MADRID and BERLIN—GM Javier Friera Acebal taps his oxfords anxiously as the elevator hums its descent. Having just shown off some of the older guestrooms at his towering, 440-room NH Eurobuilding, he’s now prepared to unveil what he promises will be a vastly different experience.
The hotel, situated in Madrid’s financial district, is in the midst of a €25-million refurbishment that will bring NH Hoteles’ once-shining flagship into a new era of 4-star, high-end accommodation.
“The differences will be clear,” Acebal says as the elevator slows. And when the doors open, he makes good on his claims.
What were once well-maintained but worn hallways have been replaced with brighter corridors—new carpet, wallpaper and lighting giving the space an almost airy vibe.
The changes in the rooms are even more dramatic. Only a few floors above, the property’s spacious guestrooms were veiled in wood paneling and dated earthtones. The updated rooms are glistening white, with crisp white duvets on king-size beds offset with a well-placed splash of purple in the area rugs. Where wood furniture once settled now stands euro-sleek white desks and bedside tables.
Acebal, who until this point has been standing back silently, walks over to the windows and throws the curtains back in a flourish. The levee breaks and daylight floods the room. The result is space that is fresh, clean, new—a reflection of change not only in that room of that hotel but in the broader corporate profile of parent company NH Hoteles.
After decades of aggressive, piecemeal expansion that had left the company without a clear identity and struggling under the weight of its own debt, the curtains are now being pulled back and changes are being made.
The man leading the charge is Federico González Tejera, who was brought on in November 2012 to right a ship adrift at sea—or keep it from sinking.
Still reeling from the global downturn and ongoing economic volatility in its home base of Spain, NH was saddled with more than €1 billion in debt as recently as February. But González Tejera acted quickly, proposing two key deals that have generated proceeds of more than €300 million and an additional €170-million loan.
The first generated a 20% capital share from China-based HNA Group. Under the deal—which came after two stalled attempts in as many years—the two companies will create a joint venture for the Spanish group’s entry into the Chinese market under the NH brand and establish a commercial partnership that would “enhance cross-selling opportunities,” according to a company statement.
The second would have NH sell five hotels totaling 804 rooms in Mexico, Chile, Colombia and Uruguay to U.S.-based Hospitality Properties Trust. If the deal closes, NH would retain a 20-year management contract with renewal options. Under the non-binding terms of the agreement, which is subject to due diligence and final documentation, NH also will receive a €170-million loan from HPT secured by four hotels in Madrid, Barcelona, Amsterdam and Brussels.
HPT’s President and COO John Murray said during the company’s fourth-quarter earnings call that the deal could close later this year.
Stepping into the role of CEO under such financial duress proved a tremendous shock, González Tejera said while participating in a panel discussion during the recent International Hotel Investment Forum. But having stopped the bleeding, he’s quickly setting his sights on new priorities.
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The 440-room NH Eurobuilding is undergoing a €25-million refurbishment.
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Making toothpaste
“How do you make your hotels like toothpaste?”
The question, posed by panel moderator/provocateur Laurence Geller, formerly of Strategic Hotels & Resorts, recalled González Tejera’s prior role as executive with Procter & Gamble, the multinational manufacturer of detergents, drugs, disposables—and, of course, toothpaste. There’s a consistency to those products, Geller said. When a customer brushes her teeth each morning, that toothpaste is the same she’s used from each tube sitting in the medicine cabinet before it.
Hotels, however, are a different story. “Experience is a combination between the location where you are, the asset … and the service that you can provide,” González Tejera says later during a break at IHIF.
That means one stay will never truly match another, which is a good thing. The CEO will never deliver the same cookie-cutter experience to NH Hoteles’ guests as he did while working at P&G, nor does he want to. A traveler staying at one of the company’s hotels in Germany should not have the exact same experience staying at the Eurobuilding in Madrid.
But there’s a difference between embracing local cultural cues and offering experiences so vastly different there’s no common DNA, González Tejera says. That’s the challenge facing the NH portfolio today—the lingering pains of ambitious growth.
And much of that expansion came in leaps and bounds. In 2000, for example, NH executed a merger-and-acquisition with Dutch hotel chain Krasnapolsky. In the blink of an eye, the portfolio rocketed by 65 hotels. A year later NH added an additional 14 with the acquisition of Mexican-based Grupo Chartwell. And the year after that, it acquired German chain Astron Hotels, bolstering its base with 46 new hotels in Germany, six in Austria and one in Switzerland.
GM Acebal notes the change this way: “We grew really, really fast. When I started 20 years ago we had 36 hotels. Now we have 400. When you grow so fast you cannot keep the same image or characteristic.”
It’s a challenge of which González Tejera is keenly aware. His hotels might not be toothpaste, but they need to maintain some level of consistency nonetheless.
Defining an experience
The CEO’s newest priority is defining the NH experience. What does the brand stand for? What does it promise its guests?
Those aren’t easy questions, he says, especially with such a diverse portfolio.
“Are all the assets we operate today, do they belong with the experience we want to sell?’ I think the answer is no,” he says.
NH isn’t alone here. One of the first things González Tejera observed when he entered the hotel industry was the harmful fragmentation within brands. “It looks like in this industry just building a building, putting on a flag (makes for) a hotel. The level of dispersion of the offer is huge. Many of them there is not an obvious reason for being,” he said during his panel with Geller.
Such careless growth is not sustainable, he said. It’s planting an ivy sprig and letting the plant run wild. The only thing left to do now is prune it back. “Beyond what we have done so far,” he says, “we need to complete the sale of some assets.” Further cuts likely will come in the form of layoffs, which Spanish newswires say could have an impact on 38 of the chain’s hotels in Spain.
Thoughtful asset disposition will not only alleviate some of the debt burden still hovering overhead, but it also will allow NH to more clearly articulate its image and promise to guests, González Tejera says.
That’s another area in which the entire hotel industry is sorely lacking, he says.
“When I came to this industry there was a lot of complaint about the power of distributors, of (online travel agents).” They’re simply doing their jobs correctly, González Tejera says. The shortfall comes well before that in the consideration phase of the travel buying funnel. If hotel chains and brands more effectively communicated their messages to resonate with guests, those same guests would be far more likely to come straight to the chain or brand.
But how to communicate that sticky message? González Tejera is strategizing with his team to find the answer.
“The day that’s done, we will stick to it and we will do great.”
BERLIN and MADRID—While the focus might be on the existing portfolio, executives at Spanish hotel chain NH Hoteles are still contemplating thoughtful global growth.
The company, which owns, operates or franchises some 400 hotels in 26 countries, will begin examining and selling off non-core assets in a bid to alleviate its significant debt burden and curate a more succinct, clearly defined hotel experience.
Each new opportunity will undergo the same scrutiny, executives said.
“Our priorities today are to grow in Latin America,” said Francisco Zinser Cieslik, chief strategy and development officer. “Latin America is a very, very important market for us. We have presence, but we need to grow that presence and have a larger footprint in Mexico, Colombia, obviously in Brazil, in Chile. We are focusing on developing in Latin America.
“But also we are looking at markets in Europe, specifically in Paris and London, where we have a very small footprint … We believe it is going to be key for us to be in those markets because those markets are not only very important markets for the hotels but are also very important outbound destinations,” he added.
China is also on the table, thanks to a deal with Chinese tourism and hotel company HNA Group.
And now with the joint venture with the Chinese group, obviously China will be very much on the screen. The deal, signed in February, creates a joint venture between the two groups that will see NH’s entry into the Chinese market. “Initially, two or three of HNA’s properties will be refurbished and re-branded with the NH Hoteles brand as a starting point,” according to a statement.
NH would not have pursued that “complicated” market if not for the HNA partnership, said CEO Federico González Tejera.
“China needs a lot of attention because it’s the most different market that there is in the world,” Zinser Cieslik said. “We need to be sure that we learn, that we understand, and that we really are able to provide what they want. It’s a very competitive market, but we believe that in the 4-star category, which is where we are … we believe that we can add value there. China is very, very oversupplied in the low end and the very high end.”
Editor’s note: NH Hoteles provided hotel accommodation in Madrid for two nights. Complete editorial control was at the discretion of the HotelNewsNow.com editorial team; NH had no influence of the coverage provided.