‘You have to be able to shift according to the dynamics of markets’

KATERINA GIANNOUKA, president, Asia Pacific, Radisson Hotel Group, tells Pavan Lall that the company’s future expansion hinges on a “manchised” model targeted at Tier 3 cities across India. Radisson, which came to India in 1998, is currently the second-largest international brand here in terms of number of hotels. Edited excerpts:

“YOU MAY BE IN COURT OVER ISSUES BUT AGREEMENTS HAPPEN OVER DINING TABLES AND CUPS OF TEA” “IN INDIA, PERMITS AND LICENCES CAN TAKE 5 TO 7 YEARS WHEN YOU HAVE CAPITAL TIED UP. THEN THERE ARE HOTELS THAT ALSO END UP GETTING STUCK”

How was the last year for Radisson?

We were 64 per cent on occupancy and on average our rates were ~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 those have to be increased.

What are your growth plans for the country?

We have 18,000 rooms in Asia Pacific, of which 10,000 are in India. In the next five years, we will add around 20,000 rooms in Asia Pacific, of which around 6,000 will be in India. A 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 licence and the standards and then you hire the staff and operate our hotels. 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 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 have said 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 are 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 and built a local team. Consumers know our brands across the smaller cities better than many others.

How robust is your loyalty program?

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. It will be rare to find hotels above 200 rooms because demand is not there in those cities. In India, what we see which can be transferred to China, for example, is localise and adapt. Cliched as it may sound, it’s all about relationships, which are 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.

What’s 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 are 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’s 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 on trying to be able to adjust to and prepare for, but we remain very bullish.