Interview: Tobias Brown, Development & Acquisition at easyHotel - Budget hotels really make money!

19. April 2019
Interview: Tobias Brown, Development & Acquisition at easyHotel - Budget hotels really make money!

I have been introduced to Tobias Brown a couple of years ago and we had a number of discussions in regards to hotel industry development. Tobias has been working both in operations and investments and it is interesting that he decided to join easyhotel a couple of months ago. moving from contemporary hotel product to complete hostel/hotel concept that actually sells rooms without a window (that I cannot imagine to sleep in) made me ask myself what the future of hotel industry is and if this concept is just cheap or it really has a value that the new generations are looking for.

Economy resistant investment vehicle

• You have been working in hotel industry for more than 25 years, mostly in development. Has anything changed in terms of investors’ plans where to invest and their expectations, and what has happened for the last 15 years?

The perception, in particular, of the budget segment, is a 180-degree change – not the cheap, smeary, unsafe or cheesy image as before. It is more a clean, reliable, good value for money and economy resistant investment vehicle, generating consistent cash flows.

As an attractive, lucrative investment, hotels are becoming mainstream part of the investment landscape. They are attractive for the ‘bricks & mortar’ (real estate) asset, and more recently for the operational aspect in terms of servicing lease contracts, and generating ROIs / IRRs. Private Equity, Venture capital, Insurance & Pension Funds and not just Banks are involved now. as a result, there are now more sophisticated financial tools investment vehicles.

The naughtiest early saw the advent (in Europe) of the budget hotel concept, thanks to IhG with holiday Inn Express, Whitbread with Premier Inn and dieter müller with motelOne. Not only have the brand products become more refined and numerous, but they have also developed meanwhile in order to appeal to the investor.

Nowadays as a hotel developer, one needs to understand not just how to market a brand, its core technical product, the distribution, marketing, operating costs etc. but also to enhance investment and real estate implications – understand land values, potential P&ls’, benchmark stats, feasibility, ROIs, IRRs, EBITda – all are part of the overall value proposition.

There’s been a plethora and surge of long stay, serviced apartment, midscale hostel concepts and of course the advent of airB&B and an increased confusion to the customer understanding what the brands are, what they offer and represent.

The market is consolidating – brand merging / acquiring other brands i.e. marriott and Starwood, Wyndham and WImdU, carlson and Prizeotel, Rezidor, accor and 25hours. The type of guests is from all segments and backgrounds, corporate to leisure, golden oldies to millennials and the ‘clever traveller’.

Innovation: how we operate hotels engaging new technology, digitalization, reservation to check-in to room key entry - all with an app on smartphone, using robots to take on menial tasks such as hovering of rooms. The days of white gloves, ‘ladies and gentlemen serving ladies and gentlemen’, liveried staff and concierge are in decline as well as that chocolate on the pillow! Rather than accepting dead spaces such as underused meeting rooms and empty all-day F&B outlets, hotels are finding new ways to reconsider space for its economic value and branded experience.

So many brands on the market, highly segmented niche defined brands, in many cases re-define the perception of what one calls a hotel.

„easyHotel“ = value for money

• Now, you are Development & Acquisition for easyHotels, which is a low budget product. And today, when we talk about hospitality, the first thing we mention is experience. What is the value of your brand in eyes of a customer and do you offer your guests experience and what kind of it?

The customer experience is a local one – we are just conveniently located, clean, uncomplicated ‘bed for the night’ within that local cosmos. It is a reliable, clean, value for money, consistent lodging product where restaurants, cafés, bars, nightlife, shops, sightseeing etc. awaits you within easy reach of the hotels’ doorstep. all staff are locals and can give you an amazing insight and guidance where to go and what to see. as a guest, I pay exactly for what I use and that is what I get. We promise a clean room, a good nights’ sleep at an affordable price in an easily accessible and secure location. I will pay a fair price for all the ancillary services and products, as and when I need them.

I book online; the check-in process is also simultaneously the checkout. No need to waste time when it is time to leave, invoicing, and payment have all been taken care of. Extra ancillary services such as early c/in, late c/out, luggage storage, TV, WiFi, daily housekeeping services, travel food boxes etc. I can pay for, as and when I need them.

Whether a business or leisure traveller, a road warrior or a clever traveller, easyhotel offers affordable and attractive accommodation to all – everybody is welcome! You pay for what you need and use, as and when you need it.

Although concepts have become very sophisticated with the advent of meininger, Generator, a&O and co. easyhotel definitely appeals to those not wanting to stay (for whatever the reason is) in a hostel, but also don’t want the hassle and higher rates of a limited service budget hotel with bed & breakfast concept.

Our business is accommodation; we offer rooms, not food & beverage services. hence, we enhance the local community by not saturating and competing with the local food and drink offering. Actually, we support the local businesses by bringing them more clients, create local jobs and pay local business / leisure taxes and operating licenses. Positive win-win!

Rolex at the price of Swatch watch?!

• In the SEE region, at the moment, majority of new (refurbished or new built) hotels are 4* and 5*. Investors show very low interest for low budget hotels. What would be their reason to think about such a low budget product?

In many cases pride, a sense of tradition and in others just plain vanity! majority of owners, operators and investors are local players who are self-made people, building something that is prestigious and a monument to themselves! Without wanting to be cynical, in reality the majority of finished products are always a compromise on how it should be. In investment terms, they want a Rolex, but only want to pay a Swatch Watch price for it. The idea that the higher the star rating is, the higher the profitability is a complete and utter anathema.

It is a stubborn ignorance - total lack of understanding or wanting to understand how efficient budget hotels can be, especially branded one, because they really do make money!

• Within your easyHotels, you have some rooms without the window. I understand you sell it, it is part of your job. However, I wonder, would you ever sleep in such a room?

Definitely yes! I was not initially turned on by the idea and then I tried it myself – in a container built bedroom. There are many advantages, namely having a guaranteed blacked-out room, that is also quieter and less expensive. For those who need to sleep, i.e. project and late night workers, families, even long distance drivers, this is an attractive solution. The notion is partly a state of mind and the solution which would alleviate most people’s doubt is through clever and
authentic design i.e. lighting, fake window with blinds and back lighting, good ventilation and a comfortable room.

Marina Franolić
Adria hotel Forum / HOW Festival


 

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