Despite the pandemic wreaking havoc in the tourism industry, hotel group Radisson did not abandon the five-year transformation plan it inaugurated in 2018. Amid challenging market circumstances, since January 2020 the group went on to sign 200 new hotels. “We leveraged all that energy [coming from the 2018 transformation plan] once the pandemic hit,” Federico González tells fDi. Today, the group operates 1600 hotels in 120 countries, and counting. With the Chinese market in sight, the company is planning to nearly double its portfolio in the next five years, while Mr González is keeping a close eye on the ongoing disruption caused by Covid-19 to business and leisure travellers and its longer-lasting consequences.
Q: How has Covid-19 affected the hotel industry so far?
A: Obviously, we’ve suffered with occupancy rates more or less across different markets. At the same time, we have been fortunate because we set in motion significant transformations in 2018, defining very clearly what we wanted to do moving forward in terms of pricing, real estate and IT. In a way, we leveraged all that energy once the pandemic hit. Given the fact that many hotels had to close, that enabled us to accelerate many of these transformations in 2021.
Q: What specific transformations are you referring to?
A: When I was appointed in 2017, we decided to build a new central reservation system (CRS) — a huge investment for a company like ours. The original plan was to have it live in 2023, but, because of the crisis, we devoted much time across 2020 and 2021 to it. The new CRS was ready in July 2021, so we were able to advance some of these IT changes by a year and a half. At the same time, given that many of the hotels were closed in this period, we could advance and operate some of the refurbishments we had planned without losing any revenue.
Q: How do you see the industry changing in the wake of the pandemic?
A: Today, what we see is that there is less international travel. However, in these months we have seen occupancy rates in places like London, Paris or Madrid or in China getting to a level that is close to what it was in 2019. What is changing is the mix — it’s more tourists than business travellers; more local than international. But I think this is a temporary situation, as travelling remains a bit of a hassle at the moment. When that comes to an end, many of these balances will go back to normal. Then we will still see some change.
With regards to business travel, we think there will be fewer one-day trips, but when we travel, we may travel for longer. If I look at my own travel agenda, sometimes in the past I used to travel to Germany to meet the team and fly back right away. Now I may decide to stay for two or three days. On a yearly basis, I’ll probably travel the same amount of days, but I will do it in a different way.
A second trend relates to smart meetings. Instead of having one big team meeting bringing together 1000 people from across our network of branches, we can have local teams gathering in different places and connecting digitally.
Q: How is Radisson itself navigating these changes?
A: We tried to take advantage of the crisis. We have signed 200 new hotels since January 2020, which is the highest rate in the history of the company. We initially committed $250m in our five-year transformation plan; we have executed part of it and have another $80m to $90m to go in the coming years. We signed new hotels in regions we hadn’t previously tackled, like Italy, Germany and Spain, while we kept signing in France, Germany, Russia. In Africa, we are operating 100 hotels and we want to increase that number by 50% by 2025. All in all, we plan to add another 250 to 300 in Europe, the Middle East and Africa in the immediate future.
At the same time, we are putting more and more growth in Asia. In the Asia-Pacific region, the group is spearheading an exponential growth plan led by expansion in China, where, together with our main shareholder Jing Jiang, the portfolio will grow to 1000 hotels in operation and under development in the next five years [Radisson currently has more than 365 hotels in operation and under development in the Asia-Pacific region, of which almost 40% are in China].
Considering our current global footprint is around 1600 properties, this all means the company will nearly double in size.
Q: Aren’t you worried about the situation in China, where the country’s zero-Covid policy has ground most travelling to a halt?
A: It’s a five-year plan, and we are not only targeting international travellers, we want to establish Radisson as a brand that is very familiar to the Chinese consumer.
Q: Do you see the tourism industry, as well as Radisson, bouncing back to pre-Covid levels any time soon?
A: I think it will be possible in around 2023. Forecasting has become a challenge — what we have seen is that whenever a consumer starts to feel good, travelling comes back very quickly. But, obviously, it also stops when some other uncertainty comes up. We need to be prudent — next year we will probably still be around 15% to 20% below 2019 levels, and hopefully at some point during 2023 we will come to 2019 levels.
Q: How has Radisson has incorporated sustainability into the way it works?
A: We have had concrete targets for years. We define sustainability from the perspective of people, planet and communities.
All of our hotels engage in community programmes. We have one of the major training programmes to build the skills of our hotel workers because, many times, in countries where we operate, there are no basic skills and we invest in training all the time. Then we always follow all the levels of responsible social engagement. That is part of what we have been doing.
We launched carbon-neutral meetings and events more than a year ago — for any meeting and event we do, we pursue carbon neutrality through offsetting mechanisms. Through our membership at the World Travel and Tourism Council, we are subscribing to the UN’s Glasgow Declaration on climate action in tourism [launched at Cop26]; we are working to be able to bring this [set of sustainable principles] in very concrete terms [to all of our] hotels. We need to give tools to every hotel in the world to be able to implement basic things that perhaps will not be [full-fledged] carbon-neutral strategies, but will actually have a much bigger effect on the planet than whatever big firms do.
Q: Talking specifically about renewable energy, is the availability of green power a deal-breaker when it comes to signing new hotels?
A: It all depends on the country and its regulations, the framework in which you operate and what competitors are doing. We have minimum standards on sustainability and metrics where we measure all the elements we are looking at, and we will not sign new hotels below a certain minimum score. Renewable energy is not the only element we are looking at, it’s a combination of factors.
Federico J. González is the CEO of hotel group Radisson
This article was first published in the December 2021/January 2022 edition of fDi Intelligence magazine. Read the online edition here.