As established during day one of the International Hotel Investment Forum (IHIF), hospitality investment has grown up. But now that hotels have gone mainstream, what are the most attractive alternatives within accommodations' categories in which to invest?
On day two at IHIF, Russell Kett, chairman of HVS’ London office, moderated the panel: “A Brave New World: What Are the Opportunities in Alternative Models?” The session examined the business behind hostels, serviced apartments, resorts, co-living, co-working, extended stay, student accommodations and other options, with four representatives of different hospitality models sharing their insights on how their various sectors are growing and thriving.
Student Accommodations Get Smart
As CEO of International Campus, Rainer Nonnengässer is focused on young travelers. The company is a developer and operator of both student accommodations and “co-living” spaces, with some 15,000 rooms in Germany, the Netherlands, Austria, Hungary, the Czech Republic and Poland. Nonnengässer expects the company to double its business in the next five years in Germany as well as in the broader CEE market. “We are currently at the door of entering Italy and Spain as well, as these are highly attractive countries for young people,” he said.
This niche, he said, is poised to remain strong as long as students travel, and he's keeping an eye on the overall number of students worldwide. “[It] has exploded in the last 10 years,” he told the IHIF crowd. “If you look at the international traffic of higher education, regardless from which continent the young people are coming from, it's four times as high as 10 years ago with a growing potential. We have double-digit growth rates from this.”
The challenge with catering to this niche is the model must handle students during the academic times of the year and traditional travelers when school isn’t in session. Similarly, student accommodations iare meant to house limited numbers of residents over several months. “For us, the challenge now is to adapt our business model from the real long stay, which means nine to 12 months average, down to a week or two weeks.” To that end, he said, the team is looking to adapt their collective skillsets or find partners to help them attract a different demographic.
Casual Chic
Kike Sarasola founded the Room Mate Group 13 years ago and has grown his company to 25 properties in six countries, many of which include bunk rooms for groups. Beyond traditional hotels, the company manages more than 10,000 apartments, 600 of them exclusively, and opened its first complete apartment building in Madrid last year.
“We believed that there was a niche for the three- to four-star hotels, dignified and doing a nice job.” he said. As the company expanded, it also added serviced apartments to its catalogue. “And now we're going into hostels,” he said. “We're [adding] three to four resort hotels right now—opening two new resorts in Mallorca and one in Italy.” With all that expansion, Sarasola laughingly expressed surprise that the company has not (yet) been acquired by Accor.
Bringing everything under one umbrella lets travelers quickly find everything from bunks to apartments to suites or long-term accommodations. “Time is the most precious element when you're looking for something,” he said. “No matter your age or what you want to do, if you go into one of my platforms you will be able to see all the possible combinations. One time, you can go to one of my apartments, and other time, you can go into one of my hotels.”
Ultimately, independence is at the heart of Sarasola’s business model. “If the industry goes that way, I go exactly the other way,” he said.
Nonhostile Hostels
Oliver Winter founded A&O Hostels in 2000, and has driven the company into more than 20 cities in six countries, with a portfolio of 22,000 beds in a wide configuration of rooms.
“We are an ultra-low-cost provider,” Winter said, noting the business’ demographic ranges from students and backpackers to families.
One of the challenges Winter and his team has faced over the last 19 years is changing demand from travelers, and how to meet that demand while keeping costs low. “Customers today are a bit more driven by your look and feel and design,” he said. As such, the company kicked off an investment of €30 million to update all existing assets over the next two years. “One of our biggest goals [for the] end of next year to have all A&Os refurbed and refreshed with a totally different new design, new look and feel.”
High-Tech Hospitality
Kerten Hospitality covers a range of hospitality verticals, from serviced apartments to branded residences to hotels and F&B.
“I think what makes us special or different is that our infrastructure back-end allows us to operate anything together,” said CEOMarloes Knippenberg." We have 3,000 keys in the pipeline and 20,000 square meters of office space.” Kerten opened just under 10 burger restaurants last year and is planning several other F&B concepts and openings this year.
To take the business beyond hospitality, Kerten has focused on technology and how the next generation of travelers is using it. “We've been talking for years about millennials,” said Knippenberg, “but we're now talking about Generation Z.” What millennials and Gen-Z want, she claimed, is to have their data used efficiently to create a seamless experience. “When you look at the infrastructure that we're building at the moment [and for the] coming three years, we can actually really push to the clients what they want, when they want it, where they want it, without us pushing any of the owners to invest crazy amounts of money into new technology,” she said. “I'm not talking about opening the door with a telephone; I'm really talking about operating systems which are there to be used for the guests. I think that's really where we're going to grow.”
Kerten Hospitality is opening a mixed-use project in Jeddah this summer, said Knippenberg. “And it's great because it's a market that is all driven by online. There's a massive transformation going on in the market. They don't mind that the data is being used.”