Radisson Hotel Group recalibrates India expansion, eyes bigger push into metros and premium hotels

NEW DELHI: Radisson Hotel Group is shifting its India expansion strategy towards larger cities and premium hotels as it targets 500 properties in the country by 2030, while continuing to enter smaller, underserved markets.

The Belgian hotel company, owned by Jin Jiang International Holdings, operates 146 hotels with about 16,000 rooms in India and has another 86 hotels, with 10,488 rooms, in its development pipeline, Elie Younes, executive vice-president and global chief development officer, told Mint.

The target calls for roughly 250 additional properties over the next four years, matching the number of properties the group took 28 years to build globally.

“We are re-calibrating a little bit. We were pioneers in getting into tier two and three cities back when nobody else was. But when we look at the bigger picture now, we feel we can do more in hotels in tier one cities,” Younes said.

India contributes 15-16% of Radisson’s global system revenue, with room revenue accounting for 60% of its revenue in the country.

About 60% of the next 250 properties are expected to be in tier-one and tier-two cities, with the remaining 40% in tier-three cities and beyond. These larger markets currently account for about 55% of its portfolio, Younes said. Recent launches include hotels in Narkanda, Coorg, Tadoba, Sonipat, Ujjain, Bhubaneswar, Namakkal and Sagar.

The shift reflects Radisson’s expectation that stronger economic growth will create more opportunities in larger cities, even as it pursues markets where other hotel chains have limited presence.

“We want to make bets that nobody else is making and go to those tier 3 and 4 cities where others have not gone yet,” Younes said.

The group also plans to expand into leisure destinations, religious centres and wellness-oriented properties, though business travellers are expected to remain its main source of demand.

Asset-light model

Radisson expects about 95% of planned additions to follow an asset-light model, under which local partners or hotel owners invest in land and hotel assets while the group manages or franchises the properties. Younes did not rule out investments in India; the remaining additions could involve joint ventures or selective investments with existing partners.

In 2012, the group entered into a joint venture with developer Bestech Group to build a mid-scale hospitality footprint across north and central India, backed by a combined $42 million development commitment.

The next phase of expansion is expected to be split roughly equally between management contracts and franchise agreements. Under management contracts, owners retain their properties while Radisson operates the hotels; under franchises, owners operate hotels using the group’s brand and systems.

Management contracts accounted for about 65% of Radisson’s new signings so far this year, against 35% for franchises, Younes said. The group expects franchising to gain ground as the industry evolves.

“There is a general market trend for franchising in India and while we are great managers, we know we cannot swim against the tide for too long,” he added.

Brand mix and market economics

About half of planned additions could carry the core Radisson brand, while roughly 30% are expected to be in the upper-upscale and luxury segments, including Radisson Blu and Radisson Collection. Upscale and lifestyle hotels, serviced apartments and other formats would account for the balance.

In smaller cities, luxury hotels can be difficult to justify if room rates are insufficient to support development costs. Radisson is therefore more likely to favour its core brand in these markets, offering a standardised hotel experience at a lower development cost.

India is one of Radisson’s strongest growth markets globally, alongside China. Its largely domestic demand base has also helped insulate the business from the West Asia conflict, which disrupted international travel in some other markets.

“India has been probably the least impacted,” Younes said, adding that demand this year had been higher than last year, with more people staying in hotels.

Company data for the year to September showed hotel occupancy at 67%, up 1.3 percentage points from a year earlier. Average daily room rates rose 5% to ₹8,000, while revenue per available room increased 7% to ₹5,000.

Room rates and occupancy have continued to improve, although performance varies across markets. Younes expects revenue growth of 3-5% in India next year, with some cities potentially performing better. He cautioned that rupee depreciation could weigh on reported growth when revenues are converted into foreign currencies.

New hotels could temporarily weigh on portfolio-wide occupancy and average room rates as they take time to build demand, even as they expand the group’s business.

Radisson could create 20,000-40,000 jobs as it expands, Younes said. The group, however, faces the broader hospitality industry’s challenge of attracting younger workers and making the sector a long-term career choice.

“We will need to attract those people and make them have careers with us,” Younes said.