Since 2012, Wolfgang M. Neumann has succeeded Kurt Ritter at the head of Rezidor Hotel Group, subsidiary (51%) of Carlson Hotels. He joined the group one year earlier as Executive Vice President and COO, taking the helm of a group of 430 properties and 95,000 rooms, operated under the brands Radisson Blu, Park Inn by Radisson, and Missoni. In four years, he grew the group to more than 500 operating properties with 110,000 operational rooms, diversifying the brand portfolio with Quorvus Collection in the upscale, Radisson Red in the generational lifestyle and Prizotel in the economy segment.Today, he is preparing the group to integrate the constellation of HNA, the Chinese tourism group that acquired Carlson Hotels.
Was it going to come Yes, Was it a surprise No. We all were aware that our industry was ripe for consolidation. We knew it was going to come as the result of two driving forces, one is the low interest rates and the second is the rise of new investors, namely from China. But it’s not only China if you look at the large merger between Marriott International and Starwood Hotels, creating a world entity of over a million rooms. No doubt that these factors are creating pressure on others.
Is it a natural, a compulsory phase to grow bigger and balance the power against the partners (OTAs), the competitors?
Will there be more consolidation? Yes. Is it the holy grail of the hotel industry? No. We need to put things into perspective. Not any group could and will be part of the Top Five or Top Ten. You publish every year the ranking of 200+ hotel groups, there is a lot of successful companies on that list which will never be part of the Top Ten. And I think while hotel consolidation will continue, it will not affect these companies which are already successful. It’s true that the scale gives you the ability to invest in IT in a different way than when you are small; to develop a larger loyalty scheme and to raise your distribution and negotiation power. That’s really what it’s all about. At the same time, smaller companies, and I consider Rezidor as a smaller company, can have a clear strategy, a business model adapted to it, and can differentiate themselves. Obviously, it takes a certain culture, a certain management style, but most importantly it takes differentiation. Medium sized hotel groups will still be able to compete successfully and play their fair share in the game.
Shangri La and Taj Hotels just announced a marketing alliance in sharing their loyalty programme, would you consider an alliance as an alternative to merger and acquisition?
Potentially alliance is an interesting path to follow, it is relevant especially in terms of marketing to enlarge the scope and the means of your actions. It is an opportunity to increase the number of members for your loyalty scheme. It is an important factor of success and this is one of the main argument develop to justify the merger between Marriott and Starwood. It allows you to communicate directly to your customers because you have this relationship, and if it’s done correctly it gives you a leverage to play against the OTAs. Potentially there is room for more alliances or marketing associations.
Do you think that European groups are getting weaker in that global strategy when the big money is within the hands of Chinese or American investors?
No, I don’t think so because the world has become big and one. There is no division between America and China, with the Europeans being left out. AccorHotels is a big force in the game and you might consider IHG as a British group even though most of its activity rely on Holiday Inn, but the center of decision is in Europe. Hotels companies create international large scaled cross-geographics with very successful bases. Some of them will fold into the consolidation process led by American or Chines groups – and we are a perfect example of that – but I am sure most of them will continue to compete as European companies.
Specifically considering the Rezidor Hotel Group what is the forthcoming scenario, after the completion of the Carlson Hotels acquisition by HNA?
At the moment, we are still a public listed company. HNA is not buying Rezidor but they acquired Carlson Hotels which owns 51% of Rezidor. The deal has just been completed and we will see for the next step. HNA has to make a decision within four weeks after completion. Obviously I had some discussions with the new owners of Carlson Hotels, but I cannot elaborate on them. Both of us are very respectful of the procedures for public companies.
But, let’s say you as Rezidor Hotel Group joins the new entity, would that give you stronger possibilities to develop, considering the tendency of Chinese groups to invest in real estate as much as in operations?
Yes, indeed. The Chinese have huge ambitions. They spent 25 billion dollars over the last three years just in hotel assets. Such a volume is a game changer. At the same time, economic reports show that the tap will not be so widely open in the future, because there is, even in China, a limit to the amount of money available. Having said that, you are right to say that real estate is a key driver for Chinese hotel groups. They take a different approach to the current business model of asset light. They are less reluctant in terms of real estate and less reluctant in terms of leases and they take a more long-term approach. And that? Is it appealing to us? Of course, It’s a wellcapitalized company, within the Top 500 in China with great ambitions. We are, so far N° 6 in Europe with obvious potential to grow bigger and faster with a little help of a new shareholer.
Can HNA help you in closing a deal with key money on the table?
Sure, even though we already do that on a select number of cases when it’s needed. But we would be able to play the balance sheet differently. It would allow us to use the real estate angle which today we are not.
Is the consolidation an opportunity to regain the terrain lost to the new players, specifically from the sharing economy, In terms of distribution, in terms of marketing, in terms of communication, in terms of innovation?
My view is that consolidation is not an answer to the disruption of the sharing economy. Scale will not allow you to be more competitive against the sharing economy players. For me, we received a wake-up call from these players, saying come on guys, are you really delivering your promises through your product, your services? We need to focus more on our Unique Selling Propositions which they don’t have, right? Even though they will try to offer services, but it’s much more difficult to maintain the level and the regularity. That is where hoteliers, big and small, can play their tune. We should work more on the product offering and on putting the customer on the stage. The focus on the customer is a priority, understanding the behaviour, and expectations which obviously have changed. At time, we have been slow to address that in the eye of the traditional industry.
Would you admit, as an industry, that you were lacking imagination and perspective?
No, this is such a broad brushed statement. You the industry! There are fantastic companies out there which were constantly ahead of the game. And honestly when you look at our Radisson Red concept, one of the first lifestyle select product on the market, exactly fitting the needs of the younger generations who think and act differently as you and I; who look at the hotels in a totally different way. They don’t mind if it’s a smaller room and not as luxurious, but they want a heck of a public area, with a fun experience. Technology is very important. It’s all about experience and sharing.
And what about the response to the product?
The response is fantastic, considering the location and the timing. You know how much Brussels has been affected by the impact of terrorism. We couldn’t have chosen a worst period to open a new hotel in the worst market, but nevertheless the customers are there. We have the best ratings on TripAdvisor and the developers like it.
Has the competition from the sharing economy forced you to launch such a concept, as a response?
Oh no, we were working on the concept long ago. If you are not in phase with you customers’ expectations and needs then you are not worth being an hotelier. And if we would have needed the sharing economy to come out with a product for the younger generations we would not be a sound company. But I admit, somehow all of us received a wake-up call. And also it needs to be emphasize that we suffer from an unfair competition whether it is regarding taxes, regulations, … Hopefully governments around the globe start to realize how much they lose in taxes. In some cities, such as Paris, the unfair practices of the sharing have a deep impact on the activity of the hotels.
Are you not too much focused on the younger generations when the baby-boomers are still alive for another decade?
Do you still want to cater for them? Absolutely and that’s why Radisson Blu is still our key brand and the largest midscale brand so far in Europe. It is not only about the younger generation or the younger generation mindset. People are different and we should cater for all of them.
Would you however consider the launch of a new brand in the coming months? Are following the trend of hybrid concept mixing different populations in the same building with different levels of comfort or services?
We just acquired the Prizotel brand which is a fantastic, young, dynamic company with several hotels already in operation in Germany and more under development. It is a great complement to our existing portfolio and somehow an answer to your question. We are interested in covering the evolving needs of our guests. It is a very promising brand and here again it is a different product which is very much focused on the experience and the services associated to it. It is a living proof that you can deliver an excellent level of service in the economy sector. As for your question about developing an hybrid product, my personal view is that if you want to please everybody you end up pleasing no one. When the customer look around in that kind of hotel, he can finally ask himself if he belongs here. If there is too much of a mix, you do not feel associated with the people around you. In my opinion, you need to cater for a distinctive audience, sharing the same expectations, for likeminded guests I would say.
Would you say that there are limits to the extension of the boundaries of the hospitality world?
To me yes. I am a hotelier with a great focus on the guest. It is all about the guest and this is the theme of our current employee campaign; "Every Moment Matters". It is about bringing the guest on the centre of the stage. When we first discussed the campaign, some people argued that we were just assuming the basics. But that’s what we need to do. Our focus was dragged away on real estate, distribution, technology, digital mobile taking away the ball of our eyes from the customer. That’s core to us.
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