We believe in a selective approach to franchising with the right owner partner: Raj Rana

Carlson Rezidor is one of the first international hospitality groups to enter the Indian market through franchising. It has successfully established a strong nationwide presence- both by way of franchising and management agreements with a portfolio of nearly 140 hotels in operation and pipeline. We spoke to Raj Rana, CEO, South Asia, Carlson Rezidor Hotel Group about his thoughts on franchising as a way for expansion and focus markets on the radar.

Tell us about your moves in India via franchise route? How beneficial was it for you?
Carlson Rezidor Hotel Group is one of the world’s largest and most dynamic hotel companies and includes 1,400 locations in operation and under development with more than 220,000 rooms and a footprint spanning 115 countries and territories. The Carlson Rezidor portfolio includes a powerful set of global brands: Quorvus Collection, Radisson Blu, Radisson, Radisson RED, Park Plaza, Park Inn by Radisson and Country Inns & Suites by CarlsonSM. Presently, approximately 70% of our portfolio is managed and 30% is franchised. However, when we commenced operations about two decades ago, nearly 50% of our portfolio in India was franchised. This helped us expand rapidly in the country. In the past, we did have strategic master franchise partnerships for some of our brands, which helped us to accelerate our growth. We have now taken full control of all our brand growth in India and do not have such master agreements any more.

Your comments on hotels now adopting the franchise route.
Many international brands are exploring the franchising option as part of their expansion plans due to increasing competition and a growing need for different formats other than management agreements. The Indian market has also matured over the last few decades and many owners have gained the ability to self-manage their assets. There is also a growing trend of hiring asset managers by the owners, hence supporting growth via franchising route.

As a global hotel company, franchising has its risks as well, this includes enforcing and maintaining brand and service standards; these standards are monitored in a stringent manner to ensure compliance. We believe a “selective” approach to franchising with the right owner partner and a strict monitoring of brand standards will be the appropriate recipe to ensure growth under the franchising route.

What are your expansion plans for 2017-18 in India?
Carlson Rezidor Hotel Group has seen strong growth in India and continues to be a key market. The Group continues its growth strategy via management, selective franchising and conversions with a target to have a portfolio of 170 hotels in operations and under development by 2020. Hotel management agreements continue to be our way forward. We see the viability of ‘selective franchising’ in certain markets where we seek to expand our footprint. There are also instances where we embark on ‘adaptive contracting’ structures, where we manage the hotel for the initial 7-10 years and convert these hotels to a franchised format (“Manchise”) thereafter.

Which city do you think is progressing the most in terms of the number of hotel groups reaching there? Which city remains your personal favourite for expansion?
Growth in the Tier 1 cities continue to remain a key focus, however, challenges abound in these markets as they are increasingly affected by high development and capital costs as well as an aggressive competitive market. With a keen interest in metros, we believe that our future growth will be strongly influenced by expansion in prominent Tier 2 and 3 cities, where we can benefit from a first-mover advantage. Carlson Rezidor Hotel Group has seen continued expansion across the country with new hotel signings in tier 2 and 3 markets, in addition to our presence in the key gateway cities. Gateway markets with deep demand drivers and stable supply fundamentals are my obvious favourites; hence Mumbai from that perspective is a key market where we would like to grow rapidly. Other markets include Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, and Kolkata.