The Sustainable CEO

Monday, August 1, 2011 - 08:17

Patrick Imbardelli, CEO of Pan Pacific Hotels Group, eschewed survival mode and chose a sustainable growth strategy during the GFC.

When A. Patrick Imbardelli was appointed President and CEO of Pan Pacific Hotels Group (PPHG) in 2009, he couldn't have been more primed for it.

For Melbourne-born Imbardelli, the high-profile appointment and move to the company's Singapore headquarters was the culmination of 25 years of experience in the hotel industry.

It came after senior management roles at leading global hotel brands, including InterContinental Hotels Group and Hilton International, and with an expectation: that Imbardelli was the man to lead PPHG into a prosperous new future.

"I spent a great deal of time with the chairman, talking about the history of the company and about the direction the board saw the company going," says Imbardelli. "A new CEO comes with a vision but it can't be 180-degrees opposite to where the board is going. You have to make sure there's a match."

Imbardelli's vision of aggressive growth for both the group's physical assets and hotel brands - particularly in the US, Asia, China and Australia - proved a perfect match for the board's plans. What he didn't know, however, was that his appointment would coincide with the GFC.

Balance of power

Previously known as Hotel Plaza Limited and a listed subsidiary of Singapore-based UOL Group Limited, PPHG had recently acquired the Pan Pacific and Parkroyal hotel brands. Imbardelli was keen to expand its global portfolio of more than 30 hotels while building its two brand profiles in new markets.

However, as many other hotel companies shifted into survival mode and braced themselves for collapsing international markets, Imbardelli says he reached a crossroad. Should he hold strong to the growth strategy that got him hired, or follow his competitors into the survival bunker?

"The reality was that within a world downturn, our assets and brands were under pressure," he says. "However, what I didn't want to happen was to get stuck focusing only on the today. So the challenge for me as leader was to acknowledge that we had some [immediate] challenges in the business today, while not losing sight of building for the future, so that as the GFC clears, we were ready to gear up for growth."

Sustainable growth

For Imbardelli, that meant balancing the basics of his business: limiting waste; ensuring contingency plans were in place; channelling sufficient resources to sales and marketing activities; finding new branding opportunities; and keeping communication lines open across all levels of the organisation, while driving controlled growth.

"We are about what I call sustainable growth; sustainable in that the capability and resourcing of the business can follow the growth," he says. "When you kick into survival mode you have to make decisions about what you can do without. An unsure organisation says 'let's sacrifice a bit of tomorrow'.

"For example, leading up to the GFC, a lot of the international [hotel companies] started selling off their real estate and giving cash back to shareholders. By doing that they were changing their businesses to one with an income stream against their brands rather than against their asset-base.

"We could see an opportunity to do both without having to compromise. So if we see an opportunity for extending our brands we will take it, but if we see an opportunity for real estate, we will also do that.

"I believe we came out of the box a little bit quicker because we were so conscious of the balance of today and tomorrow. We were building up as we could afford it during the GFC, knowing what the organisation would look like after the GFC."

Market forces

The proof is in the profits. In 2010, PPHG's pre-tax profit was up 43 per cent to S$70.4 million (AUD$54 million) from S$49.2 million (AUD$37.5 million) achieved in 2009, and net profit attributable to shareholders increased 36 per cent to S$53.6 million (AUD$40.8 million) from S$39.3 million (AUD$29.9 million achieved in 2009. Despite posting strong numbers, Imbardelli is quick to recognise that the market remains tight. The key to achieving growth, he says, is in being strategic about the markets in which you choose to expand.

"America is still tough. However, South-East Asia is strong, China is experiencing incredible growth and Australia is buoyant. Also, supply continues to outstrip demand in a lot of key destinations so we are still under pressure. We are out of the GFC, but each country or market is at a different level of maturity."

Australia has been a major growth market for PPHG, with the rebranding of four hotel properties within six months. The company launched Australia's first Pan Pacific hotel in Perth this January, and last November, relaunched its Parkroyal brand, with two hotels in Sydney and one in Melbourne, after more than a decade's absence from the Australian market.

Targeting market segments

Parkroyal was founded in Melbourne in 1962, and was acquired by PPHG in 2002. It has maintained a significant presence in South-East Asia since. However, reintroducing the brand was challenging.

While brand recognition has remained high, says Imbardelli, the difficulty lies in updating the brand in the minds of contemporary consumers.

"Customers don't generalise anymore," he says. "That is, if you were building a hotel in 1985 you would have said, 'Right, I have leisure, business and government people staying here', and build a hotel that can cater to everybody.

"In today's environment, it's about building the service and structure of a hotel to specifically look after one market. For example, if we look at the hotel we are building now in Singapore, it is definitely a corporate hotel. It's technology-driven and specifically pitched at 30-48 year olds. So we have made the decision that the hotel doesn't have to appeal to people outside that demographic.

"We came to that conclusion because customers are now saying that if they come and stay in a particular city and it's for business, there is a high likelihood they will stay in a different hotel than if they were visiting for leisure. Most hotel brands try to be everything to everyone, which can still succeed, but at a huge cost. They are the most vulnerable."

Unified management teams

As Imbardelli drives growth, he is quick to cite the need for a talented and unified management team. Building and managing one, he says, requires a clear vision from the CEO and a commitment to matching the talents of team members to the goals of your strategy. As such, strategy must precede recruitment.

"From a leadership perspective it was about establishing the strategy, getting the board on side, then building the team," he says.

"The easiest thing is to employ people that are exactly like you because they are easy to manage.

I made the decision to go out and get some very diverse people. The tricky part of that is that you have to put these people around the table and say 'Now I need a team that is functional'. When it comes to leading diverse talents it's about having a very clear strategy and vision that everyone can anchor to."

Achieving that, says Imbardelli, is about implementing an open and honest communication culture across all levels of the organisation.

"We're a bit different in that we don't have tiers of communication," he says. "I'll pick up the phone and talk to the general manager of Ho Chi Minh City or to the general manager of Perth directly. I'll ask them what's happening, what's their strategy, and how their people are feeling. If you can create an environment where people feel comfortable to tell you what they really think, you're going to get much better results."

Today and tomorrow

Imbardelli is intent on driving such results well into the future. To do so, he knows he must remain vigilant about achieving the right business balance.

"Our biggest challenge will always be the trade-off between today and tomorrow," he says. "Do we spend $1 million today on consumer research or do we take that $1 million as profit?

"In a public company where shareholders are involved, the challenge is to give them steady, predictable income [and] not undermine the sustainability of the business.

"I am very conscious that we as a management team recognise the right level of earnings rather than stretching for the sake of stretching and creating too much stress in the organisation. Our challenge for the future is to continue to maximise earnings only through sustainable growth."