The Conversation: Federico J. Gonzalez, CEO, Radisson Hotel Group

The disruptions caused by Covid-19 have been harsh for the hospitality industry. However, the company signed up the largest number of rooms in 2021 at the €498-million hotel chain. It has over 1,700 hotels and 200,000 rooms across nine brands — Radisson Collection, Radisson Blu, Radisson, Radisson RED, Radisson Individuals, Park Plaza, Park Inn by Radisson, and Country Inn & Suites By Radisson and Prizeotel. "In 2021, we signed 12 hotels in India and 200 globally," says Gonzalez. He explains how the industry combated Covid disruptions, the change in consumer mindset and the importance of having a sustainable business model.

Edited excerpts from the interview:

Every crisis opens up opportunities. What kind of opportunities did Covid-19 open up for the hospitality industry?

The pandemic has given us an opportunity to rethink and improve our operating systems. We will have better operating margins once revenues come back. We have been able to re-engineer a lot of our processes and have tried to make sure we cannibalise more revenue. The crisis has also brought an opportunity to tailor newer products. For instance, when the pandemic started nobody wanted to have buffet breakfast, six months later they started asking for buffet. So, now we need to be able to offer what the consumer wants. Some of them like buffets, while some like personalised breakfasts.

We need to increase the complexities of the services we offer. We have launched concepts such as hybrid meeting rooms. The consumer can have physical meetings as well as video conferencing. The pandemic has forced us to become more creative and find more solutions. Our offerings today are more complete.

Offering more complexities comes at a cost. How are you managing costs?

While we have increased the diversity of experiences we offer, we need to offer more diverse solutions, and at the same time, minimise fixed costs. If an experience is not being used, we make sure we don't spend on it. For added experiences, we need to be priced accordingly. Radisson has made significant investments in revenue management systems, which are helping us define the right price for different offerings, in a way that it balances costs.

The pandemic has been particularly difficult for the hospitality industry. How did you bounce back?

We are a people-focused industry. Having the hotels closed for a period of time created a situation of lack of connection, so we had to figure out ways to communicate with our people to keep them engaged. We gave our people a lot of training to build skills. We have learnt to adapt better to difficult situations.

At Radisson, we over-communicated. I myself talked to our people to keep them engaged. We also communicated with employees of franchise partners. We made sure they were engaged the same way as our own employees. We did have to do salary cuts, but we didn't lay off any employees.

We have been lucky as a company. In 2017, we defined our five-year plan with 29 initiatives to secure our revenue and optimise costs. That helped us between 2017 and 2019, since we were able to increase our profits significantly. We were able to define new IT and revenue management programmes. We introduced Radisson Collections (the group's collection of iconic properties) three years ago. When the pandemic hit in 2020, we obviously had to shut, but what it allowed us to do is continue doing whatever good work we had defined as soon as our hotels opened. We further improved our revenue management and appraisal systems. It helped us give the highest GOP (gross operating profit) per room. In 2022-23, when the business is getting back to normal, it helps us to be in a much better position.

Most hotel chains were forced to slash tariffs during Covid. Are room tariffs back to pre-pandemic levels?

What we have seen during the pandemic is that the consumer is actually ready to pay what they think they have to pay. The rates in many destinations today are higher than what it was in 2019. Consumers are ready to pay more if they find value. A hybrid room with conferencing facilities in a business hotel has takers and guests are willing to pay more. The transparency in pricing and services that you offer and trying to balance your quality is what matters. A good thing in hospitality is you can see quickly if the consumer is willing to pay and you have the flexibility to change.

BUSINESS OR LEISURE?

There is a trend of business hotels increasing their leisure offerings. Is it the way forward?

People had started eliminating some trips during the pandemic. Now, if they have a one-day trip to make, they prefer doing it virtually. When they are travelling they prefer extended stays. I may have a meeting on Thursday-Friday and I may probably extend my stay to Saturday-Sunday. That's the reason a business hotel needs to offer a good location and better experiences. Radisson, despite having business hotels, is compatible with leisure.

Wouldn't offering business as well as leisure facilities mean additional investments?

At Radisson, the investments we have made are more on the business side. We have invested in meeting room equipment and video conference facilities in rooms. In leisure most of our hotels are well-equipped.

Isn't too much focus on leisure for a business hotel chain a short-sighted strategy?

Even before the pandemic, most business and leisure consumers were the same. I may come to Radisson for a business meeting but if the hotel is good, I will come to the same hotel for leisure. Our hotels have always been equipped for both business and leisure. You need to focus on leisure but business travellers will come back, so you have to keep both alive.

FOCUS ON SUSTAINABILITY

Adopting sustainable business practices has become mandatory for all hotel chains. But sustainability comes at a cost. How sustainable is sustainability?

We have targets of being zero waste by 2050, and have been reducing water consumption. The challenge in the hospitality industry is how to start being sustainable. We may set targets of becoming carbon neutral in 2050, but how do we start the process in the next few months? We are first trying to put in place some basic principles for the short and medium term. We have put down 15 things (such as measuring your carbon footprint, your electricity consumption, and tracking whether your suppliers follow ethical practices, among others) which the industry needs to standardise. Those 15 things will not make us carbon zero, but it is the start. You can't write a book or poem if you don't know how to write vowels. So, how do we start making sure that in every hotel we put in place measures that will help first to have an effect, and then translate big things into concrete actions? That's going to be the biggest game-changer. Once we are able to make sure that we are following these 15 steps, we can have more guidelines.

On how sustainable is sustainability, there are enough examples. In fact, Paul Polman, former CEO of Unilever, has set an example of how to do business and yet be sustainable. There are many other examples. Sustainability creates engagement everywhere. We have somehow been blind towards the damage that has been happening. We need to face it and try to be ethical. We need to minimise our carbon footprint.

We have construction guidelines in place to minimise footprints in terms of consumption of energy and water. From an operational point of view also, we are developing norms to minimise footprint.

Is the consumer willing to pay for sustainability?

The consumer is changing. She wants to know what you are doing and why you are doing it. If you explain to me that the pressure of water has been reduced to make an impact, I will understand. When we started the movement for reuse of towels, we explained to consumers that it will help conserve water, and they understood.

The consumer is ready to pay for what they understand. Therefore, the industry needs to move away from trying to hide. We have to be willing to regulate ourselves. We have to enable hotels to practice sustainability and apply self-control. The more we work as an industry to self-regulate, the better it will be. For instance, 10 years ago it was unthinkable for 5-star hotels to have dispensers. Now, it is mandatory in many countries since they want to minimise plastic.

The more we can advance as an industry to regulate ourselves, less will be the chances of negative reactions.