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Rezidor keeps its nerve over rapid expansion plans

08 July 2010 by
Rezidor keeps its nerve over rapid expansion plans

As the Rezidor Hotel Group celebrates the 50th anniversary of its first property, president and chief executive Kurt Ritter maintains ambitious plans for the group's growth. Janet Harmer reports.

While the recession encouraged its competitors to hold back on expansion, the Rezidor Hotel Group ploughed ahead with its growth strategy. In fact, 2009 was a record year for openings for the company: 36 new hotels with 7,100 rooms came into operation across Europe, the Middle East and Africa, creating a total of 4,000 new jobs.

Today, the group, which operates five brands, has more than 290 hotels with 61,000 in over 60 countries, and a further 108 hotels with 23,430 bedrooms in development.

"We intend to add another 7,000 rooms a year to the portfolio and we are on schedule to open one a hotel a week in the near future," said the Swiss born Ritter, who is believed to be the longest serving chief executive in the hospitality industry. He has headed the company from Rezidor's headquarters in Brussels since 1989.

"Other hotel companies were scared by the recession and dampened down their pace of growth, but we took the decision to carry on our planned expansion as we knew that just as there are lows in the economy, there are also highs. To some extent, we acted on gut instinct, but during the down turn you can make good deals."

Like all hotel companies, Rezidor, which has the master franchise agreement to operate US-based Carlson's hotel brands within Europe, the Middle East and Africa, suffered enormous decreases in revenue per available room (revPAR) - down 16% from £62 to £52 - as well as in occupancy and average room rates. But its Hedging for Turbulence strategy - a reorganisation of the company's management structure resulting in cost savings of £35m - is credited with staving off the worst effects of the recession.

During 2009, 78% of the total rooms added to the Rezidor portfolio were without any financial commitment. Ritter added: "This certainly helped our decision to continue with the planned openings as there was very little risk to the company - how could we lose?"

Today, the 400 Rezidor properties are split between 62% managed, 21% leased and 17% franchised hotels. All future new properties are expected to be management contracts.

Rezidor's two main areas of growth are currently in the development of its first class Radissson Blu brand and mid-market brand Park Inn, with a heavy concentration of openings taking place in the emerging markets of Russia, the former Soviet republics and Africa.

Radisson Blu, recently named as Europe's largest upscale brand by MKG Paris (see graph), completed its name change from Radisson SAS last year, reflecting the natural end of its links with the SAS Airlines Group, who withdrew its investment in 2006 in a move that saw Carlson become the largest shareholder with 42%. This year sees Park Inn become Park Inn by Radisson (except within the M25), a decision intended to confirm the link between Rezidor's key brands.

In the UK, Rezidor intends to continue to grow Park Inns "considerably" from its current number of 26, with seven new hotels due to open. Radisson Blu is closer to saturation in the UK with 15 properties.

Ritter said the agreement preventing Rezidor opening any Radisson Blu within the M25 - due to the clash with Radisson Edwardian Hotels, which has the franchise agreement with Carlson to operate Radisson hotels in London - is "not ideal, but we've learnt to live without operating in this important area".

Having opened Rezidor's first Missoni - a design, lifestyle brand developed in conjunction with the Italian fashion house - in Edinburgh in 2009, Ritter said he would be interested in launching one in London if the right opportunity arose.

The second Missoni opens in Kuwait in September 2010, followed by properties in Cape Town, Oman and Brazil.

The development of the Missoni is timely as the 50th anniversary has put a focus on the original Rezidor hotel, the Radisson Blu Royal in Copenhagen, which is often referred to as the world's first designer hotel.

Every aspect of the hotel, including the furniture, door handles and cutlery, was designed by legendary architect Arne Jacobesen. Today, room 606 of the 260-bedroom hotel is preserved as it was in 1950 and is regularly let to guests, as well as being used for functions.

THE REZIDOR BRANDS

COMPANYHOTELSROOMSHOTELS IN DEVELOPMENTROOMS IN DEVELOPMENT
Radisson Blu18942,8545313,124
Park Inn9116,758488,682
Missoni11364696
Regent3 5543928
Country Inn213300

Radisson SAS changed to Radisson Blu in £3m rebrand >>

Rezidor goes into the red in 2009 >>

Kurt Ritter to head Rezidor until 2012 >>

By Janet Harmer

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