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Continued: $1.5 billion for Radisson face-lift

  • Article by: SUZANNE ZIEGLER , Star Tribune
  • Last update: March 3, 2010 - 9:41 PM

In spite of a recession-battered hospitality industry, Carlson Hotels Worldwide announced an ambitious plan Wednesday to spend up to $1.5 billion to upgrade and renovate existing Radisson hotels to its new standards and open five "flagship" hotels in five U.S. cities, as well as expand into emerging international markets.

Most of the existing 159 Radissons in the United States are franchised, and the owners will pay for the renovations that Minnetonka-based Carlson is promoting, at a cost of roughly $15,000 per room. Those costs will total about $600 million, and the company may help some owners having trouble getting financing.

The renovations include more contemporary rooms with bold colors and sleek lines, as Carlson tries to appeal to younger travelers. And much like the airline industry, Radissons will offer a new "business class" that will include the best available room, a turndown service, upgraded bathrooms and other amenities. An express laundry service also will be offered.

Speaking at a conference for its franchisees and company officials in Kissimmee, Fla., Carlson President and CEO Hubert Joly said the company is hoping to take the edge off the hassle of traveling. "The hotel is the only part of the travel process where you have a chance of being treated like a human," he said after making reference to long security lines and tarmac delays.

Carlson plans to add about 500 hotels -- new luxury Regent hotels, mid-scale Country Inn & Suites and Park Inns--to its current portfolio of 1,060. Joly did not name the five U.S. cities where the company will build its signature hotels.

Joly said he intends to split expansions equally among the brands -- except Regent, which will stay exclusive -- and roughly a third will be in the United States, a third in India and a third in other parts of Asia.

Radisson has always been more successful outside the country, he said, because its properties in many of the world's capitals are stunning, while its U.S. hotels are much more pedestrian. Part of the effort, he said, is to streamline the hotels worldwide so guests will know what to expect.

Joly said Carlson probably will build one or two hotels itself, while the others will be existing properties it renovates or rebrands. As hotel operators continue to unload underperforming properties to cope with the recession and a plunge in business travel, some of those may be properties that other companies are having trouble managing.

The plan comes as the industry is struggling with low occupancy and low room rates but Joly, whose speech was made available via webcast, said the company has been taking advantage of the downturn. "This may be the best time to invest in this business," he said. "At least that's our conviction."

Hospitality expert Bobby Bowers said Carlson is thinking strategically and trying to catch the "upswing" of the cyclical industry.

"In the U.S., I think they have a lot of opportunity for expansion" because they are smaller than some other chains, said Bowers, a vice president with Smith Travel Research in Nashville.

Bowers said that 2009 was the worst year for the hotel industry that his company has ever tracked, with an index that tracks occupancy and room rates down nearly 17 percent. "Most people are thinking this year will still be a down year, but 2011 will see some good recovery."

Joly wasn't subscribing to gloom and doom. "It's true that there's still a lot economic uncertainty for the short term," he told the Associated Press. "But, come on, the world has been going through economic cycles forever, for the last two or three centuries. This is not Armageddon."

The Associated Press contributed to this report. Suzanne Ziegler • 612-673-1707

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