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News for the Hospitality Executive

After Hiring French Native Hubert Joly, Carlson Embarks
 on a Major International Growth Strategy

By Gita Sitaramiah, Pioneer Press, St. Paul, Minn.McClatchy-Tribune Regional News

Aug. 22, 2010 --Carlson's first hotel was in downtown Minneapolis.

That was a Radisson acquired in 1962. Now, the Minnetonka-based hospitality company holds 1,059 hotels in 77 countries, and a major international growth plan is in the works.

Since hiring the first chief executive from outside the Carlson family two years ago, the privately held company has developed 'Ambition 2015,' a plan that calls for adding 50 percent more hotels to reach at least 1,500 worldwide.

Industry observers say the strategy is solid, given the opportunity in emerging markets, and see French native Hubert Joly as the right leader.

Joly, in a recent interview at Carlson's headquarters, calls the need in emerging markets extraordinary. He points to India, population 1 billion, which has 100,000 hotel rooms, the same number as New York City.

'American brands are extraordinarily appealing around the world to all of these emerging markets, and so it makes sense to leverage that,' Joly said.

Joly is hardly the only hotel operator touting international growth. Choice Hotels, the Maryland company known for its Comfort Inn and EconoLodge brands, has an expansion plan of 683 hotels around the world.

'When you go to a lodging conference, everybody's talking about the importance of international expansion,' said Heather Soule, a Choice Hotels spokeswoman.

<>For Carlson, the ambitious international strategy is achievable given its wide global presence, said Bjorn Hanson, a New York University researcher who formerly headed the hospitality practice for Pricewaterhouse Coopers.

"A 50 percent growth rate is aggressive for any company but less aggressive a goal for Carlson than for most," Hanson said.

Joly credits his predecessor, Carlson chairwoman Marilyn Carlson Nelson, for boosting the company's international presence. He points to gross domestic product data that show growth opportunity for hotel and restaurant development internationally.

"If you're just focused on North America, you're forgoing 75 percent of the world's markets," Joly said.

Carlson's brands include the luxury Regent, upscale Radisson, midscale Park Inn, Park Plaza and Country Inn & Suites as well as the TGI Fridays casual dining chain.

Sales in recent years of Regent Seven Sea Cruises for a reported $1 billion to Apollo Management private equity firm and Carlson Marketing for $175.3 million to Groupe Aeroplan in Montreal freed up resources to invest in growth.

Currently, 249 more hotels are in the pipeline. That includes 90 Radissons and 80 Country Inns; 54 Park Inns, 14 Park Plaza and 11 Regent locations. The majority will be in Europe, the Middle East and Africa (99), followed by the Asia Pacific region (73), North America (71) and Latin America (6).

Joly believes the cyclical travel business is in recovery.

When Carlson executives first firmed up the international strategy, it was days before the collapse of Lehman Brothers, Joly recalled.

"After Lehman Brothers hit, there was so much uncertainty, panic in the world that it would have been difficult to craft a strategy," Joly said. "It was not a time to do strategy. It was a time to cut costs."

Carlson in June 2008 already had laid off 200 employees, citing the slowdown in business travel.

The strategic planning just ahead of the recession gave Carlson direction even as costs were cut, Joly said.

Carlson also is expanding TGI Fridays globally, building more hotels in North America and investing $1.5 billion in a luxury rebranding of Radisson hotels in the U.S.

At a conference earlier this year, Joly announced that Radisson, long an underperformer in the U.S., was to be remade into a more stylish and contemporary brand, with distinctive architecture and flair.

"Radisson was not able to get the same kind of attention for their brand as say Hilton did or say Hyatt or Marriott," said Kirby Payne, a Rhode Island-based consultant who manages and owns hotels.

But it's precisely because the more elegant Radissons abroad don't carry the baggage of its American versions that Carlson may be wise to keep putting them up internationally.

Radisson Blu brand in Europe is well-respected, as is the Park Plaza, Russell Kett, managing director of HVS global hospitality services in London, wrote in an e-mail.

Both the Holiday Inn and Radissons were opened in Europe during the 1970s and were a notch or two higher than U.S. versions.

"Over the years, Holiday Inn has realized the need to establish a global quality across its brand, and so Radisson needs to ensure that there is greater homogeneity to ensure guests can be assured of receiving a similar quality wherever they are in the world," Kett said.

Establishing a benchmark property for each brand remains important in China, said David Ling, managing director of HVS Singapore, in an e-mail.

"Carlson has managed to position this for Radisson and Park Plaza -- The Radisson Hotel Shanghai New World and Park Plaza Beijing Wangfujing," he said.

In China, "Recruiting, training and maintaining a team of hoteliers that provides consistent services remain a challenge in a market where demand for skilled talents outstripped supply," Ling said.

One of Carlson's goals is to become a leading player in emerging markets. That's especially true in India.

Carlson, which operates 28 hotels in that nation, projects it will have 82 hotels in India by the end of next year, which would make it the second largest player after the Taj Hotels of India.

Infrastructure in India is notoriously poor, but Joly said the government is aware of the situation and making strides. Joly noted that the New Delhi subway system and a new airport were built before this fall's Commonwealth Games.

He sees the day when more Carlson hotels are built along new freeways and highways in India.

While consistency in brands is important, some differences must be respected in different cultures such as no alcohol in much of the Middle East or no beef served in a restaurant in India, Joly said.

In Russia, the Radissons cater to the tastes of the oligarchy.

While in India, travelers also are accustomed to a level of customer service much higher than in the United States. The cost of labor is inexpensive, and there are typically 2.4 staff people per room at Indian hotels while there are 0.5 in the U.S., Joly said.

"When I travel to India and stay at a Radisson," said Joly, "I have my personal butler, and that's not the case in Minneapolis or Paris or Stockholm."

One way Carlson has gained such understanding is by acquiring local players, something Joly said also helps Carlson spread its corporate culture to the local base.

With so much work to do, Joly isn't ready to think beyond "Ambition 2015" yet.

"Doing it is the hard part," he said. "We know it's a journey because we've set the bar pretty high in terms of our goals."

Gita Sitaramiah can be reached at 651-228-5472.


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