VIENNA—For the past two decades, developing markets at home and in near eastern European neighbors, Slovakia, Poland and the Czech Republic, have underpinned the slow but steady expansion of the Vienna International Hotels & Resorts management group.
Now the company has its sights set on many more hotels throughout the entirety of Europe.
Its management portfolio of mostly business sector hotels recently surged from 31 to 37 with the takeovers of several properties from Germany’s Arcadia Hotels.
Those five properties—in Coburg, Amberg, Günzburg, Wuppertal and Limburg—indicate the new battle plan for VI Hotel’s Europe-wide expansion.
All are located in small- to medium-sized cities with a thriving business and meetings, incentives, conferences and events tourism sector, yet scant mid-market (3- to 4-star) competition.
That, said CEO Andreas Karsten, is precisely the tactic the group is taking to develop its brand in Germany, Austria, Croatia, Romania, Slovakia, Russia and beyond.
“At the moment we are expanding in Germany. Since the beginning of the year, that has seen us grow from managing two hotels in Berlin and Munich to operating eight properties. The takeover of the Arcadia Hotels represents a big step forward in our expansion plans.
“By the close of the year, the portfolio of hotels we are managing in Germany is set to rise again—and we will continue our expansion in 2014.
“On top of the German expansion, we see a rising potential for conference and MICE locations in small cities of eastern Europe in smaller cities, whereas in big cities in western Europe the market is often already saturated. We see that potential lying primarily with the 3- and 4-star hotel industry.”
Putting the pieces in place
Since joining the group in 2011, Karsten has been the architect of a major reorganization and brainstorming, which he said has prepared the group for future growth.
Over the past few months in particular VI Hotels seems to be readying for a major takeoff into new markets. In September, the group expanded its executive management team in order to shore up its bid for a more international presence.
The company’s COO, Dutchman Martin Ykema, will head up operations in eastern Europe, said Karsten, while he focuses on new acquisitions.
“To be noticed on an international level, we have to grow and manage more properties than we do now. With this in mind, we are focusing on the central and eastern European market, actively searching for interesting prospects. We are also getting many proposals for managing hotels, but the properties have to fit into our portfolio and to be profitable in the future.
“If the product, the location and the infrastructure fit—and the economic viability is guaranteed—we are keen to expand the size of our group and to take over the management of additional hotels,” said Karsten.
Karsten declined to reveal details of hotels it will soon add to its portfolio, saying only “the current focus is on Germany.” Discussions are underway and more management contracts are pending.
Stiff competition
Like France’s Louvre Hotels Group, VI Hotels has swung away from its eastern Europe development to focus on Germany, where Karsten said it faces stiff competition in the higher end of the market.
“In certain destinations we experience a highly competitive market, with for example 5-star hotels exerting sharp pricing pressure on the 4-star hotel industry. This is mainly the case in big cities like Berlin, where we have succeeded in positioning our product away from the main market,” he said.
In Berlin, VI Hotels manages the 4-star superior hotel Andel’s Hotel Berlin, which is fulfilling a demand for design-centric but high-tech business hotels. No doubt more such hotels in this niche market are on the cards. Its location—a couple of miles from the city center but well connected by public transport—helps contribute to a competitive price (from €81/$112 single, €114/$157 double).
The Andel and Angelo brands have played a big role in the group’s growth strategy.
“Both are 4-star design hotels with a very functional approach for business yet also attracting leisure travelers,” said Karsten.
He sees a future for both brands in the Russian market, where the group already manages the Angelo Hotel Ekaterinburg. Opportunities for tapping into Russia’s burgeoning luxury hotel market begin with the spring 2014 opening of the Astrum Spa & Conference Hotel in Shelkovo, Russia.
Meanwhile, VI Hotels will be tackling mid-market competition in Germany and elsewhere with gung-ho price setting. “We are very competitive regarding our price setting with our 3-star hotels. The rest is settled by the Internet,” the CEO said.
He believes the groups’ strongly personal approach and a slight up-scaling on standard budget hotel service is helping give it an edge on rivals.
“Business travelers count nowadays on affordable and meaningful service. Our guests prefer a cordial smile instead of checking-in via a machine. That doesn´t mean that it has to be much more expensive than a budget hotel. If the product is good and the service is outstanding, then the guest is willing to pay a little more for the product,” said Karsten.
Back home in Austria, the group would happily grow beyond its trio of hotels, if the economic conditions are right, said Karsten.
“We don’t plan to grow just for the fact of getting bigger. We already have very competitive and interesting products in our portfolio with our hotels in Loipersdorf, Salzburg and Dornbirn, which fit in the market for wellness, city-trips and conferences,” he said.