One-on-one: Why Hard Rock Hotels is heading to Berlin

Hard Rock International CEO Hamish Dodds presents a custom guitar to Heskel Nathaniel, founder of Trockland Development Group. 

Following the launch of its first hotel in Europe last year, Hard Rock International has announced plans to expand its hospitality business into Germany. The 372-room new-build Hard Rock Hotel Berlin Checkpoint Charlie, developed with Berlin-based Trockland Development Group, is set to open in 2020. Notably, the property will be centrally located adjacent to Checkpoint Charlie, one of the city’s more popular tourist attractions in the Mitte district, right where the Berlin Wall once stood.

Hard Rock Hotel Berlin Checkpoint Charlie is set to be part of a larger multi-use project where the two plot areas comprise nearly 1 hectare (2.5 acres) at Checkpoint Charlie. TTrockland Development Group will own the hotel, which will include retail spaces, offices, residences and a curated exhibition space focusing on Checkpoint Charlie and the Berlin Wall. 

But why Germany? And why Berlin? “Germany has always been a target market,” Josh Littman, Hard Rock’s VP of hotel development EMEA told Hotel Management. The country is one of the world’s “global players” on almost every scale, and as a market, it is ideal for every kind of business. With four Hard Rock Cafes in Germany (and one in Berlin), the company was already familiar with the rules of doing business in the country. “We know the market,” Littman said. “Berlin is a major financial player and it’s an obvious location for any hotel co that wants to plant a flag in a global city.” Beyond that, he noted, the energetic and “cool” vibe of Berlin’s youth culture fits the Hard Rock target demographic nicely. “It ticks all the boxes,” he said. 

Germany is also one of Europe’s strongest economies—a reality Hard Rock could not ignore. Financial strength, Littman said, translates into the type of demand characteristics that drive development. “Who wants to visit? Why? How strong are the markets? Is there sufficient demand?” Germany’s economic strength also underpins the fundamentals that affect the global hospitality industry, he noted.

“That said, it’s not an easy market to get into,” Littman acknowledged, noting the difficulty in getting management contracts, which Hard Rock prefers. Beyond that, in order to develop on a popular location, Hard Rock had to sign a lease with the Germany-based Trockland. Leases, he said, are “an important element” for any business looking to plant a flag in Germany.  

The deal structure, he continued, is a straight lease. “This is typical for hotels in Germany, especially in prime locations. It has to do with how deals are financed in Germany. Lease deals are more appealing for them.” Hard Rock is not paying exclusively for the development, but is contributing to the costs, and while the lease deal is not a management agreement, Hard Rock will be running the hotel. In conducting due diligence, Hard Rock spoke with local experts to learn the dynamics about Berlin’s supply-and-demand characteristics, coming to understand the city’s business scene “intimately.” 

“Berlin has a gap in the market in terms of quality international hotels,” Littman said. While there are many luxury hotels and some midscale and upscale options, Hard Rock found a lack of  lifestyle hotels. “That’s what appeals to us: the lifestyle product,” he said. On the other hand, this gap meant that there was a lack of available data on what kind of demand they could find in Berlin. 

As the company waits for its first hotel in a European capital city (and its first hotel in Germnay) to open, Littman said that the team is looking to build off of this momentum and start securing options in other city centers. “There are some ideal opportunities in the region,” he said.