Erwan Garnier is the senior director, Development Africa for Radisson Hotel Group. He looks after the Group’s strategic growth across West and Central Africa, sourcing, negotiating and signing over 20 hotels, resorts and serviced apartments projects across 12 countries, while establishing the Group’s presence in 7 new markets.
In this interview with Obinna Emelike, Garnier talks about the Group’s African expansion plan of 150 hotels by 2025, sustained interest in Africa, why Nigeria is top among its markets, its portfolio in the country, brands segments and other related issues.
Excerpt.
Congratulations on the huge impact of Radisson Hotel Group in Africa, especially keeping staff on the job and its doors open during the pandemic. But how much do you think the pandemic affected the African hospitality market?
The pandemic had a massive impact on our operations in Africa and globally. It is hard to make a global statement because it is country by country. If we narrow to Africa, the impact on the commercial side was drastic, but at the same time, a lot of our hotels did not automatically shut down. Our position was to liaise with the owners, liaise with government officials and if possible to keep hotels and operations open as much as possible.
In the case of Nigeria, the country is less impacted than other African countries because Nigeria has its own economy and it does not rely on international customers in order to drive revenue and growth. To be transparent with you, in our 2021 operations in Nigeria, we had good results. So, there was no reason to close our hotels or sack any employee.
In fact, the results were satisfactory. But you need to keep in mind that they were satisfactory because Radisson Hotel Group adapted its model and operations during the pandemic. It was not like we stayed, doing nothing and waiting to see what would happen. During that time, we had to adapt to a new revenue model. What we did was that we were one of the first hotel groups to implement what we call the Hygiene Protocol in partnership with SGS, meaning that it was one of the safest hotels in term of Covid-19 in Lagos and this was with the aim of protecting our customers and employees and it was also to drive business because we had a huge drop of occupancy during covid-10 because people were scared and there was no more international business. So, what we did was to create this whole system of Hygiene Protocol, which allowed us to attract a lot of government and medical businesses into our hotels, which other hotels were not doing. We saw competitors having half of the occupancy that we had because they were waiting for the business to come; we adapted our business and took action around the huge hygiene situation.
How far is the African hospitality industry recovering from the impact of the pandemic?
Right now, the recovery in terms of budget is going to take time. It is going to take years to go back to the result we had. As an industry, we are forecasting to have the result we had in 2019 in 2024. This is the overall expectation, but overall the industry got a drop of 50 percent of business on profit. Now, you have special cases as I named before, you have countries that have their own domestic markets and are less impacted like Nigeria, Kenya, others. Now you take a country that is highly dependent on international travel like Mauritius and Seychelles, very leisure driven, not a lot of people stay in resorts locally, they tried to adapt, and hence these markets were impacted on the other side. South Africa was hugely impacted and on top of that, its border was closed a long time and recently by the Omicron.
Kenya was better-off because it had its own domestic market and the East African regional market as well.
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Is West Africa still your key market?
We have a very focused strategy for Africa. Few years ago, the Radisson Hotel Group created a reorganization plan globally to make sure that we become a market leader. Today, we are the second largest hotel group in the world and the aim is to be the market leader globally. For that, we reorganized the company with initiatives to make sure that we are the best performer in terms of profit, revenue generation and market share. At the same time, to do that, the aim is to grow faster and stronger. Last year for example, we expanded with an additional 250 hotels in one year, globally. Out of that, in Africa last year, we had the largest market share; meaning that out of the entire 111 brands competing against each other in Africa, Radisson is the fastest growing brand in Africa, in terms of pipeline, which is the brand that signs the most new hotels in Africa. Last year, in Africa, we signed 15 new hotels, while some competitors signed just two hotels.
So, we have a huge focus in Africa because we have always been endeared to developing countries; we are the market leader in Russia, India, and Africa. This is how we are endeared to develop more markets.
Today West Africa remains a huge focus because the region includes Nigeria, and Nigeria is the largest economy on the continent, but it does not mean Nigeria is an easy market to penetrate. But the fact that it is not easy does not mean it is not a priority.
Today, we have 25 hotels in West Africa, we aim to reach 50 hotels by 2025, which means 5 hotels a year in the next three years.
Are you still on track with your expansion plan by 2025?
Our target in Africa is to have 150 hotels by 2025 and today we have 100 hotels open and under development. Of course, the pandemic has made us change and adapt. So, we have created and adapted because we believe that it is critical to adapt to the environment. For that, we did multiple things. I talked about the hygiene and SGS Protocol, but in terms of growth, we created a brand called Radisson Individual, specifically during covid-19, and specifically for existing hotels and owners who are having a drop in business and entering the Radisson Hotel Group engine and commercial force with a minimum investment and this has been very successful.
Additionally, we created new growth opportunities with serviced apartments, which was a booming business during covid-19 and we can see the traction right now.
About 20 percent of the projects I am working on now are serviced apartments; hotels for long stay and it targets international companies that instead of sending their employees for two to three months in a hotel, where people do not want to stay in a room for up to three months and people do not want to stay in an apartment for three months where you don’t have security, hygiene and hotel services, this combines both worlds and we see across Africa that there is a huge traction.
To answer your question, our plans for expansion remain intact with an adapted strategy meaning that we are still aggressive, forward thinking and positive product, and humble. There are huge opportunities, but we need to do it in a different way, let us create a brand that answers market demand, lets target serviced apartments, we are diversifying more and adapting to the current situation and demand.
What is your hotel portfolio in Africa now?
We have 100 hotels open and under development right now in Africa. But our target is to have 50 new hotels in the next three years. We did 15 hotels last year, so, it means 15 per year to realize 50 new hotels in the next three years. From 100 now, we target 150 hotels in Africa by 2025.
Considering the harsh economy and many abandoned hotel projects across Nigeria and West Africa, how can you help credible partners access funds to finish their projects?
It is a very good question and something I am facing almost on a daily basis. Nigeria has a massive issue with the availability of Dollar currency, knowing that 90 percent of the products that you need to build and open a hotel are imported.
Obviously, it creates a huge problem and on top of that, the interest rate has been rising.There is a multiple answer to that.
But what we do at Radisson Hotel Group is to make sure that the product we develop has an optimized costing development. So, we make sure that we look at the project to optimize the cost, and optimize the revenue in order to ensure that it has best in class results and return on investment. It becomes the best case to raise equity and to minimize risk because when you look at a hotel project, the financing is the main issue and to ensure solid funding, you need to make sure that there is sufficient equity. In order to attract equity funders, present a good business case; what kind of products you want to build, at what cost, who is the professional team, how much time is it going to take, how much delay because the more delay the more time and cost it takes.
All these factors give you traction to get better equity funders and there is a decrease of overall cost by having less interest rate.
What is your portfolio and strategy in Nigeria?
In Lagos, we have two hotels that are under development and that are due for opening in 2023, Radisson Collection in Victoria Island and Radisson Collection in Ikoyi. I am working in Abuja because it is a priority. We have one hotel under development in Abuja now, Radisson Hotel Abuja, but we are working on more. But for our strategy in Nigeria now, we want to focus on Abuja, Lagos and Port Harcourt. When we have a bit of traction in those major cities, we then focus more on the capital state cities, focusing on the business segment, the serviced apartment segment and the resorts segment.
Which of your brands is doing best in Africa?
Logically the brand that is doing the best in Africa is Radisson Blu. It is the first brand created by the group. The first hotel we opened in 2000 in Africa is Radisson Blu Waterfront in Cape Town, South Africa.
This is the first brand that is the most expanded and if you look at our portfolio this is what represents the most of our expansion. I will say that the brand that represents 65 percent of our portfolio in Africa is Radisson Blu.
But our fastest growing brand is Radisson because it answered market demand. If you look across Africa the demand is into the upscale four-star segment, not the Three or Five-Star. Radisson Blu is Upper Upscale Five-Star. Radisson is where we see the most growth all across the market. Now the reasons Radisson Red is not expanding as fast as Radisson or Radisson Blu are because it is a brand that is very recent. It was created four years ago. Radisson Blu was created 50 years ago.
Another reason is that Radisson Red is a special brand. It is a very different type of hospitality business and not all the markets are ready for it. We recently opened the Radisson Red Johannesburg Rosebank. It is stylish and different, this is a place you will have the DJ on the rooftop. We are looking at having a Radisson Red in Lagos because we believe it will be a huge success in doing so. But at the same time, we do not believe that Radisson Red is ready for Abuja yet because it is a completely different market, because the city is governmental, but Lagos is more vibrant and with a booming lifestyle. Each market is very different and Red is not a brand you can have everywhere, it takes a more precise development scheme for it.
Park Inn is our midscale brand, and the type of brand we see developing in the secondary cities of Nigeria because of the buying power of the secondary cities.
How is Radisson Individual doing since launch in Africa?
We have two properties due to open this year. We have 25 hotels open or under development now across the world. So, the brand is doing well and we are happy with the direction it has taken and we are looking at opportunities in Lagos as well.
Radisson Individual is an upscale brand dedicated to existing hotels that want to keep their identity while plugging into the system of Radisson Hotel Group. So, if you have a hotel that is in good condition, that is a four-star product, and you are targeting, as an independent hotel, only local business or potential regional business and have no access to the international market, with a limited investment, if the product is acceptable to us, meaning that we are going to review what you are doing in the market, what kind of score you have on Bookings.com or on Tripadvisor, are the guests satisfied or not, we are going to use them as KYC to make sure it is a good product and we are going to consider plugging you as an affiliation so that you keep the product or your name on the building and you affiliate yourself into the system as Radisson Individual.
It is only about existing hotels that want to take advantage of the Radisson system in terms of sales. But you need to make sure your product is already in good shape, we don’t take any hotel and that is why it is very handpicked.
While on your expansion, what plans do you have for human capital development to ensure the same quality across your offerings in Africa?
Human capital is a critical aspect of the hospitality business because hotels are about people. So, this is in the centre of our strategy because we cannot brand our hotel, put our name and not having the people at the centre of it because they are the ones delivering to customers, the customers are driving the business and we have shareholders who are expecting good results. We have an ethos ‘Yes I Can’ for the past 50 years, which is harnessed by having from day one and ongoing training being done either by induction from day or with ongoing online training that allows the people to be constantly trained and explained about the service and about the best way to go about their work across departments. There is a lot of programmes that allow people to learn in each department and go round the different departments of a hotel, so it creates one learning but also growth because it allows them to change. Again, we are present in 120 countries and we move people around and they grow and because they grow, they become more motivated. This is a whole part of working with us, developing yourself and having the opportunity to work in different departments or different countries depending on your aspirations.
Do you see the Nigerian market still very attractive to brands and investors?
I think it is very attractive in terms of market opportunities because there are not enough quality hotels in Lagos and most of the capital cities. But particularly in Nigeria, it is so difficult to develop hotels.
Our hotels in Nigeria are always fully booked because we have good hotels. So, do we lack quality hotels in a city like Lagos? The lack creates huge interests to build new quality hotels because there is opportunity here. There is opportunity for investors because of the lack of quality rooms and not only in Nigeria, most African countries have similar experience.
The challenge is not in the demand, but to develop it, to finance it and to deliver on it because it takes a lot of knowledge, a lot of time, a lot of financing, local connection, administrative knowledge and a lot of tools to be successful here.
In Europe it takes about two years to build a hotel, if you are successful in Nigeria, it takes about four and you are talented.
How is the relationship with your Nigerian investors and partners?
It is very good. But most of the Nigerian investors and partners are frustrated by the macro economic situation of the country because they want to do business, they have land, they partners, but if you take the macroeconomic, how can you manage the fact that interest rates are so high, how can you manage that you need USD currency that is not available in the market, how do you manage the fact that it takes more time because the products are imported and you don’t have the skills locally. What I am saying is that overall the cost of development is much higher than usual and the performance is good but not as high as it should be. So, it creates a lot of innovations and this is why we do good business with investors because it is very innovative and we are very innovative and it takes a lot of will to move forward and find solutions. I think many are determined to make it happen here, but this takes a lot of energy and commitment.
Why will I stay in a Radisson Group Hotel?
We are a company that is very sustainable. We have been awarded for the past 10 years as the Most Ethical Hotel Company in the world. We really care, because caring for the people and the community is at the centre of our strategy.
While being very sustainable, we also focus on having better service and growth, we are very keen at expanding across the globe, not only in Africa, we have massive expansion plans for Europe and Asia.
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