HONG KONG—Carlson Rezidor Hotel Group’s transformation into a company focused on management contracts in Asia instead of franchising agreements is moving at a brisk pace with India leading the charge, according to the company’s top executive in the region.
Simon Barlow, the company’s president of the Asia Pacific region, said during a break at the Hotel Investment Conference Asia Pacific that the company is pleased with its 40% growth rate in the region since it decided in 2010 to concentrate on building its management business.
“Pretty much everything we’re opening is managed as opposed to franchising,” Barlow said. “The buzz in this part of the world is the emergence of middle-class wealth, the development of infrastructure. The domestic markets in these countries are becoming real opportunities for mid-market hotels.”
The company has 92 properties open in the region—“too many to be small but not enough to be big,” the executive said. “But there’s a lot of opportunity in our pipeline.”
Carlson Rezidor has committed to growing in various countries in the region, including:
- Fifty-seven of the company’s 92 properties in the region are in India, including 19 in the New Delhi market. Carlson Rezidor in April signed a 49-hotel deal in India with Bestech Hospitalities. Carlson Rezidor is investing capital to build the first two hotels and will develop the rest over 15 years in northern and central India. “It’s the first time Carlson has invested capital in Asia,” Barlow said. “They can see we’re prepared to invest when it is strategically good for us to do so.”
- Four hotels in Thailand with a Radisson Blu scheduled to open in Bangkok in mid-2013.
- Two hotels open in the Philippines with five more in the pipeline as part of a deal with the SM Group. “The aspiration is to grow the Park Inn brand in Philippines,” he said.
- A desire to enter Indonesia with the mid-market Park Inn brand. “We’re very hopeful to announce a major deal for at least 20 hotels in Indonesia,” Barlow said. “We have an existing partner with the Carlson company that is not in hotels at the present time and wants to invest in the hotel industry.”
- Thirty-four hotels open or in the pipeline in China.
Barlow said the key for foreign-owned companies to enter markets in Asia is to ensure proper partnerships are formed.
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| The 196-room Radisson Blu Resort Wetland Park in Wuxi, China, is one of 34 hotels that Carlson Rezidor has open or in development in China. |
“For example, our management team in India is all Indians, and the same thing is in place in China,” he said. “That’s important in emerging markets. You have to get competent managers from the countries they’re in. You have to be living it every day to know when it makes sense to go into a market.”
A change in direction
The company began moving into management contracts as its primary growth vehicle in the region when it bought out its master franchise agreement in India in mid-2010 and turned it into a management company.
Barlow said with STR Global projecting that 430,000 rooms are under construction in Asia and the main business model in the region being management contracts, the recipe is right for companies with proven track records to be successful. STR Global is a sister company of HotelNewsNow.com.
There’s also the matter of consistency across brands.
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| Simon Barlow, president, Asia, for Carlson Rezidor Hotel Group |
“In high growth markets you need to protect the integrity of your brand,” Barlow said. “Emerging markets don’t always understand brand standards. If you don’t partner with the right partner, you’re going to lose brand integrity right away.”
The company’s makeup in the region is approximately 40% franchised and 60% managed. Barlow said by the time it reaches its goal of 160 hotels in the region in 2015, the makeup will be 70% managed and 30% franchised.
“As part of that plan, 70 of those 160 hotels will be (Radisson) Blu,” he said. “It’s an upper-upscale brand that fits well with the growth that is taking place in Asia.”
The company recently added two Blu properties in China—a 400-room hotel in Chongqing Shapingba and a 196-room hotel in Wuxi.
“The dominant brand today is Radisson Blu followed by Radisson upscale and Park Plaza,” Barlow said “We’re also introducing Park Inn by Radisson in Asia and have had some great success setting up that platform.”.
Plenty of optimism
Barlow has been involved in business in Asia for more than 20 years. He said the most pleasant surprise has been the willingness of governments to invest in infrastructure, although it is an arduous process that often can be frustrating.
“This whole government spending on infrastructure that is fueling domestic travel is the next wave for development,” he said. “The second wave is harnessing the middle-class wealth.”
The region is ready to accept the influx of global brands, Barlow said.
“China is a very brand-conscious country—they like the association with a consistent branded hotel,” he said. “If you can tailor your overseas offer to the local market, you will get a great deal of success. You’ve got to take something that’s successful and localize it for it to work.”
For example, the company will slowly integrate the use of self check-in at its hotels in Asia, according to Barlow.
There are plenty of opportunities for the Carlson Rezidor family of brands to grow, as Barlow cited Singapore, Seoul, Hong Kong and downtown Tokyo as key markets the company must penetrate.
“We’re excited and energized,” he said. “I tell the team that we’re on the front end of a journey rather than in a mature business. Having 92 hotels gives us a good, strong platform. We’re really excited about next wave of hotel development being mid-market hotels in some of the most populated countries in the world.”