• Red for China as Radisson joins the brand expansions

Carlson Rezidor has revealed China will the location for the first property to appear under its Radisson Red hotel brand. The announcement came as a rash of new hotel brands were announced, around the globe.

The first Red branded hotel will be in Shenyang, capital of Liaoning province and car manufacturing hub in northeast China. The 300 room hotel will sit in a twin development alongside a Radisson Blu, and is expected to open in 2016.

Radisson Red was launched in February 2014, alongside Carlson Rezidor’s other new luxury brand, Quorvus. Red will include the latest technology apps for skipping check-in, while guests will arrive in a reception designed as a gallery. The aim is to have more than 60 Reds open by 2020, and at the launch, a 2015 rollout was promised across urban centres globally. Up to USD140m was said to be set aside to support the construction or conversion of the first five properties.

News of the first Red comes as a slew of new hotel brands were announced in the same month. Hilton has revealed Canopy as the new name for its latest lifestyle brand, which promises quick adoption via conversions.

In Brisbane, Australia the first Next Hotel opened, a 304 room conversion by Singapore’s SilverNeedle. In China, Shanghai’s Shimao Group launched MiniMax and Minimax Premier, aimed at young adults seeking an “unconventional” experience. Meanwhile in the US, Montage Hotels launched its “fashion-forward” Pendry brand, and Red Lion revealed Hotel RL, a conversion three star brand designed to appeal to Millennials.

“The signing of Radisson Red Shenyang Hunnan marks an important milestone for the Radisson Red brand, being the first in the world,” said Carlson Rezidor regional president Thorsten Kirschke. “We expect to see Radisson Red feature significantly in our portfolio growth in China, as well as across the region, as the brand has a strong relevance to the growing segment of millennial-minded travellers and a compelling value proposition for hotel owners and investors. Of the global target of 60 by 2020, we are confident that half of it will be in Asia Pacific. This new addition to our China portfolio further strengthens our commitment to China. We will be growing our presence in China, from 13 hotels currently in operation to 41 within the next three years.”

“Carlson Rezidor has proven to be the right partner, delivering strong financial returns for our hotel,” said Lv Li Hua of Shenyand New Times Investment Co. “We are very confident of the strong investment potential of Radisson Red. It is a forward-looking brand that caters to the new breed of global travellers. Radisson Red gives us the opportunity to capture this important and growing segment and we are pleased to have the first-mover advantage.”

China sits as a small but growing part of the Carlson Rezidor portfolio. Currently the group has 10 Radisson Blu and three Park Plaza hotels open in the country, but 27 in development, set to treble the presence within the near future.

Meanwhile, the holder of the Radisson torch across Europe, Rezidor, revealed a drop in portfolio size with its third quarter results. Seven hotels departed the company, while it opened two, as it continues extricating itself from problematic property leases. “The two new hotels are expected to generate, in a stabilised year, at least twice as much fee revenue as compared to the seven hotels leaving the system,” noted the management statement. Only “exceptionally” will Rezidor sign another lease, as it expands further in emerging markets. 

“The important activity around asset management continues to be a key driver of our Route 2015 turnaround plan,” said CEO Wolfgang Neumann when delivering the results. “We have restructured two agreements in October that will improve the profitability of the leased portfolio by ca EUR3.2m per year as from January 2014. The cost reduction will be reflected in the Q4 results. Together with the two leases that were restructured earlier in the year, we have now secured an EBITDA improvement of ca EUR4.6m for the full year 2014.”

The funds received from the rights issue will be used to refurbish hotels in the Nordics, where growth is now anticipated.

Meantime, the group saw revpar up 3.5% in the third quarter, with both occupancy and rate moving up; revenues increased 5.9% to EUR13.4m. Political problems hit returns in eastern Europe sending revpar down 3.3% in the regoin, while the bright spot was Saudia Arabia and its neighbours, with double digit revpar growth in South Africa.

 

HA Perspective [by Chris Bown]: So the first Red on the map is, appropriately, in China; an area where the group sees much potential, apparently ignoring the short-term downturn that others are noting in their results. In common with pretty much every other new brand announced, technology to automate check in and do other clever things will be integral from the start. The idea of turning the lobby into a gallery is novel, though something art’otel and new Spanish brand One Shot are already using as a theme.

Brands are breaking out all over the place, as hotel groups hope to create a distinct space in the market, with a strong appeal to a key customer group.

Currently dismissed by the establishment as no threat worth mentioning, Airbnb makes much of its offer connecting guests with their hosts and with local neighbourhoods. And it feels as if its influence is already beginning to colour the brand creators. Hilton’s Canopy launch talks of the brand being neighbourhood oriented, “offering simple, guest-directed service, thoughtful local choices” and “more included value” that includes an “artisanal” breakfast. Already finding success with conversions at DoubleTree, it is sure to replicate the approach to roll out Canopy, again making for a brand with less of a cookie cutter feel to its properties.

Of course, one benefit of launching new is that the latest technology can be installed as part of the fit-out. So many of these new brands promise smartphone-driven check-in, room controls and amenities, putting them a technological age ahead of more established brands and properties. The winners of this new tech race will be those whose systems are flexible enough to accommodate change. Everyone who bought Betamax saw redundancy when VHS triumphed – and who uses video cassettes today? In just the same way, selection of the wrong systems today threatens an expensive headache for hotel brands and property owners tomorrow.

[Additional comment by Andrew Sangster]: Hotel Analyst caught up with Thorsten Kirschke and Carlson COO David Berg at the HICAP conference in Hong Kong this October. Kirschke was proud of the fact that Red had launched in his patch and said it reflected the growing importance of such markets. Historically, major brand launches had occurred in the West, usually the US.

Carlson’s focus in Asia Pacific is India as much as China. In fact, Carlson has been arguably the most successful of the global brands on the sub-continent while in China it is a relative laggard.

Alongside these two giants, the Philippines and Thailand were also key territories. Carlson would be focusing on the major territories but was also prepared to be opportunistic, said Kirschke. The soon to be second property in Bangladesh was a function of such opportunity rather than a strategic push into such a minor market.

New opportunities are springing up surprisingly fast thanks to a trend towards conversion. Asia Pacific is normally viewed as primarily being a market for new development but a surge of activity by smaller private investor platforms has led to a number of new independent hotels.

Many such properties, particularly in the upper reaches of the chain scale segments, are finding that it is necessary to sport an international flag to attract a share of the rising volume of international arrivals, reckons Kirschke.

But perhaps more interesting than what is happening in terms of development is the awareness Carlson is demonstrating about other industry issues with the launch of Radisson Red. As discussed by Chris above, the concept is hardly revolutionary and I am not sure that Millennials are that radically different from other guests.

Despite this, Red matters for at least two reasons. Firstly, it is evidence that Carlson understands that loyalty is no longer anything to do with points and is all about recognition. This is, to repeat a dreadful cliché, “baked into the brand DNA” which in normal English means that this idea of recognising the customer has been properly addressed by all of the brand’s key features.

Secondly, Red shows an understanding that distribution has fundamentally changed and is no longer controlled by the hotel brand company. Rather, the hotel brand’s focus is about gaining the best possible traction in the wider distribution landscape.

For Berg, this might mean working with the new distribution players such as Airbnb in some form of “coopetition”. There are few other big-brand hotel company executives that would utter such words.

Carlson Rezidor sits just below the biggest global majors in terms of size. And perhaps because of this, it has had to think a little more cleverly to make its way in the world.

Carlson Rezidor in particular has been sharp in understanding the opportunities presented by globalisation and emerging markets. This sharpness seems to be spreading throughout the organisation and beyond development issues.

 

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