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Interview with Federico J. Gonzalez Tejera, Chief Executive Officer at NH Hotel Group

Federico J. González Tejera was born in Madrid in 1964. He studied Economics and International Trade and Finances and has a vast professional experience developed in various multinational companies operating in the sectors of large consumer goods, leisure and tourism with leading responsibilities in business and sales. Before joining NH Hotel Group in 2012, he worked in leading global companies, such as Procter & Gamble (16 years) and Disney (8 years) where he served as Deputy General Manager of Euro Disney Paris, among others. The last 18 years of Federico’s career have taken place in different countries such as Portugal, Sweden and France. As CEO of NH Hotel Group, he is directing all areas of the company, and is in charge of the compliance of the strategic plan, the expansion and development of the different business lines and the consolidation of the NH brands.

Most of your career, these last twenty years have been spent outside of Spain, how do you feel “coming home”?

Coming home is always a pleasure, in particular after so many years, and I have to say that the experience is being very positive. Working for NH means working for an international brand that has the added value of its Spanish heritage which is a great combination and has a very positive impact on all what we do.

Would you say that your international experience, working for big corporations, will help give a broader view to the strategy of the group? 

I think that experience in general terms is always a plus. Working in different industries, cultures, countries, etc. represents an opportunity to learn and grow, while gaining a wider and better understanding of the business context and consumer demands and needs. In my case, P&G and Disney provided me with particular attention to focus on view and methodology which definitively helped me approach NH priorities and challenges more effectively and define a 5-year plan, with a clear vision that is concrete and realistic aimed to meet specific targets.
Also, what I found very positive in the industries where I’ve worked has been the importance given to the collaboration of industry players. The alignment of standards and the relationship between manufacturers and distributors add value to the overall industry context and also help drive cost effectiveness.

We’ve heard about the changes at NH, which are the key elements of that transformation and your priorities as NH Hotel Group CEO?

We are immersed in a profound company transformation as a result of our strategic 5-year plan that has also been inspired by our new company’s new vision that says “one day, whenever anyone contemplates a trip to a city for an overnight stay or meeting, for business or pleasure, they will always ask themselves, Is there an NH at my destination?”. In order to achieve this objective, we´ve drawn up a realistic schedule to be implemented in two stages, the full economic impact of which will be effective by 2020. The first phase, spanning the next three years, entails implementing a new business model while the Group aims to grow most intensively during 2017 and 2018.

All the initiatives in the plan have been divided into four key priority areas for the upcoming years: carrying out a clear segmentation of the hotels under a new brand umbrella; designing a new value proposition that enhances guest experience; drive brand recognition through communications; and optimize management and organization capabilities, particularly with regards to the Group’s technology systems.
Some of them have already been accomplished or are in the process with very positive outcomes so far, as the launch of our new brand umbrella and segmentation, the implementation of the divestment plan amounting to €125 million that is in line with forecasts or the new pricing strategy that will help us manage our portfolio more efficiently.

How important, in terms of gross revenue, market shares,… is the domestic market for NH Hotel Group?

Domestic market vs. global represents 25% of the overall size and 15% of company profits, which highlights the relevance of this market for us. We are the number-one operator in Madrid and Barcelona, with more than 5,300 employees in Spain out of 18,300 worldwide truly committed to delivering the best service.

Most of the significant growth of the group was made through mergers & acquisitions (Astron in Germany, Jolly Hotels in Italy, Hesperia in Spain, Golden Tulip Krasnapolsky in the Netherlands…); how strong and unified can the culture of the company be with so many histories, cultural differences, staff changes?

Over the years NH has grown significantly to around 400 hotels in 28 countries today, which obviously add complexity to the operations and its management due to geographic dispersion. However, there are certain elements that have allowed us to be consistent regardless of where we operate. Those are common values that unify us all and that we adapt to capture the essence of the destination. Our passion for service, our positive attitude and young minded vision, always with a smile and enjoying what we do are what drive us globally towards delivering memorable experiences.

The financing of that growth required heavy debts in the worst possible period. Could you update the financial situation of NH Hotel Group?

We restructured our debt last year with three major operations that allowed us to cover our financial commitments with a more flexible framework while implementing our business plan. We formalized the issuance of convertible bonds for 250 million euros with a five-year maturity period, and at the same time, we issued 250 million euros of NH senior secured notes with a six-year maturity period. With the funds obtained from these two operations and a Club deal financing of 200 million euros, we have secured the necessary capital to meet our financial obligations and our current strategic investments. We are very happy with the current payment schedule, as we´ve been able to reduce significantly the cost of the debt, and today this has led to a very healthy situation for us from that perspective.

The group chose to terminate several costly hotel operations in Spain and to dispose of several major assets to reduce the debt and re-establish good operating margins. Were these decisions efficient? Are you in favor of an asset light or even asset free development strategy for hotel groups?

At the end the critical point is the return on the capital employed, so first we need to secure a return on the capital employed of between 10% and 15% and second we need to ensure there is no operation that is not giving value to the shareholders. In that sense all the interventions we have done to reduce hotels or to exit hotels have been the consequence of thinking they would not be profitable in the long term, so we can consider them punctual. However, we have the determination that once a hotel operation becomes unprofitable, we´ll try to upgrade it as a way of keeping it within the portfolio, but if this is not possible we´ll do what we have to to take it out of the group. On the other hand, there have also been many hotels that were beyond or met profitability requirements, but that the hotel or property was not any longer within the standards that NH wants to have, so some of the exits are because of that.
Regarding asset light or asset free, we like to say that we need to have an “asset right” strategy, and what that means is that any asset needs to have the right return on investment. We may find great opportunities to buy and I would recommend doing so if there are strong reasons that support it, but also we should be able to sell those with which we haven´t reached the maximum profitability.
How do you view the presence of HNA as a major shareholder in the company? Would you consider that presence as a temporary life jacket to face a rough period or a strategic move to enlarge the scope of development in the Far East?

Our relationship with HNA is very positive. They are an important shareholder and have provided us stability from a financial point of view, which has been key to develop our 5-year plan. But also, our relationship provides us with great opportunities to grow and expand our operations in key markets such as China. In that sense, we recently signed an agreement with HNA with the intention of setting up a jointly-owned company with the purpose of building a portfolio of hotel management contracts in the middle and upper-middle segments in the territories of China, Hong Kong, Taiwan and Macao under the NH Hotels brand, which is very positive as long as it allows us to get our feet wet in one of the world’s biggest markets together with the assurance we are working with a serious and reliable partner.

Could the recent talks of HNA with Italian banks to re-enforce their stake in the capital of NH Hotel Group modify the strategy of the group?

The relationships with our shareholders, including HNA, are fluent and close but we do not comment on their decisions or plans. Having said this, the NH Hotel Group strategy is clear and is well defined in our five -year plan, which is being implemented steadily and it´s our intention to keep in that line.

Looking ahead how would you like to see NH Hotel presence?

First I see ourselves increasing our presence in the countries where we are already operating, that means we see opportunities in Italy, Germany, UK and France, and those are the countries where we will focus the growth in Europe. But we also see big opportunities in Latin America where we have very strong brand recognition and where we think our service and our concept of hotel has a place in the market.

In terms of branding strategy and positioning, what is the NH Hotel Group agenda for 2015?

It´s very important to go step by step and I think the transformation of all the properties of NH Hotels and NH Collection ensuring a solid presence & branding will be our number 1 priority. Also we are focused on completing our Brilliant Basics integration in all the hotels as well as the reinforcing signage.

Technology and innovation have become key elements for improving the consumer experience. How is NH Hotel Group facing this trend?

Well I think we have to consider this from different angles. One is technology for the consumers, normal consumers who use the rooms and expect from us an experience that fulfills their expectations. But these consumers also recall that NH is a business hotel chain, which means that we have to reinforce not only what the experiences in the rooms are but also make investments in other areas such as in the offices, common areas, meeting rooms, etc. For example we have increased the WiFi from 0.5MG to 1MG in NH Collection hotels, but the most important thing is the way you now enter into the WiFi , which is really easy: with just the name and room number clients can have a hassle-free WiFi experience. So it´s not only what you offer but how you offer it. Beyond that, with the launch of the NH Collection Eurobuilding, we have just announced the creation of a Living Lab where new technologies will be shown and tested, even by the consumers thanks to the hi-tech rooms we’ve designed.

Do you consider there is still much to innovate for the Millennials, their parents and their children?

There is still a place to innovate for any consumer, Millennials or not, in our business. For example our innovations in the basics, the bed, the shower, the service in general, are very important. If you come to a NH Collection hotel, we offer to have your shirt ironed before a meeting or trip the following day. That´s innovation too, although it is not technologically advanced it is very meaningful technology. Technology plays an important role and it´s critical that we are able to offer and adapt it to those who want it, for example with highly demanded services such as WiFi that everybody wants today and that we need to deliver everywhere. Also, you may think that controlling the room with a tablet is something that the Millennials may want, but I need to make sure that I don´t upset consumers who do not want it. So we need to be very prudent.

How do you look at the exponential rise of the “sharing economy”, could companies such as AirBnB and others be a threat to the hospitality industry? What other challenges does the industry face from your perspective?

I think that AirBnB and the likes are a reality and what that means for the hotel industry, and for NH, is that we need to make our rooms and our hotels more and more distinctive and more and more performing than any competitor. Once the consumer has the option to go to an apartment, then I need to make sure that my rooms are always better and give a better experience than an apartment. In that sense, it´s like any other hotel chain.

What could be the best response from a hotel group?

Experience, experience, experience. Service, service, service.

Sustainable development and social responsibility were always strong items on the NH Hotel Group agenda, will you be continuing in these directions?

Yes, Sustainability and CSR are part of our DNA and a long-term company commitment. Indeed and for example, this year we´ve received the European Business Award for the Environment in the ‘Business & Biodiversity’ category that recognizes our ongoing work in applying concrete measures aimed to drive benefits for our clients, employees and our environment, making us at the same time more efficient and eco-friendly. And we will keep working hard in that sense.

Also on the subject:

  • NH Hotel Group reduce its losses on 1st semestre 2014 by 0.8%
  • Foncière des Régions acquires the NH Hotel Amsterdam Center
  • Intesa approves HNA buyout of NH Hotel

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