This week the Carlson Rezidor Hotel Group launched its Radisson Blu brand in Brazzaville, the first in the Republic of Congo. The 178-roomed property is one of eight Radisson Blu hotels to be opened across the continent before the end of the year.
According to Andrew McLachlan, Carlson Rezidor’s vice president of business development for Africa and the Indian Ocean Islands, the opening of the hotel in Brazzaville is part of the group’s Central African strategy.
“Our focus is on creating a sort of regional corporate travel circuit. We know that within an economic community you have similar kinds of travellers going from one city to another and, if we look at our Central African strategy, we currently have a Radisson Blu and a Park Inn in Libreville, Gabon. We are now open in Brazzaville and we are also focusing on Cameroon,” he told How we made it in Africa.
“It’s the same type of regional banker or traveller that will be moving from Cameroon, to Republic of Congo, to Gabon. And if we are able to put the same high quality product in each of those financial hubs, we are able to secure good corporate business.”
About 80% of the group’s hotel guests in Africa are travelling on business.
More demand than Sandton
The group is actively targeting emerging cities where there is little competition, but a growing economy. McLachlan noted Congo’s oil industry – alongside the growing banking, manufacturing and ICT sector – is attracting senior level managers to the country, who are demanding “first world” accommodation.
“Your demand and ramp-up factor in a market like that is far greater than it would be in say Sandton (a wealthy business district of Johannesburg)… There is more demand and not so much supply,” he continued.
“And your ramp-up periods are going to be faster. If you are going to open a hotel in Cape Town or Johannesburg you might need a 1,000 days for it to get to its stabilised occupancy. But if you are going into a market where you don’t have too many competitors… then it is going to take you just a couple of months to get to that stabilised occupancy.”
He highlighted the group’s Radisson Blu hotel in Freetown, Sierra Leone, as one example of this. Even during the Ebola crisis in 2014, the hotel traded at 81% occupancy.
The company is also following a similar strategy in other African markets, such as South Sudan where it currently has a Radisson Blu under construction.
First comes Radisson Blu…
One of the company’s strategies is to enter an emerging market first with their upscale hotel brand, Radisson Blu. Thereafter, and depending on how mature the market is, the group may open their midscale hotel offering, Park Inn by Radisson.
The strategy is not simply based on the Radisson Blu brand being the most well known. According to McLachlan, the decision is also due to the cost of the supporting infrastructure and services.
“Some people ask why we don’t start with a three-star brand. But because you are going into emerging markets where you don’t have much infrastructure, you have to build such a big ‘back of house’ engine room to drive your hotel. So you end up having to build a good four-star or entry-level, five-star hotel product to make the return on investment work, because you are creating your own sewerage plant, water treatment plant, and you need to have storage facilities as you are importing a lot of goods that need to be stored,” he explained.
“So you end building a much bigger ‘back of house’ area than if you were building a hotel in South Africa where you can order your meat on a daily basis and have it delivered. [In other emerging markets] you need to have a kitchen that is both a butchery and bakery, whereas in a first world environment you just have to order that all individually.”
He added in emerging markets with little competition, the Radisson Blu brand also shows good returns on its other services.
“You can become the best restaurant in the city, the best bar and the best wellness spar facilities… The barriers to entry are really difficult in a lot of these markets and you then have the opportunity to be the only game in town for a number of years.
“So we quite like to go into new markets and have this sort of first-mover advantage.”