Early reviews seemed positive for Choice Hotels International’s planned acquisition of the core assets of Radisson Hotel Group Americas, announced on Monday. The Maryland-based hospitality franchisor plans to acquire the franchise business, operations, and intellectual property of the Americas division of Belgium-based Radisson Hotel Group, for approximately $675 million.

The deal is unusual in its construction. Choice will run about 600 hotels in the Americas. But it will consult with Radisson Hotel Group on the “growth, continuity, and success of the brands.”

“It’ll be fascinating to see how these players will be cooperating in the Americas but competing with each other everywhere else,” said Baron Ah Moo​, managing director, head of U.S., PKF Hospitality Group.

Looking ahead: If Brussels-based Radisson is acquired someday, its new owners might cause complications for Choice.

Brand Float or Brand Bloat?

For now, the deal brings nine new brands to Choice. Some analysts have questioned if Choice will keep all of them. But there’s no official talk of culling brands.

“The acquisition of some of the industry’s most recognized brands extends Choice Hotels’ customer reach in the upscale segments and enhances our presence in the core upper-midscale segments,” a Choice spokesperson said in response to a Skift query.

Yet some brands seem to be in a firmer position than others, according to observers.

“If you’re an owner of a Country Inn & Suites, this deal probably means more occupancy and better rates,” said Sid Narang, the managing principal at Crescent Capital Ventures. “But if you own a Radisson Blu or Radisson Red, will Choice drive higher rates?”

The deal includes 453 Country Inn properties, and there’s a lot of overlap between Country Inn’s audience and the audience of most of Choice’s brands.

Choice’s stated plan to go further upscale is where things may get bumpier.

The Choice business plan is that it can do a better job of driving net operating income out of the same properties. Its system includes a giant loyalty program that drives direct bookings, dominance in the corporate travel and group markets, technological expertise for tasks like revenue management (rate setting), and the ability to negotiate volume discounts and haggle lower commissions from the online travel giants.

“With all this in mind, Choice is the stronger brand [than Radisson Hotels Americas] in every respect,” Starkov said. “And it’s survival of the fittest out there.”

Yet a repeated theme in Choice’s statements about the deal is its desire to go “upscale.” Expanding beyond limited service to other concepts can be harder than it looks, some experts said. Supporting a lifestyle brand, like Radisson Individuals or Radisson Red, may require different mechanisms for marketing and service to compete with others in the space, such as Marriott’s Moxy, Hilton’s Signia, or IHG’s Kimpton. Choice’s own Cambria has still to prove itself here.

“Many people seem to think that all a hotel group has to do to enter the ‘lifestyle’ category is add fancy furniture,” said Narang, a former acquisition and development leader at SBE, Starwood, and W.

“But the harder part is getting the guests to come and then come back,” Narang said. “You have to market at the right touch points with the right messages, and you have to staff your corporate sales and marketing teams with people who breathe the culture of lifestyle.”

Growth and Debt

Expansion is the deal’s overall theme, adding 8,000 hotels in Radisson’s pipeline to Choice’s.

“I’m looking forward to the months ahead as we work on integration and achieving our long-term strategy of asset-light growth in higher revenue travel segments and locations,” said John Rau, a senior analyst in corporate development at Choice via LinkedIn.

Choice has the capital to fund the deal thanks to $527 million of cash on hand, plus revolving loans.

The deal got a positive nod from S&P Global. The ratings agency acknowledged that the deal would elevate the ratio of Choice’s adjusted net debt to nearly three times its earnings before interest, taxes, and depreciation. That debt level won’t prompt a credit downgrade, S&P Global said.

Choice has said that its policy is not to go much higher than that in debt load. So this may be the last large acquisition for Choice for a while.

One brand with a possibly uncertain future is Radisson Inn & Suites. Two months ago, Radisson Hotel Group Americas brands launched it as its first limited-service concept for urban markets. The brand is the metropolitan counterpart to Country Inn & Suites by Radisson, offering a more urban look and feel. But it also could be a direct competitor to some of Choice’s own brands.

Consolidation Coming

The sale to Choice should improve the chances of Country Inn and at least some of the other eight brands.

“Radisson in North America hasn’t had a chance to make a mark, partly because of a revolving door at the leadership and business development levels,” Narang said.

If Choice is successful, the deal may help give further momentum to the franchising movement.

Already about 70 percent of hotel rooms in the U.S. are branded, and roughly half in the U.K. are branded, but the rest of the world is full of independents.

“The Choice acquisition of Radisson is part of the consolidation avalanche that we will witness in the post-Covid era,” said Max Starkov, an industry consultant.

Starkov anticipates more mergers because of technological pressures. Some brands stand apart for having better “hotel tech stacks,” meaning that their software and hardware drive efficiencies through labor cost reduction, revenue gains through best-in-class digital marketing, and lowered distribution costs through more sophisticated loyalty programs.

The tech savants will be acquiring hotel brands that have a sub-par hotel tech stack, digital presence, and loyalty programs, he said.

“Post-crisis developers, owners, and managers will flock in droves to the strong hotel brands/major chains,” Starkov said.

Skift Take

Good morning from Skift. It’s Tuesday, June 14, in Puerto Rico (where the Skift Team is meeting). Here’s what you need to know about the business of travel today.

Rashaad Jorden

Today’s edition of Skift’s daily podcast looks at Choice Hotels’ acquisition of Radisson’s American operations, the Taj Mahal’s tourism challenges, and the strategy behind a new Europe-based hotel loyalty group.

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Episode Notes

Choice Hotels International announced on Monday that it’s acquiring the Radisson Hotel Group Americas for $675 million as part of Choice’s strategy to beef up its presence in the upscale hospitality sector. But the acquisition is forcing Choice to decide what to do with Radisson’s brands, reports Alan Woinski, the editor of Daily Lodging Report, a Skift brand.

Although Woinski writes that the issue is whether Choice keeps all of Radisson’s brands or merges or eliminates some, he adds the belief that companies with the most brands win is still strong in the hotel industry. He cites Radisson’s Country Inn & Suites as a brand that would fit in very well with the Choice family. However, it’s uncertain what Choice will do with brands such as Radisson Red and Radisson Individuals that have struggled to gain traction in the North American market.

We now turn to the Taj Mahal, India’s most famous landmark. Despite its importance to the country’s tourism industry, the Taj Mahal’s future is in peril as it grapples with problems such as overcrowding, pollution, and inadequate infrastructure, writes Asia Editor Peden Doma Bhutia.

Currently embroiled in controversy about whether it was originally a Hindu temple or not, the Taj Mahal is suffering from apathy displayed by the Indian government, according to one travel executive who believes Agra — the site of the Taj Mahal — is not currently a priority for the government. Development in and around the monument has been delayed, with another Indian travel executive adding that the country’s leaders have not recently approved any tourism projects in Agra. The Taj Mahal generated $11 million worth of revenue in 2018 and 2019.

In addition, Indian officials have called out the government for failing to take measures to combat pollution at the Taj Mahal. Sanjay Sharma, the president of the Tour Guides Federation of India, criticized the government for failing to build a dam to protect the monument.

Finally, loyalty and distribution platform Global Hotel Alliance has entered into a partnership with Spain-based NH Hotel Group that will double its membership reach, reports Corporate Travel Editor Matthew Parsons. That move comes as major hotel companies are increasingly developing their loyalty programs.

The 10 million NH Rewards program members will now switch over to Global Hotel Alliance’s Discovery loyalty program, giving it a membership of 21 million members. The NH Hotel Group has more than 340 hotels in its portfolio worldwide, which boosts the alliance’s network to more than 800 hotels.

Global Hotel Alliance CEO Christopher Hartley said the partnership gives his company an eclectic mix of hotel brands that could appeal to consumers in an environment where leisure and business travel are blending. But Parsons writes that the alliance’s rivals are finding creative ways to expand their loyalty programs to coerce repeat guests into booking directly on their website. Such bookings would help properties reduce how much they pay to third parties.

Skift Take

Travel management firms face challenges helping their customers deal with widespread travel disruption this year, the inevitable knock-on effect from the wider industry’s own struggles with labor shortages. CWT needs to staff up as quickly as possible.

Matthew Parsons

Corporate travel agency CWT is refocusing on how it hires staff to “lever up” after the pandemic downturn, a period which saw it enter bankruptcy and switch its own CEO two times.

The Minneapolis-based agency wants to get back into growth mode, according to its new chief customer officer, after September’s $1.5 billion refinancing deal.

“The biggest challenge is how do you manage that spike in demand,” said Nick Vournakis — a 22-year CWT veteran who took on the new role in January this year.

Calling Up

CWT is now revisiting how it rewards employees, looking at its compensation and bonus schemes. Vournakis said the agency was also able to bring back furloughed capacity after its pandemic “realignment.”

“We need to recognize how to be more aggressive and an employer of choice,” he said. “Attrition in the industry is pretty rampant and therefore competition for skilled expertise is also fierce … it’s important to ensure we’ve got the economics right in terms of competitive pay and potentially variable pay.”

During the coronavirus crisis the company also invested in technology to enable frontline staff to work remotely, and in the pandemic’s latter phase it trialed predictive analytics company Zytlyn, which diverts resources to where they are most needed. The platform predicts future travel demand to and from specific routes, overlaying CWT’s historical booking patterns, helping CWT with resource management, supply requirements and capacity planning.

Vournakis said one concern was manning its call centers, despite the ongoing industry focus on adopting new technology in the business travel sector. CWT now wants more frontline staff to answer the phone, and Vournakis said competitors were bullish in by encouraging customers to use digital channels for booking.

“Getting those questions answered by a human rather than a machine, that’s really important. There are very few digital tools that are effective in making changes to trips and itineraries,” he said. “We’ve to make sure we’ve got all of the right infrastructure, getting our frontline enabled, our people and technology to support the resurgence in travel … You’ve got people calling.”

Industry Crunch

Travelers are starting to feel the pain of widespread staff shortages, with airlines both in the U.S. and Europe struggling to cope. Cabin crew strikes will also likely affect operations later in the summer, which could drive more calls from business travelers looking to rebook as their schedules change.

CWT isn’t the only one addressing the issue. American Express Global Business Travel’s newly acquired Egencia division recently opened a new hub in Gurgaon, India, to focus on travel management, global technical support, website reliability engineering and e-commerce.

There are 144 employees, with space for more than 275 people. “Our talented team in India will continue to innovate, enhance, and build products supporting our customers and give travelers the best user experiences, unmatched content, and unbeatable service,” said Pratik Modl, senior director, technology and India lead at Egencia.

Skift Take

A huge step forward for a country that was particularly strict with Covid protocols, coming during a week in which Prime Minister Justin Trudeau tested positive for the virus for a second time.

Tom Lowry

Canada will suspend its requirement to be vaccinated against COVID-19 for domestic travel and to work in the civil service, a government source said on Tuesday, after provinces lifted most health restrictions in recent months.

The mandates may be reinstated later, especially in the case of a surge of a new variant, the source, who was not authorized to speak on the record, said. International travelers coming to Canada still will be required to show proof of vaccination.

Unvaccinated people departing from Canada will be allowed to travel, the source said.

The mandates for domestic travel and the civil service have been in place since Oct. 30 of last year, about a month after Liberal Prime Minister Justin Trudeau won a third election in part by promising to take a hard line on vaccinations.

Spurred by the mandate, 95% of public employees confirmed they had received two shots of a COVID-19 vaccine.

This summer, with infections declining, most provinces have dropped even their masking requirements, and the Trudeau government has come under increasing pressure from the opposition and industry to relax its mandates more broadly.

The travel mandates have also been blamed by some airline industry officials for lengthening already long wait times at airports.

In recent weeks, Toronto’s Pearson airport has had planes stuck at gates and hours-long security lines because of staffing shortages. Last week Canada said random testing would be suspended at all airports until July 1, also with an eye on reducing airport congestion.

The government will hold a news conference later on Tuesday to announce the suspension of the mandates, news that was first reported late on Monday by the Toronto Star and the Canadian Broadcasting Corp.

(Reporting by Steve Scherer Editing by Alexandra Hudson)

This article was written by Steve Scherer from Reuters and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].

Skift Take

As the first Asian country to legalize the growing of marijuana, Thailand gets a headstart in the region in welcoming backpackers back to its beaches.

Matthew Parsons

“Amnesia”, “Jack Haze”, and “Night Nurse” are among marijuana strains on sale at a pop-up truck in Bangkok, as retailers cash in on demand for the newly decriminalized substance from foreigners and locals alike.

Thailand last week became the first Asian country to legalise the growing of marijuana and its consumption in food and drinks by de-listing it as a narcotic.

The government has said it hopes the move will help the agriculture and medical research sectors of the economy. Sellers of the drug said the Covid-19-pandemic battered tourism industry should also get a boost.

Smoking pot in public can violate health laws, however, and parliament is still debating a draft cannabis regulation bill meaning there is confusion about how it can be legally used.

Keira Gruttner, a 32-year-old customer from Canada, was among tourists who queued at a green pop-up truck in tourist haven Khaosan Road, where staff weighed and packaged buds and crushed leaves.

“I think it might bring people from countries where it’s not legal. It could be another tourism pull for people,” she said.

The truck, located in an area of Bangkok popular with backpackers, is selling buds at 700 baht ($20) per gram and staff said the drug can affect users in different ways like helping them sleep better or easing anxiety.

Another foreign customer, Kentaro Kajima, described his purchase as a “dream come true” while dancing with a friend in front of the truck.

The Southeast Asian country, which has traditionally used cannabis to relieve pain and fatigue, legalised medicinal marijuana in 2018.

(Reporting by Juarawee Kittisilpa; Editing by Kanupriya Kapoor and Ed Osmond)

This article was from Reuters and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].