Stockholm—Last March, Hilton Hotels Corp. sold Scandic, the largest hotel operator in the Nordic region, to Sweden-based private equity group EQT because Hilton was uncertain of Scandic’s ability to catch on outside its home region.

Frank Fiskers, a former Hilton vice president who is now Scandic’s CEO, clearly has no such doubts, as he already has implemented an aggressive European growth and development strategy, focusing especially on eastern and northern Europe, including Russia and the Baltic region.

Apart from the last five to six years under Hilton, “Scandic has always been a growth brand,” Fiskers says. And with EQT as the new owner, “we saw that [we] could rejuvenate this growth, and agreed that the brand should embark on a growth path,” he adds.

So for the past six months, Fiskers has been largely focusing his time on development, while simultaneously setting up a larger development department. To help carry out the planned growth, the company recently hired Nevio Sagberg as senior vice president of business development. Sagberg, who formerly headed development for Ikea in Russia, and who has hotel acquisition experience from a stint at Pandox AB, will lead Scandic’s development team.

“He’s going to be the one driving the development,” Fiskers says. “Of course, he will be supported by me, because I see growth as one of the largest value creators we have, and being owned by a private equity firm, value creation is key.”

Scandic, with 139 hotels now, has a goal of reaching 200 properties in four years. To get there, the company will use a three-pronged growth strategy, Fiskers says, which includes further growth in the Nordic region, as well as a focus on Russia and eastern Europe (with special emphasis on Poland), plus a push into the major markets of western Europe.

The company also will move from a strictly leased operating model with no partnerships or franchises to pursuing management contracts and franchises in addition to leases. “We have a couple of management contracts coming and a couple of franchise agreements in the pipeline,” Fiskers says.

Scandic’s first step into the wider European market will be into Berlin, where a 572-room hotel at Potsdamer Platz already has been announced. “That’s going to be our main push—into Germany,” Fiskers says.

Russia is likely next with Scandic actively pursuing a partnership to extend its brand there. And while Scandic is focused on expanding to new markets, the company is simultaneously continuing its growth in its home region with new hotels announced in Norway, Denmark and Sweden during the last three months of 2007. At the same time, Fiskers says he is not ruling out the possibility of an larger acquisition in these countries.

Meanwhile, Scandic’s former parent, Hilton, has no intentions of giving the brand free reign in eastern Europe— or even the Nordic market. “We’re not locked out of that market, and when we see options up in the Nordic for our other brands, we’ll definitely explore that,” Hilton Chief Financial Officer Robert La Forgia has said.

“Hilton is a formidable competitor—a very good brand manager,” Fiskers notes. “But in terms of hotel operations, I think we are as good as any. When you move into Russia and eastern Europe, where brand maturity is less than in western Europe, it is [about whether] you are an efficient and good operator. We will meet Hilton in competition.”

As for other competitors, Fiskers believes Scandic has an advantage over most mid-market brands thanks to its Nordic roots. “We come from the Nordic environment, which is one of the most expensive areas in the world to operate in,” he notes. “So we are used to complex cost structures, and that has made us good on cost management. In terms of creative use of labor and creative use of technology, we have a clear advantage. When we bid for hotels, we will be able to achieve effective margins. I’m quite confident we will be able to find growth, sustain growth and create growth.”

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