• Rezidor’s new leadership plan

Rezidor Hotel Group’s new CEO announced plans for a new five-year strategy which is expected to see it align itself more closely with Carlson Hotels as it looks to drive revenues.

The news came as fellow Scandinavian group Scandic Hotels reported a strong quarter as it too welcomed a change at the top and continued to pursue expansion.

Federico González-Tejera, president & CEO, Rezidor Hotel Group, said that “the opportunities going forward look significant”. Following the board’s approval of the five-year plan, the group intends to share the core components at an investor day in the fourth quarter.

The CEO, who replaced Wolfgang Neumann, told analysts that the vision for Carlson Rezidor was to be “one of the top three companies in the world”.

González-Tejera described the company’s strengths as its Radisson brand – one of the most recognised, he said, upper-upscale brands –  its position as one of the top six companies in Europe, and its asset-light growth.

He said: “We need to focus on driving revenues at a much faster pace. We will continue our growth both in mature and emerging markets.” Driving this, he said, would be a revised IT system.

González-Tejera said: “I am energised by the potential of the company, and excited to build on Rezidor’s achievements to further strengthen the group’s profile and profitability.

“We have started to work on a comprehensive and holistic five-year strategy plan that will be presented to the board in October 2017 for a launch in January 2018. The plan analysis covers our operations and asset management, brands and products, commercial and IT areas, talent and culture. It is also aligned with our partner Carlson to capture global revenue and brand opportunities, in order to reach our joint target of becoming one of the world’s leading hotel companies.”

Earlier this year a global committee was created to oversee both companies, which have been bought together under HNA Group, which acquired Carlson Hotels in 2016 and holds a stake of 70.4% in Rezidor Hotel Group.

The company saw net openings of 83 rooms in the quarter, something which González-Tejera said would see “a significant change”.

When asked whether the possibility that HNA would not acquire the remaining shares in the group would influence strategy, he said: “No matter who is on the board we will present a sound proposition for the coming five years. What is important is that the management team is focused on higher revenue growth…that will be the same no matter what the nationality of the owner”.

The CEO said that using HNA to foster growth in Chinese guests was “not something that we have exploited. Is that an opportunity for the future? Chinese consumers are coming and where we sell those rooms depends on the price they will pay but it is not a material affect for the next 12 to 24 months”.

The company saw Ebitda for the quarter fall by 22% to EUR28.4m, hit by higher central costs and higher bad debt costs, as well as softer conversion in the lease like-for-like portfolio.

At Scandic Hotels, the company reported a busy quarter, opening nine hotels and acquiring Restel’s hotel operations in Finland, turning Scandic into the leading hotel operator in Finland and reinforcing the leading position in the Nordic market. The company also signed a new loan agreement which CFO Jan Johansson told us would increase flexibility and reduce financing cost.

Frank Fiskers, outgoing president & CEO, handed over to Even Frydenberg with the comment that Scandic was “very well situated for the future with strong market positions and a successful business model that is bringing us commercial success. In addition, we expect that market conditions will remain favourable in 2017”.

Adjusted Ebitda at the company for the half year reached SKr615m (GBP74m), up from SKr509m in the same period last year. Norway continued to recover, with Johansson telling us: “What you see in Norway is that there’s no capacity coming into the market, so that is that main driver”.

The acquisition of Restel gives the company additional scale, which would not, Johansson said, change its distribution strategy. He said: “We use the expression ‘controlled distribution’ and our direct bookings are close to 70%, which is due to such a large base of recurring corporate contracts. We have a stable customer base which will be harder to maintain when we have more leisure customers, but we are hopeful of maintaining a high proportion of controlled distribution.”

Johansson said that the company had “no reason” to follow Marriott International and Hilton into cancellation charges “because occupancy has been so high”.

The group continues to look to Germany, where it currently has four sites, most-recently acquiring the Wyndham Grand Frankfurt, which will open as the Scandic Frankfurt Museumsufer at the start of next year. Johansson said: “We are very picky  – Germany is quite a difficult market and profitability comes first. It is tough there, but we are starting to make a name there.”

HA Perspective [by Katherine Doggrell]: González-Tejera is a man who likes a five-year plan, having launched a successful one at NH Hotels Group, where he no doubt caught the eye of shareholder HNA, he is now looking for more of the same.

Details so far are scant. One analyst asked whether having a Chinese owner would mean a different asset strategy for the company to having a European or American owner, with the former likely to be asset-heavy. The CEO would not be drawn on ownership “whether that is asset light or asset heavy in certain areas”.

This would seem to indicate that the new plan will not be a wholesale shift for Rezidor, which has always been opportunistic in its approach to growth, one of the reasons why it has had success in the emerging markets.

An analyst close to the situation pointed us back to the five-year plan at NH, which, as González-Tejera plans for Rezidor, leant on technology. It also focused on moving the estate towards the upper-upscale  – in this case Radisson – as well as pushing for greater global expansion to counter what was at the time (but is no longer) Spain’s weak performance. Rezidor is not sited in poorly-performing areas (if one discounts the Middle East) its domestic market is rising and its hotels are not in need of refurbishment, something which gave this analyst confidence for the company’s future.

Key to the push for that third position among the global operators was that HNA had been widely expected to merge NH with Carlson and Rezidor, a plan which provoked many of the ructions at NH. The plan slipped a little when HNA failed to pick up all of Rezidor, but closer contact, despite repeated comment from the new CEO that it and Carlson will be independent, will see the two closer to a merger by any other name. What this means for Rezidor-unique brands such as the economy Prizeotel remains to be seen, but what is likely is that those at NH may see a reignition of enthusiasm on HNA’s part after a quiet year so far. A fascinating autumn beckons.

Additional comment [by Andrew Sangster]: At the risk of using a tired cliché, Chinese companies remain a mystery wrapped in an enigma or, trying to be less cliched and probably failing, like picking your dinner from a Chinese restaurant menu using only numbers.

The cause of this uncertainty is the Chinese government and in particular its crackdown on overseas investment by Chinese firms. During 2015 and 2016 there were massive outflows of Chinese capital and late last year Beijing dictated that enough was enough. This year, rather than the USD417bn outflow of capital seen in 2016 there was a USD16bn surplus for the first half of 2017. The crackdown has worked.

In the forefront of these aggressive moves to slow capital outflow have been Anbang, Dalian Wanda, Fosun and HNA. All four have big exposures to travel and tourism in the West.

As well as wanting to stem capital flight, the Chinese government is thought to be concerned about the amount of leverage built up by these companies during their overseas buying sprees.

The response of the companies to the government intervention has varied: Dalian Wanda has been busy selling off more than USD9bn of property assets in China to a domestic company while HNA has revealed that a US charity now holds a 30% stake, transferred from an opaque Chinese shareholder.

HNA still has 10% of Deutsche Bank and 25% of Hilton among its investments, as well as Carlson together with Carlson’s majority stake in Rezidor. The move to take Rezidor private has been postponed until at least September with reports suggesting this is down to HNA’s struggles to get capital out of the country. The failure by HNA to complete the what is understood to be a relatively small deal to buy foreign exchange retailer ICE has helped fuel rumours about problems.

With all this noise and rumour, the Q4 strategy presentation by Rezidor is certainly going to be interesting. The obvious question is whether there will be a tie-up with NH? This is something that would no doubt send a few shivers down the backs of many executives in Rezidor as they have spent the past few years digging themselves out of a number of tricky lease deals and they would not relish having a whole bunch more heading their way from NH. Perhaps a little bit more light will be shed during NH’s own investor day on 28th September.

And another big question is what HNA is going to do with its stake in Hilton? Was this a manoeuvre to quickly shift capital outside of China before the controls kicked in? Or is there a longer term strategic plan?

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