LONDON and PORTO ALEGRE, Brazil—Two hotel management companies headquartered 6,500 miles apart have reached across the Atlantic Ocean to fulfill their needs for growth.
For London-based Yoo Hotels, the partnership with InterCity Hotels is about breaking into the burgeoning South American hotel market. For Porto Alegre-based InterCity, the alliance serves a desire to extend its 25-hotel portfolio into the design-laden upscale segment.
The two companies recently joined forces when they executed a contract that calls for InterCity to oversee the growth of the fledgling Yoo2 brand in Brazil.
Sergio Bueno, InterCity’s director of development, said during a phone interview that the alliance with Yoo couldn’t come at a better time as InterCity was exploring its options to launch two new brands on its own. It found Yoo to fill the need for an upscale design-oriented brand. It will announce plans for a lower-scale brand unrelated to Yoo at some point before the end of the year, he said.
“We are very glad with the new alliance,” Bueno said. “The people from Yoo came to Brazil searching for a management company to partner with. They were not willing to manage hotels in Brazil. They were looking for (management) partners who can work with local franchising partners.
“So far our alliance with Yoo company is for business in Brazil,” he said. “But it’s a natural step for us to go into neighboring countries after we establish hotels here.”
Yoo Hotels is part of Yoo Limited., a global design-oriented company founded by French designer Philippe Starck and English real-estate entrepreneur John Hitchcox.
Yoo has one hotel in operation, the J Plus in Hong Kong. The company announced the launch of the Yoo2 and the luxury Yoo Collection brands in March. The deal with InterCity does not include Yoo Collection properties.
Yoo Hotels CEO Marco Nijhof said during a separate phone interview that the company has 20 projects in the pipeline and will soon be announcing several new hotels in six countries, including Indonesia, the Philippines, St. Vincent & The Grenadines and the United Kingdom. It has a signed letter of intent for a property in Phuket, Thailand, and is in negotiations for hotels in Istanbul and Costa Rica.
It’s the desire to have that kind of international footprint that drew the company to InterCity, Nijhof said.
“I am Dutch; everything is extremely black and white, and I am pragmatic about what I can do well and what I cannot do,” Nijhof said. “I have worked in 19 countries, but I do not understand the inner workings of Brazil and do not understand (the inner workings of) China. So I want to find the best possible partners I could find to run the hotels on our behalf.
“(InterCity) did not have a premium brand like we have in Yoo2,” he said. “We give them design, technical services, the philosophy, and they will basically run it on our behalf.”
The key elements of Yoo2’s design-oriented philosophy include the Yoo Lounge—a bar and restaurant/lounge concept that serves as the hotel’s heart and soul, the personalized guest service approach and the design in the guestroom.
“Yoo2 is a brand between the midscale and luxury scales,” Bueno said. “The hotel itself, its fixtures, its design, will be much different. We will target guests who are willing to pay a little more for more comfort.”
Design is the driver
Starck’s involvement in Yoo was a big attraction for InterCity, according to Bueno.
“Of course we knew of him, but the Yoo company itself didn’t have a high profile in the Brazilian market,” Bueno said. “We expect that to change.”
Design-driven hotels are few and far between in Brazil—something Bueno said the Yoo2 brand will help change.
“Most hotels are commodity types that look like each other,” he said. “There have been few experiences in design hotels, so the differentiator for Yoo2 is to create something unique. There’s a huge new demand for it, especially in the major markets.”
InterCity will have no financial investment in the Brazilian Yoo2 hotels but will be fully involved in searching for investors to develop hotels and finding sites, according to Bueno. He expects the brand to eventually have up to 10 hotels in Brazil’s major cities.
“Design hotels that look for bigger rates will make sense in bigger markets,” he said, citing Rio de Janeiro, São Paulo and Brasilia as the primary targets.
Nijhof called Yoo2 “affordable luxury with 200-square-foot guestrooms, great design and great food-and-beverage outlets.”
“We know design delivers higher average rate,” Nijhof said.
Bueno said negotiations are underway for two hotels to fly the Yoo2 flag in Brazil, including one already under construction.
“By the end of 2015 there could be the first Yoo2 in Brazil,” Bueno said.
Similar ages, different paths
Both companies were launched around the turn of the century: Yoo in 1999 and InterCity in 2000. Yoo focused on residential design before becoming involved in hotels. InterCity immediately jumped into the hotel industry.
InterCity is a management and ownership company that manages 24 hotels in 15 cities located throughout Brazil and one in Uruguay. Nineteen of the properties are branded as InterCity hotels, which Bueno classified as middle-class, business hotels. The InterCity brand is divided into the Premium and Express sub-brands. The biggest difference between the two brands is that the rooms are larger in a Premium property.
InterCity owns four of the properties but plans to grow primarily through management contracts like the one it signed with Yoo.
“We’re expanding very quickly,” Bueno said. “We plan to have 65 hotels by 2017. All of the growth will be through management contracts.”
Bueno said management contracts in South America are not much different than they are in the United States. The biggest difference in the hotel environment is that the majority hotels in Brazil—including 80% of the InterCity’s properties—are condo hotels.
“Due to very little available debt, condo hotels have been very popular in Brazil,” Bueno said.
Some of the hotels have investors for each room—investors who share the profits.
Meanwhile, Yoo also is a hotel management company that is looking to expand its brands globally. Nijhof said the company is looking for similar partners to InterCity in China and India.
“I lived in Asia for 10 and a half years but do not want to pretend to know how China operates,” Nijhof said
Yoo has some hotels planned for Europe but sees some roadblocks for expansive growth, according to the CEO.
“We’d like to be more in Europe, but Europe is difficult to enter because it’s an expensive market,” he said.
Yoo signed five management contracts this year. By 2016 it will have seven properties open and four or five more each in 2017 and 2018, Nijhof said. The company has utilized Hitchcox and Starck’s relationships with celebrity designers to have them design some of the new properties.
“We are not the Goliath of the hotel business,” Nijhof said. “If you are not big you have to be smart and you have to be agile. That’s what we are trying to be. We know how to operate high end and extend it into the hotel business. We want to find owners who understand what design is all about.”