NEW YORK CITY—Germany’s Meininger Hotel Group Non-Executive Chairman Navneet Bali is convinced his company’s economy hotel-hostel model would fit into the American hotel landscape perfectly, following its expansion success in Europe.
“Why not the U.S.?” he asked. “Lots of Americans come to stay with us in places like Brussels and Amsterdam. These are people who also want to travel to New York City; Washington, D.C.; and Miami.”
While a U.S. presence isn’t in the works just yet for the Berlin-based company, its current growth trajectory means expansion is certainly on the radar, Bali said. He took over as chairman three years ago, and his top priority was building a pipeline for the brand.
“We built that pipeline, and now there are more deals being signed as we speak across Europe,” he said. “We’ll have more in Germany, we’ll have Rome, Venice, Paris, Budapest, Lisbon and more in some cities where we already have hotels.”
Bali spoke to Hotel News Now during a break at the 2016 New York University International Hospitality Industry Investment Conference.
Meininger Hotels operates 16 hotels and 7,025 rooms across Europe, with its largest concentration in Germany along with other properties in London, Brussels and Amsterdam. Most recently the company announced deals to open a conversion hotel in Leipzig, Germany, in 2017; and new builds in Barcelona and Budapest, both slated for 2018 openings.
The brand’s hotel-hostel model makes it appealing to a wide audience of travelers as well as to investors who see the value in the operating margins, Bali said. Meininger works with independent developers, many of whom have established footprints in their home countries, like Foncière des Murs, a notable hotel real estate investor in Europe.
“We operate hotels and hostels in one building,” Bali explained, as that combination means the brand can appeal to very distinct markets. “Typically, our hostel rooms appeal to individual backpackers sharing a room or traveling in groups, student groups, people celebrating weddings together. We cater to that hostel set with free, fast Wi-Fi and a kitchen where they can cook for free.
“Then you have the hotel market, where we compete with regular budget hotels,” he said. “We get families traveling together, which we accommodate in family rooms that can sleep up to six people.”
Public spaces are like those in a typical budget hotel, with a breakfast area and gaming area, and while Meininger hotels do have kitchens free for guest use, the breakfast buffet does have a small cost.
That combination model leads to profitable margins, Bali said.
“We measure our KPIs per bed, and we’re high because of high occupancies and operating efficiencies,” he said. “There’s a strategic element to this. The design of the product becomes quite important, and we can address yield well.”
He said occupancy on average in the portfolio is around 90%.
Eye on America?
While Bali called Europe the company’s “home pitch,” he said he is eyeing expansion to the U.S. because he sees demand for his type of product among European and American travelers.
“On the hostel side, Meininger is a young person’s hotel, where the average age of our guests is 26 to 27,” he said. “Europeans are intrepid travelers; they want to go to Europe, India, Russia and America. There’s a demand for that so we want to find deals.”
He said the company is looking to add a development executive in the Americas region, and is targeting big-name markets.
“We’re looking at gateway cities first to establish our brand,” he said. “We’re willing to invest in the brand to start up in the U.S.”
He said converting existing hotel product into Meininger properties would be the first step, and within five years he said he’d like to be opening about four properties per year. Right now, the company is investigating possible deals in San Francisco, Miami and Washington, D.C., Bali said.