A latecomer in hotels hones catch-up strategy
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FOR global hotel operators, China’s hospitality sector remains a market that no one dares to avoid. Gateway cities like Beijing and Shanghai are still the prime locations for international hoteliers, but secondary and tertiary cities are creeping into the spotlight. The Minneapolis-based Carlson Rezidor Hotel Group certainly has inland and smaller cities on its radar.
As the only privately held hotel company among the world’s top 10 players, Carlson Rezidor plans to triple its China operating portfolio in the next three to five years. Its Asia-Pacific network is set to double to 200 hotels.
Globally, the group has more than 1,370 hotels in operation or under development, with 180,000 rooms in more than 100 countries.
Thorston Kirschke, president of Carlson Rezidor’s Asia-Pacific operations, recently sat down with Shanghai Daily to discuss trends in both the global and China hospitality markets.
Q: How large is Carlson Rezidor’s presence in China and what is your growth plan for the next five years?
A: In China, we currently operate two of our seven hotel brands: the Radisson Blu and Park Plaza. We have 13 hotels open and another 28 in the development pipeline. That’s not a big number in country this size. While we have been very successful expanding in other parts of Asia, our relative market share in China lags behind our competitors. We are committed to changing that. We project to more than triple our portfolio of operational hotels here to around 50 in the next three to five years.
Q: Any initiatives to accelerate your growth in China?
A: Of course, we can’t just throw a number in the air and wait for people to come to us with hotels, so we are offering three new initiatives.
One is new contract formula that embraces all forms of hybrid contracts — being managed, being franchised or being anything in between. Over the last two decades, China’s hospitality sector has developed a lot of competence and capacity. Twenty years ago, no one would give a franchise licensing agreement to a Chinese partner to run your hotel on your behalf. Today that has changed. We want to be flexible and respond in a meaningful way to our partners’ different needs and expectations. But make no mistake about it, franchising will not be the big backbone of our growth.
As a second initiative, we are launching two new brands — Radisson Red and the Quorvus Collection — which will open up opportunities to widen our exposure.
And third, we are currently strengthening our development team and network in China to have more representation on the ground talking to our partners.
Q: In which part of the country do you expect to see the strongest growth?
A: Our China growth strategy is very much a three-pronged approach, and underneath those three dimensions, we are exploring secondary and tertiary cities to expand our presence beyond markets like Chongqing, Shanghai and Beijing. Our growth story will be very much in line with China’s plans for urbanization beyond coastal development. One should not forget that even secondary and tertiary cities in China are home to several millions of people. So there is substance and scale. It is a matter of deploying the right brand in the right market, which is as true in China as it is anywhere else in the world. I personally think we have good opportunities in central and southern China as they continue to develop. Shanghai alone is a market that can probably take 20 hotels of a given brand, and Beijing is no different.
Q: What’s the exact positioning of Radisson Red and how do you expect its China portfolio to expand?
A: Radisson Red is a new brand that complements our existing portfolio. The millennial or boutique hotel sector is a very vibrant one that is growing at a furious pace around the world. The demands and expectations of the younger generation are distinctively different from 50-to-70 year olds, who prefer more traditional services. The younger generation is a lot more geared toward wanting an authentic experience beyond luxury and functionality. Radisson Red addresses that. It beats to a changing demographic and offers an attractive value proposition for investors.
Last October, we signed the deal for the first Radisson Red hotel in the world in the city of Shenyang. If all goes well, it should open in about a year, leading to maybe a dozen to 30 of the hotels in the next three to five years.
Q: What is Carlson Rezidor’s particular strength compared with your international competitors?
A: Let’s look at it from a global perspective. You have about 10 to 15 global hotel companies that account for a combined 80 to 90 percent of worldwide inventory. We are one of them, but we are the only one privately held. The vast majority of them are publicly listed companies that need to cater to the investment market on a quarterly basis. They are often forced to take short-term decisions. We are more agile, flexible and can respond more quickly to a changing market. We don’t go into a market with a cookie-cutter approach. Rather, we take a more tailor-made approach in our global market strategy. And we don’t leave our partners out in the rain. We work together all the way, from the inception of a project far beyond the opening of a hotel.
Q: Many international hotel groups have been introducing tailor-made services to Chinese customers. What’s your take on that?
A: I always have to smile a little bit when I see those efforts. It’s the essence of what we have always been doing. Whenever we operate a hotel in a certain market, we have to make sure that we are embracing and catering to the needs of that market. If somebody announces that they are globally launching green tea or sushi or anything that speaks to a particular palate, that’s nice for a public relation stunt, but it is just noise. If you do not cater to the needs of a particular market in a form that’s relevant, then you are missing the point. You will be out of business sooner or later.
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