The Rise of Rezidor

4th March 2009 (Last Updated March 4th, 2009 18:30)

Rezidor's expansion plans show no sign of stopping as its reputed brands go from strength to strength. Natalie Coomber assesses how it is refocusing to maintain a competitive edge.

The Rise of Rezidor

Rezidor is involved in operating, leasing, managing and franchising 322 hotels in 48 countries around the world and is regarded as one of the fastest growing hotel companies. Although it has some declining markets and has experienced past difficulties because of its association with the infamous Carlson family feud, Rezidor is now establishing itself as a major brand in its own right. As many chains announce a halt to further builds, Rezidor plans to increase its portfolio with a strong focus on emerging markets – bucking the trend and becoming a shining example to others.

According to research firm Global Markets Direct in its Rezidor Hotel Group AB SWOT Report, as of December 2007, the group had 237 hotels in operation and 85 under development – encompassing more than 65,000 rooms. Its properties widely vary from 1,000-plus room high-rises to boutique hotels with just 40 suites. Among the 237 hotels in operation during 2007, 65 were leased, 104 were under management and 68 were under franchised agreements. Its five unique brands include Radisson SAS, Park Inn, Regent, Hotel Missoni and Country Inn.

It manages a diverse property portfolio including city centre, suburban, airport and resort hotels with a historic base in Europe, and a growing presence in Africa and the Middle East.

Radisson SAS is the largest full-service hotel brand of the company with a total of 44,000 rooms in 194 hotels. Park Inn is second, targeting the mass of mid-range consumers and consists of about 16,000 rooms across 93 hotels. The Regent is an international premium brand offering traditional luxury and the Country Inn is a limited services brand operating four hotels in Austria, France, Germany and the UK. Hotel Missoni is being introduced to the lifestyle sector of the hospitality market after a worldwide licence agreement was secured with the Italian fashionhouse.

Rezidor shifts focus

Withdrawl of SAS Group investment from Rezidor activites has made Carlson the main shareholder with 41.7% ownership stake. But despite a strong 2007, dependency on third-party brands has hampered awareness about Rezidor as a force in its own right. To combat this the company has shifted its focus from the core Radisson SAS brand to a multi-tiered approach with other brands operating across market segments. Along this line it added 57 new hotels in 2007, representing a total of 8,937 rooms, to the product portfolio.

This record addition is paired with a shift in the business model to garner more fee-based revenues from managed properties across all brands.

“Rezidor has a major presence across European destinations, particularly in the Nordic region.”

Global Markets Direct estimates that the new focus on managed properties will lead to an additional 20,000 rooms between 2007 through 2009.

Before the dark economic cloud formed, the World Travel and Tourism Council forecasted tourism to generate over $13tn between 2008 and 2017, with an average growth rate of 4.3% per annum. It has since reinforced its view that the growth of tourism will continue and has said: “People still want to travel and, once the recovery starts, there is likely to be huge pent-up demand.”

The company has a major presence across European destinations particularly in the Nordic region. This locality is considered to be a stable market with strong revenue-per-available-room growth. In terms of market profile, the Nordic Region is characterised by a large proportion of mid-market hotels and a prospect of high domestic demand. Global Markets Direct says Rezidor “can be positively impacted by this growth, which would help the company to push its revenue and profitability figures.”

Rezidor also has a presence in Africa and the Middle East and there is a tremendous opportunity to expand both these areas. In February 2009 it announced plans to open a further ten hotels in Africa as part of its continental development strategy. The Rezidor Hotel Group president and CEO says emerging markets will be a focus going forward. “Rezidor’s global business development strategy is to introduce our world-class brands in emerging markets such as Africa and Russia, which are upcoming destinations for business and leisure travellers. We are confident that Africa’s tourism will reach new heights during and after the 2010 FIFA World Cup, which will unlock the world’s appreciation of this continent’s unscathed beauty and offering as a world-class destination.”

Coping in cyclical markets

The hotel industry is highly cyclical in nature. This, coupled with various uncertainties in the market, will have a considerable affect on the performance of hotel companies like Rezidor. Downturn in the market economy and political instability in the regions where the company operates has impacted the operations of the company in the past and the credit crisis is likely to prove a major test.

Rezidor is experiencing a decline in revenue streams in Prague, Tallinn, Manchester and Liverpool. The company is facing the challenge of understanding market cycles while expanding its business model and generating revenues through agreements with high-value brands across potential markets.

“Rezidor plans to increase its portfolio with a strong focus on emerging markets.”

In addition, previous internal problems in the Carlson group as a result of a family feud, which saw mother and son locked in a lawsuit over the running of the family firms, may potentially impact the performance of the company.

An autonomous image along with disassociating itself from the problems in the Carlson group, is one route that may help the company maintain a successful and independent operation.

Its expansion has been so fast that its image as a big corporate player is yet to become entrenched in the business traveller psyche. Because of this, during the downturn it may have to rely on the brand strength of the individual divisions. With these covering a diverse customer base and geographical spread all looks positive but changing focus to cope with challenging times will need to be a prioirty going forward.

To purchase the Rezidor Hotel Group AB SWOT Report, click here.

More Global Markets Direct reports are available at www.global-market-research-data.com