Being Host, Living Trust, Fighting Z-pirit
Rezidor has made significant progress on its turnaround journey: 2015 was the Group's best year after the 2007 cycle peak, and supported the long-term strategy targeting asset-light, sustainable and profitable growth with a specific focus on emerging markets.
2015 was another strong year for travel and tourism. International arrivals continued to increase, and the sector contributed 10% of global GDP – further strengthening its position as one of the largest and fastest growing industries worldwide.
However, there were also challenges to be faced during the past year: the eurozone was fragmented and was recovering only at a slow pace, and the worsening situation in Syria as well as the refugee crisis raised concerns across Europe and the world. The situation in Russia remained fragile, and the declining oil price put major pressure on oil-producing countries like Norway and Saudi Arabia. Terrorism also affected many destinations: Sousse, Ankara, Beirut, Sharm El Sheikh, Paris, Brussels and Bamako came under threat and saw terrible attacks.
In Bamako (Mali), 17 guests and three of our employees lost their lives when the Radisson Blu Hotel was hit on 20 November 2015. This horrific incident left all of us devastated, and our deepest sympathy and condolences go to the families and friends of the victims. Amidst all the sadness and shock, it was incredible to see how we stood together to overcome this tragedy as one united team. Our Yes I Can! ethos and our values of Being Host, Living Trust and Fighting Z-pirit were never stronger than in the days and weeks following the attack. I am equally thankful for every gesture of support given to us by owners and business partners, governments and authorities, and I am proud to say that thanks to the closely Coordinated efforts of many stakeholders, we were able to re-open the Radisson Blu Hotel, Bamako on 15 December 2015.
Despite the distressed environment, Rezidor's turnaround journey towards improved profitability and enhanced quality made significant progress: 2015 was our best year after the 2007 cycle peak – EBITDA was over €100m for the first time, and EBITDA margin improved to 10.1%. With this result we reached the lower target range of our turnaround programme Route 2015: launched in December 2011, Route 2015 encompasses clear improvement objectives in revenue generation, fee-based growth, cost savings, cap utilisation and asset management. It targeted an EBITDA margin increase of 10–12% by the end of 2015. The 2015 EBITDA margin of 10.1% was positively impacted by one-off income – the underlying EBITDA margin would be 9.6%. We will therefore continue to further pursue our Route 2015 objectives in 2016 – for example through an accelerated CapEx deployment in our Nordic home markets. Following our successful €60m rights issue in 2014, we started to implement a three-year renovation programme in 2015. The sum of €110m (our largest investment ever) was allocated for the refurbishment of several Nordic hotels – among them flagships like the Radisson Blu Royal Hotel, Copenhagen and the Radisson Blu Strand Hotel, Stockholm, which will see a total make-over.
Targeted global revenue initiatives delivered the fourth consecutive year of market share growth and RGI increase in 2015. We also gained further momentum in pursuit of our long-term business development strategy for asset light, sustainable and profitable growth with a particular focus on emerging markets: the year was especially strong for signings, and we reached the milestone of 100,000 rooms in operation or under development. In Africa, our portfolio grew to 30 hotels with 6,700 rooms in operation and 35 hotels with 7,600 rooms under development. These numbers mean that Rezidor continues to hold the largest pipeline of any international operator in Africa. Our commitment to this powerful continent was further underlined by optimising our operational area structure and setting up Africa as a standalone area. It is now headed by a dedicated Vice President supported by an experienced team comprising 90% African nationals.
In Russia/CIS & Baltics we also defended our pole position as the leading international hotel group. Despite the geopolitical unrest in the region, we signed two projects during the past year and opened five hotels. Our operating room count remained twice as high as the room count of our nearest competitor.
All across our world, Rezidor placed greater emphasis on sustainability. Due to our Scandinavian roots, Responsible Business has always been at the core of our business and is embedded in our vision: we want to be seen as the most responsible organisation.
In 2015, we extended our "Think Planet" energy-saving programme to include water stewardship and teamed up with the international water aid charity "Just a Drop". For every 250 towels that are re-used at Radisson Blu, we donate USD 15 to "Just a Drop" – enough to provide one child with drinking water for life. By the end of 2015, we had already helped 4,700 children. We are proud that our efforts are acknowledged and rewarded: Rezidor has been recognised as one of the World's Most Ethical Companies every year since 2010. We aim to be a role model within our industry, and I strongly support Responsible Business alignment across all major global hotel companies in my role as Chairman of the International Tourism Partnership (ITP), a position that I have held since June 2015.
To reach our targets, our 4D Strategy outlines our business priorities and focus areas. 4D is a simple, yet powerful framework based on four elements: Develop Talent, Delight Guests, Drive the Business and Deliver Results. In 2015, our matrix organisation continued to take shape: 4D is designed and monitored at corporate level, driven in our six operational areas, and implemented in all our hotels.
To attract, retain and develop the best people, we further enhanced our performance management culture. Rezidor's employee value proposition "Our Promise" became a distinct tool for internal and external communication. The Women in Leadership programme, targeting 22% women in senior management positions by the end of 2016, was extended with personalised development plans. And our Yes I Can! ethos was reinforced through a new training course with an empowerment angle: we enable every one of our 40,000 hoteliers to take decisions and to be proactive, creative and innovative in delighting our guests.
Last year also saw the roll-out of Radisson RED, Carlson Rezidor's new lifestyle select brand inspired by the millennial mindset. We signed three exciting projects in EMEA – in Cape Town (South Africa), Glasgow (UK) and Brussels (Belgium) – and are thrilled at the prospect of opening the world's very first Radisson RED in April 2016 in the Belgian capital. Our strategic partner Carlson has three projects in the Americas and four in Asia-Pacific in the pipeline, thus underlining the global traction of RED with a portfolio of ten hotels under development at the end of 2015.
In March 2016, we proudly expanded our brand portfolio and entered the economy segment through the acquisition of a 49% stake of prizeotel – an entrepreneurial and creative start-up with currently three operating hotels in Germany designed by Karim Rashid.
We made solid progress in tax optimisation and procurement and continued to fully focus on revenue generation to maximise profitable total revenue. We are implementing a long-term project to reshape Rezidor's revenue generation engines, enabling us to embrace the shifting dynamics of the marketplace and ultimately deliver a 70% system contribution by 2020. The optimisation of our UK sales force successfully marked the first project phase, further initiatives in the Nordics and Central Europe have just been kicked off, and a revised funding model as additional enabler is under development and scheduled to be launched in 2017.
While the economic outlook for 2016 is positive, the geopolitical outlook remains mixed: turbulence will continue to impact many regions, and terrorist threats and attacks might affect additional destinations. Ensuring the safety and security of our guests and employees remains our highest priority, and we are constantly developing Rezidor's corporate security programme to minimise risks in a changing world. We were the first major global hotel company to sign an agreement with the global security consultancy Safehotels, and had 65 hotels certified during the past year.
And wherever we are present, our people continue to make Rezidor unique: we are a people business living our strong values. And we are true hosts – inspired by the Yes I Can! ethos and creating personal relationships with our stakeholders. Whether we interact with our guests, our owners or other partners, we strongly believe that, quite simply, every moment matters.
Thank you for joining us on our journey!
Wolfgang M. Neumann
President & CEO