How Radisson’s Foray Into Indonesia Was Undone by Betrayal

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It seemed a good match when it was sealed in March 2013. At the time, Carlson Rezidor Hotel Group, which was raring to expand in Indonesia, thought why not create a joint venture with Panorama Group, a leading travel and tourism player with vast connections and local knowledge.

Panorama was also a trusted partner with whom Carlson had signed a joint venture in 1999 to establish Carlson Wagonlit Travel in Indonesia.

PT Carlson Panorama Hospitality, 70 percent-owned by the international chain, was gearing up to bring in 20 Radisson and Park Inn by Radisson management contracts to top-tier Indonesian cities such as Jakarta, Bali, Surabaya, and Yogyakarta, and emerging cities including Makassar, Palembang, and Medan by 2020.

Fast forward to today, the joint venture brought in a grand total of six contracts, one of which fell through.

What’s more, a dispute erupted between the global chain and a developer, believed to be Saphir Group, that is in arbitration in Singapore, where Radisson Hotel Group Asia-Pacific is based. At press time, Radisson’s Asia-Pacific president, Katerina Giannouka, had not replied to Skift’s questions about the dispute.

Though the joint venture got off to a good start in the first two years, a conflict of interest, question marks on the joint venture’s delivery, and changing leadership and directions in Asia-Pacific as the global hotel group changed hands, all contributed to the eventual breakup, which was announced in a joint statement on Tuesday, according to sources.

When things started to get messy

The 2013 deal was signed by then Carlson-Rezidor’s president of Asia-Pacific, Simon Barlow, who was replaced in 2014 by Thorsten Kirschke.

The year also saw the chain introducing its new brand Radisson Red to Asia-Pacific and in 2015 it signed a deal outside its joint venture with Panorama. This was a multi-property agreement with Saphir Group to operate a Radisson Red Jakarta CBD, Radisson Red Bali Legian Camakila, Radisson Bali Legian Camakila, and Radisson Bali Tanjung Benoa. The latter two, which have opened since 2016, have dropped Radisson from their names.

“We are pleased to welcome on board a new partner in the key market of Indonesia, where strong growth opportunities are supported by the government’s pro-tourism measures,” Kirschke said in the statement.

That must have made its joint venture partner Panorama see red.

The deal was not just to introduce Radisson Red to Indonesia, but grow the Radisson brand and almost double its hotel pipeline in the market, according to the statement.

In addition, sources said there was also an inherent conflict of interest since Panorama had its own hotel management company, PHM Hospitality, even though when the joint venture was signed, both parties believed there was going to be none. Their view was PHM offered local brands in secondary cities while Radisson and Park Inn were international brands that could compete with Accor’s brands in primary cities.

In short, things started to get messy. Major restructures and changes at the global level, with HNA Tourism Group acquiring the chain in 2016, also trickled to the region. Kirschke was out in early 2017 and Giannouka became president Asia-Pacific in September last year, inheriting a group that by then was widely seen as “a basket case by the Asian industry” because of its constant changes.

“The market feedback is the group is very volatile and no one understands its strategy. It is considered a basket case by the Asian industry. Most of the development team has left, it has a mixed portfolio of management contracts and franchise deals. It’s just messy, no clear vision,” a hotel consultant said at the time.

“None of it was caused by the new CEO but she inherited it,” said the consultant.

Giannouka has been rebuilding the image since coming in as president. Settling the Indonesian joint venture amicably is part of her handiwork.

Both parties have now agreed to “pursue independent growth” as Radisson buys over Panorama’s 30 percent stake and gains full control of the joint venture, while Panorama continues to grow its hotel management company on its own.

“The separation has been agreed amicably by the shareholders to permit the groups to align better with their respective business strategies, while still maintaining close business relationships,” said the joint statement.

Of the six contracts brought by the joint venture, three are in operation, Radisson Blu Bali Uluwatu, Radisson Golf & Convention Center Batam and Radisson Medan. Radisson Lampung, initially a Park Inn by Radisson, is slated to open in the second quarter of 2019. A Radisson Jakarta Cengkareng is understood to be postponed, while a Park Inn by Radisson Makassar fell through.

When contacted, Panorama Group CEO Budi Tirtawisata declined to discuss the reasons behind the end of the joint venture, only saying “this will help grow our respective hospitality business in a more focused way”.

“There are many opportunities in the future,” he said when asked if he was looking for a new partner.

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Photo Credit: Radisson Hotel Group will now grow its brand in Indonesia on its own. Skift