Katerina Giannoka, the newly appointed President of the Radisson Hotel Group, Asia Pacific tells Pavan Lall that their future expansion hinges on a "manchised" model targeted at Tier 2 and 3 cities across India. Presently, Radisson which came to India in 1998, is the second largest international brand here, by the number of hotels.
How was the last year for Radisson?
We were around 64 per cent on occupancy and on average, our rates were Rs 6,000, which was better than the industry average by a few points but the challenge is that while supply has been absorbed, average rates are relatively still very low and that has to be increased.
Your game-plan for growth?
We have 18,000 rooms in Asia Pacific of which 10,000 are in India. In the next 5 years, we will add around 20,000 rooms in Asia Pacific of which about 6,000 will be in India. The majority of the rooms are in the upper-scale brand or full service or what we call Radisson Blu but going ahead it will be in the mid-market.
And all through management contracts ...?
The model we use to grow is either the classic management contracts where we run hotels through owners who just own the asset or we franchise them so that we basically give you a license and the standards and then you hire and staff and operate our hotels, or then the other structure is 'manchised' which means we transition the two where we start with a management agreement where the operator learns along the way and then in four or five years we step out and the agreement becomes a franchise deal.
You also have a model where your hotels are fractionally owned by multiple operators?
Yes, so for our 90 hotels in India, we have some 300 different owners. It's not institutional ownership, it's High Net Worth Individuals (HNIs). We do have some owners who own more than one property entirely and some of them are real estate operators but it's also a lot of HNIs.
You've said that you will add many more hotels. Specifically where?
The pipeline is geared for Jammu, Gorakhpur, Mohali, Hosur, Panipat, Pehlgam, Gulmarg, Manali, Bareilly, which we would term tier 2 and 3 cities.
What are you best known for as a hotel company?
In India, the brand equity is well-known so we're classified as an international company with a local touch, and remember, that as a foreign brand we are one of the companies that got here first so we built a local team, consumers know our brands across the smaller cities better than many others.
How robust is your loyalty programme?
As part of our rebranding exercise, we recently lowered the threshold for our rewards where as few as nine stays at a Radisson gets you to the next level. So it's more accessible. We have 18 million global members and in India we have 700,000 members for our Radisson Rewards.
What have you learned in India that you could apply to other markets for Radisson?
We work with smaller hotels, so 100 rooms for second tier city hotels is one thing we see that works and it will be rare to find hotels above 200 rooms because demand isn't there in those cities. In India, what we see which can be transferred to China, for example, is localize, adapt, and cliched as it sounds, it's all about relationships which is more than just ink on paper and contracts. You may be in court over issues but agreements happen over dining tables and cups of tea. Another learning is that one cannot just go by plans; you have to be able to be fluid and shift according to the dynamics of the markets.
The big challenge for your growth ahead?
The cost of real estate to open a hotel, interest rates and financing are all increasing. The permits, the licenses and all is actually simpler in China where it takes three to four years but in India, it can be as long as five to seven years when you have capital tied up. Then there are hotels that also end up getting stuck. It's the last minute hiccups that you can't plan for and that's something we work at on trying to be able to adjust to and prepare for but we remain very bullish.