Outward bound

International tourists hit the one billion mark for the first time last year. Wolfgang Neumann, CEO of the Rezidor Group, explains how one of the world’s biggest hotel operators hopes to cash in
Wolfgang Neumann took over as CEO of the Rezidor Group this year after long-serving boss Kurt Ritter retired
By Ed Attwood
Fri 10 May 2013 02:59 PM

Smart, slick, sophisticated and genial, Wolfgang Neumann is your archetypal hotelier. And if he’s looking satisfied, he has good reason to be.

“Last year, for the first time, tourism saw a billion arrivals globally; it’s a growth industry,” the Rezidor Group’s CEO says. “The emergence of budget airlines means that travel has become so much easier, more affordable and more accessible to the masses.”

Neumann’s not wrong there; as the middle classes expand in key emerging markets, the hospitality industry is all set to benefit. Last year, international tourist arrivals in emerging markets rose by 4.1 percent, outperforming the 3.6 percent growth in advanced economies, according to UN’s World Tourism Organisation. The highest increases were seen in South-East Asia and North Africa (up by 9 percent), while Central and Eastern Europe saw growth of 8 percent.

That spells good news for hoteliers like Rezidor, which, like many of the world’s big hotel groups, is focusing heavily on emerging markets. And by any measure, Rezidor’s growth has been rapid. When Neumann’s predecessor, the redoubtable Kurt Ritter (who retired at the beginning of this year) took over at the Brussels-based Rezidor Group, he was managing eighteen hotels.

Just over 20 years later, Ritter found himself overseeing 319 properties, with another 100 in development. He had also been the driving force behind the tie-up between Rezidor and Minneapolis-based Carlson. The two brands together run some of the industry’s biggest names, including Radisson, Radisson Blu, Park Inn by Radisson, Country Inns & Suites by Carlson and Hotel Missoni. Altogether, the Carlson Rezidor Group has just over 1,300 hotels, in 80 countries, making it the ninth-largest hotel company on the planet, with over $7bn in revenues last year.

Neumann’s job is now to build on that platform. Unsurprisingly, he sees the Middle East as a vital cog with regard to future growth. With 30 hotels in operation, and with another fifteen in the pipeline, Rezidor already has a pretty strong presence in the region. In the UAE specifically, Neumann says he is excited about last week’s announcement that Dubai has set itself a target of 20 million visitors by 2020.

“It’s, as usual, a very ambitious target, but when you look at the track record and history of Dubai…I think they can make it,” he says. “What it ultimately means is that Dubai as a destination will continue to grow, there will be further investment into Dubai, and with that comes more arrivals and more demand for accommodation.”

When asked what this specifically means for Rezidor, Neumann doesn’t reel off a spate of planned new properties, which is unsurprising given how recent the announcement has been. But there is little doubt that both Dubai and Abu Dhabi are a major part of the firm’s focus.

“We have seen in the last eighteen months the market rebounding [in Dubai],” Neumann says. “There’s been a bit of a difference between Dubai and Abu Dhabi; Dubai has had the supply increase and it has been able to absorb that. Abu Dhabi had even more of a supply increase, but was perhaps not so successful in absorbing that supply, so it’s more challenging.”

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He continues: “I think what’s important in Abu Dhabi is that the infrastructure projects that have been announced, like the museums, are going to lift Abu Dhabi in an important way. The last eighteen months has been positive; volumes have grown and rates will follow.”

One of the main features of the Abu Dhabi market has been the glut of high-end hotels that have hit the market more or less at the same time. But delays in delivery and a recent slackening in project announcements means that the UAE capital should see something of a breather. Jones Lang LaSalle says that another 5,200 rooms are expected to come onto the market by the end of 2015, a distinct reduction on previous years. Neumann laughs off suggestions that the oversupply might crimp Rezidor’s plans in Abu Dhabi.

“Our business is a long-term business and if you only look at the next three years, you won’t get anywhere,” he smiles. “You need to look at the next fifteen to 20 years…it’s not about taking a hotel, rebranding it, putting your flag in place and then three years later you change again — we want to establish win-win partnerships for the long term”.

One area that Neumann is considering is a beachfront property in Dubai; it’s the one gap in Rezidor’s portfolio and he says he is “actively looking” and hopes to have a hotel in place within the next three years. Other areas of interest in the Gulf include Saudi Arabia (which Neumann describes as the most exciting non-BRIC opportunity in emerging markets), Oman and Qatar. However, he shares concerns over the ambitious hotel projects that have been earmarked for Doha as the country builds up to the 2022 World Cup.

“You need to be careful; you look at Doha as a city and how much supply increase there will be, and you always need to balance,” the CEO says. “What’s very important is that governments also need to take responsibility in making sure that they really take advantage of that event. Because the event will be over before you know it, so you need to build up your marketing muscle, your organisation, which then helps promote that destination.

“In Doha in particular, it’s important that the tourism infrastructure continues to develop and the promotional activities will continue post-2022.”

But the Middle East is not the only market where Rezidor is pitching for growth. It is the largest international hotelier in Russia and the CIS, for example, where there are 70 hotels either open or in development. In Africa, Rezidor’s third focus region, it has 50 hotels operating or in the pipeline, and is present in 22 countries.

“In general, emerging markets are critical,” says Neumann. “The differentiator for us with the other global companies is that we are not busy in India and China because our strategic partner Carlson do those markets.”

Back home in Europe — where Radisson Blu is the continent’s most prolific upmarket brand — the news is less good. “I think in Europe we have to be ready for a couple of years of sluggish growth still — but I think they’ve seen the worst and I think we’ve turned the page,” the CEO says, adding that the outlook on America — which has seen strong recent jobs data — is far more positive.

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Given that Rezidor’s reach extends both upscale and into the mid-market, there has been speculation that the company will launch a two-star brand for some time, which was fuelled by Kurt Ritter’s suggestion to this magazine last year that any such launch could take place in the Middle East. Neumann says it’s an area that the firm is working on.

“Is there an opportunity for us? Yes. Is it something we are evaluating? Yes. Is it immediate? No — because our focus at the moment is on relaunching Park Inn by Radisson and building Radisson Blu further up,” he says. “I’m not ruling out a budget brand but at the moment it’s not a priority.

There appears to be less certainty, however, about the future of the firm’s tie-up with the Italian Missoni fashion house. Launched in Edinburgh in 2009, Hotel Missoni is a luxury boutique-style brand, which is largely overseen by creative director Rosita Missoni.

As yet, however, only two properties are open; the Scottish hotel and Hotel Missoni Kuwait, which opened in 2010. While more are believed to be in the pipeline — including a launch at Jebel Sifah in Oman — Neumann is fairly dismissive of the brand.

“It’s a niche product, a lifestyle brand,” he points out. “We are reevaluating at the moment the strategy and the cooperation with Missoni. It’s not a core brand for us; it’s a small niche, and we only have two hotels at the moment, so it’s much less important than our other brands.”

When pushed as to whether the launch in Oman will go ahead as planned, Neumann simply replies: “We are evaluating that at the moment.”

The Missoni link-up followed a similar partnership between Dubai’s Emaar and Armani. Although the Armani Hotel — based in the Burj Khalifa — has been a success, there has been only one additional property, in Milan, since then.

Aside from regional expansion, Carlson Rezidor has made clear it is planning to reach 1,500 hotels by 2015. Neumann says this is a reasonable target, but there are several other areas that need developing. One is Park Inn by Radisson, a mid-market brand that is in the process of being revamped to cater to the needs of a younger market. The firm carried out research last year and is currently making a number of changes to hotel design, including putting sound systems in headboards, removing desks and redesigning lobby areas.

“For us at the moment, the focus is on building the profitability of the company; we are a public company, we’ve grown very fast, and we have announced a target of improving our EBITDA [earnings before interest, tax, depreciation and amortisation] margins by 6 to 8 percent,” Neumann says. “It’s a fun industry, and with our brands we are very well-positioned — we don’t have fifteen-20 brands, where I would have difficulty explaining to you the difference between them.”

If Rezidor’s next decade is as successful as its last, then Neumann will consider his work a job well done.

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