Clarity of purpose – Barceló CEO Raúl González

In a globalised marketplace dominated by asset-light models, fast-growing economies, mergers, acquisitions, headline-generating IPOs, integrated distribution channels and the all-encompassing power of ‘The Brand’, scale has never been more important. Where operators once promoted their properties, they now sell themselves on their portfolios.

This has inevitably seen publically held behemoths emerge at the fore, as owners and developers in all corners of the world gravitate towards the largest players in the field, but where does that leave smaller operators seeking to join the party and establish a more international presence? Do they try to play the Marriotts and IHGs at their own game,
or look to leverage their differences? The answer, it seems, is a bit of both.

What’s in a name?

Established in 1931, Barceló can hardly be described as a minnow. With nearly 19,000 rooms established across 19 countries, Spain’s third-largest operator is a significant player in the market. The group remains family-owned, however, and, over the past decade, as expansion became the principle driving its European and North American peers, who sought to diversify their brand offerings and pivot towards the Middle East and Asia accordingly, Barceló remained more circumspect.

Two announcements in June of this year suggest a significant step up in ambition. First came the unveiling of a new multibrand strategy that will see Barceló’s portfolio divided into four distinct market segments. Second was the signing of a master franchise agreement with Asian power player Plateno that includes a commitment to open 100 Barceló-branded properties in China over the next ten years, an unprecedented rate of growth for the Spanish operator. It appears that big changes are afoot, and that, in itself, is a significant step.

“We are now 85 years old and our owners are third generation,” explains CEO Raúl González. “Barceló is not only our brand; it’s the family name. That means change is never straightforward. Things often take time.”

Much work has already gone on behind the scenes. When González joined the group more than 20 years-ago, Barceló was operating one to five-star and luxury properties all under a single brand. While the portfolio has since been cleansed of anything three-star or lower, the CEO knew that the time for more clarity had arrived.

“As the market has matured, it’s become essential that you really clarify to your customers the meaning and position of your brand,” he believes. “Consistency is not easy – you can only guarantee it by having just one hotel. The guests need to know their expectations will be met every time, but when you have hotels at so many different levels, those expectations will vary widely.”

Barceló had been thinking this way for some time, and conversations surrounding branding strategies were already taking place. But it was last year’s acquisition of Occidental Hotels & Resorts – and its 13 Latin American resorts spread across four brands – that helped to frame and accelerate those discussions.

“We now had several brands and had to really think about what fitted into which category,” González explains. “It was about reaching a decision on what we wanted these brands to say. Would they be targeting specific age demographics? Where in the market would they sit? Would one be for cities, another for resorts? There were a number of decisions to make.”

Brand consultancy Saffron was brought on board to guide a series of brainstorming sessions, and four distinct brands are the result: Royal Hideaway Luxury Hotels & Resorts; Barceló Hotels & Resorts; Occidental Hotels & Resorts; and Allegro Hotels. All will be pan-regional, and incorporate urban and resort destinations, but González is confident that each sits in a distinct category. Some retagging of the portfolio is necessary, and €150 million has been earmarked for bringing properties up to speed with the new standards.

“I once read that people often prefer to be seen as smart than to be understood,” says the CEO. “My priority here was always complete clarity, to ensure that we didn’t overcomplicate the strategy.”

Brand new

Royal Hideaway will encompass luxury, destination hotels. Seven have been selected so far, including four of Barceló’s Spanish properties – Formentor, La Bobadilla, Asia Gardens and Sancti Petri. González compares the quality to a Leading Hotel of the World and says branding will be kept light.

“We’re talking about hotels where the name is the brand,” he explains. “Few guests know who operates the George V or Cipriani; that’s the standard we have in mind.”

At that level of luxury, González acknowledges, we won’t be talking big numbers. A much greater growth driver will be a subtly repositioned Barceló Hotels & Resorts, which currently accounts for 80% of the group portfolio and consists of four and five-star full-service properties, boasting plenty of facilities.

This focus on amenities will mean some properties being placed within the third brand and second main expansion vehicle, Occidental. In fact, its first European opening, the five-star Praha Wilson in Prague, would have been a Barceló prior to the strategy launch.

“It’s a wonderful property, perfectly located, but it only has a small restaurant and bar,” González explains. “That meant it couldn’t be a Barceló. What I’m really trying to emphasise to our colleagues and owners is that it’s not a question of one brand being better than the other. There’s no dip in standards – this remains a truly great hotel. In fact, standards across all brands must be lifted.” 

The final addition, Allegro, is that must-have for any ambitious hotel operator in 2016: a youth-orientated, lifestyle-led, experience-driven brand targeting the budget-conscious traveller. “We’ve been talking about ‘happy managers’ rather than general managers,” reveals González. “It’s about lots of colour, freshness, keeping things less formal. The target demographic will naturally be a little younger. I think we’re talking about something quite different.”

There will be four ‘brand leaders’ making sure new standards are implemented and maintained, but, for now at least, the CEO does not foresee a dramatic change in organisational structure. The company will continue to be managed regionally, and the initial intention is to consolidate strength in high-yield markets where the group already has a presence.

The deal with Occidental was in large part funded by the formation of Bay Hotels & Leisure, a joint venture with Spanish real-estate giant Hispania, into which Barceló sold 15 resorts – Hispania is majority shareholder in the two-party partnership, boasting a 76% stake. The stated aim is for Bay to become Spain’s leading luxury hotel owner and to be publically listed within three years. This may indicate a move away from bricks and mortar for the traditional side of the business, but González refuses to be so absolutist. In Central and Latin America, 80–85% of the portfolio is owned, and the company continues to invest, having recently acquired a 205-room five-star property in San Salvador, El Salvador’s capital.

“In Europe, we’ve changed from being an owner that also runs hotels for third parties to being a management company that also owns some hotels,” he explains. “That reflects a market that’s become more asset-light, but it’s not necessarily the case in Latin America. We’re also still a family company, and families tend to like having a bit of real estate on the books. It depends what’s right for each market.”

Old haunts

One market where Barceló looks set to make a big splash is China, and it will do so without the need for significant investment, either capital or human. If the targets of the recent master franchise agreement signed with Plateno are to be met, a new Barceló property will have to open at an almost monthly rate over the next decade.

This may all seem like unchartered waters but, intriguingly, it’s more a case of unfinished business. The group was actually the first Spanish operator to enter China, with the signing of the Barceló Grand Hotel Shanghai during the ‘Wild East’ days of 2000.

Things did not go well. Within eight months of the ten-year contract commencing, the owners decided to terminate the agreement. A Chinese court of arbitration eventually ruled in favour of the group and compensation payments were ordered, but such bruising encounters can have a longer-term psychological impact.

“We certainly didn’t agree with their reasons for termination, and we were ultimately proven to be correct, but when you’ve had a bad experience, it can be difficult to come back,” González acknowledges. “I think that’s especially true in a family business; people have long memories.”

This time though, things look quite different. Founded in 2005 and with more than 450,000 rooms, Plateno has already become China’s second-largest hotel company. “We’ve been talking with a number of interested parties in the past few years, but this relationship just seemed to work. A local player like Plateno, with its knowledge of the market and ability to find investment, is the best possible partner,” González declares. “Our support comes with the branding, and those European, or Spanish, standards and style. The real challenge comes with growth, and that’s their responsibility.”

It may only be a franchise agreement, but the impact of a strong Chinese presence could be huge for the group
as a whole, in the region and somewhat closer to home. Plateno’s loyalty scheme has well over 80 million members and, while the group has traditionally focused on the budget segment, that strategy is starting to change as the market becomes more mature. Whether we’re talking about outbound Chinese guests flying to Europe and Latin America, or moves to establish Barceló’s other three brands in China, the potential is clear.

“I have sat in a McDonald’s in China and seen diners willing to spend more than we would here in Europe,” marvels González. “They put huge value in Western branding and are willing to pay a premium. Right now, we want to learn – to understand the market and behaviour a little better. Who knows what will happen in the future? For now, what matters most is finding the right assets and the right investors.”

As Barceló continues to lay down markers and state its ambition with increasing clarity, one imagines that there’ll be a growing number of players more than willing to listen.