies the investment, he said. “We don’t expect (average daily rates) to recover so soon in these particular areas, but the properties, the ones that we try to keep, are well-located, new buildings, so I think they have a future.”
Lukewarm development
Most of NH’s pipeline is rooted in existing markets such as Italy, Germany, Holland and Spain, Burgio said. In South America the company opened two hotels in Buenos Aires in the second half of 2009. The only new countries in the pipeline are Colombia and Panama.
NH sees sales picking up in Italy and Germany.
But development in general is a bit lukewarm for NH Hoteles, according to Burgio.
Countries typically considered “hot” such as China and India require a lot of resources. “We don’t have the size to do that,” he said. “Of the countries where we can probably do things, I would say that today there’s not much excitement.”
Back in Spain, the weakening British pound has upset a lot of incoming tourists and sometimes corporate groups. “Lately, the pound has recovered a little bit; I don’t think it will be sufficient to go back to the level of incoming tourists in Spain,” he said.
Warming up to sustainability
While development has cooled, sustainability efforts have heated up for NH.
The company has established three basic pillars for sustainability and worked toward those in the past four or five years, Burgio said.
“The first one is if you can do an activity more sustainable than we were doing before, why not?” he said. “The second one is that most of the time if you do take this approach, the end game is that we save money, and so it’s good for our shareholders. The third pillar is that we have 80 million nights sold, so a lot of people going through our hotels.
“If they can see NH is taking care of the sustainability approach to business, we hope we can do a kind of training, communication, and explain things so more people react to these things in their own home, in their own companies, in their own lives,” Burgio said.
The company saved more than 5 percent of costs in energy, heating, air conditioning and water through training and communication with customers and employees, according to Burgio.
Water is an important issue in hotels. In a review of every hotel, NH found that some hotels were spending many liters per client or per room. The company looked at why consumption was so high—guest habits, training, inefficiencies—to save resources.
Top-level buy-in always is essential.
“You have to show strong motivation at top management, the board must be on your side,” Burgio said. “There’s still a lot of misconception, especially on the top level where many issues are mixed. For example, the fact that the climate is changing, what is sustainability, do we have to invest too much. … Why should we care about saving? … We have to insist, we have to be sure what we do, and the results are there."
Watch video highlights from interview with Gabriele Burgo.
Read full interview transcript.
