AMSTERDAM—The array of offerings within the world of the hostel-hotel and budget segment has developed swiftly in the last few years, but it still offers market gaps and opportunities for novel ideas, according to sources.
Executives with Netherlands-based startup CityHub Hotels believe the company has one such unique concept.
Preston Benson, a director at CityHub who represents its interests in the United Kingdom, including identifying sites, said the company’s strategy is to develop nontraditional buildings in underutilized, cool neighborhoods with a business model that makes sense to investors who are increasingly moving into the segment.
Benson said CityHub is adapting what he called “unloved spaces” and creating a sustainable business that allows for long-term leases.
The structure is similar to the Whitbread model of 20- to 25-year leases with five rent reviews yearly capped and collared at revenue-per-available-room indices, he said.
Sem Schuurkes, who founded CityHub with university friend Pieter van Tilburg, said CityHub is an “urban hotel for digital natives.”
If that sounds like other brands, Schuurkes said CityHub does not have an emphasis on the dormitories that other hostel-hotel offerings do. Benson agreed.
“We’re filling the gap between hostel and hotels with a communal environment, where guests can meet each other, yet, at the same time, have privacy,” Benson said.
CityHub’s technology concept also goes beyond its competitors, Schuurkes said.
Its first and so far only asset, the 50-room CityHub Amsterdam, opened in in October 2015 between the Kostverlorenvaart and Bilderdijkgracht canals in the Amsterdam Oud-West neighborhood of the city. The building was an industrial shed and garage.
Guests receive a wrist band with chip insert when they automatically check in via touchscreens. The band contains an interactive app that helps guests explore that particular city, keep in contact with other guests who have become friends and control music, lighting and other in-room accessories.
“The band even allows guests to pour their own beer,” Schuurkes said, who added the average stay is two or three nights.
Groups are limited to a maximum of 10 people.
Going elsewhere
Schuurkes said CityHub’s construction method is what puts the company in a different space altogether from any upstart rival, the difference beginning right at the start of a hotel’s life.
Warehouses, large sheds and empty offices all can be homes for CityHubs, he said.
“We can bring to use nontraditional structures,” he said. “We have a build time of nine months at an average cost per room of €40,000 ($42,428), and hotels are designed around technology to minimize staff costs.”
Benson said other nontraditional hotel offerings at a CityHub include:
- Shared showers, one for each gender, with a central location in each property;
- a construction process that can be changed depending on the property’s former use, which Benson describes as “like building Lego;”
- only one staff member per hotel, known as a City Host, who operationally does nothing and thus has 100% of their time dedicated to guests; and
- very simple public spaces, with what Schuurkes describes as “only one hanging-out area,” and no restaurant.
Schuurkes said the basic idea originated from the amount of empty office buildings in Amsterdam.
“We made the decision we would not break anything,” he said of the spaces he and Van Tilburg found and continue to find. “Initially, it was very difficult to get started. We were students and came from outside. It took a while to get an investor. It was easier to convince the (Amsterdam site) owner as no one knew what to do with the space.”
Schuurkes said CityHub is even more efficient than competitors in the economy segment.
“There is the opportunity to have more space for rooms, actually, on average more than 2.5 times than those in budget hotels,” he said.
Taking this approach is creating a better return for its investors, Benson said.
“The Amsterdam hotel took about nine months, right from applying for permits, with construction time taking 4.5 months. That might change a little depending on location,” he said, adding that despite much interest from investors, their business plan is to initially “stick to ourselves a little, with bank debt and one initial private investor.”
“It does hold up with the numbers. (Average daily rate) and occupancy are high,” Schuurkes said.
Rolling out an idea
Schuurkes said CityHub could expand into cities such as Amsterdam and Barcelona, Spain, that either have or are thinking of implementing moratoriums on new hotel construction.
Typically CityHubs will be outside city centers, he said, in up-and-coming districts but still close to those centers.
Planning regulators have pretty much closed down the center of Amsterdam, Schuurkes said.
“Everywhere they’re trying to regulate new builds, which provides business models such as ours an advantage,” he added.
CityHub aims to open eight locations by 2020.
“We feel we have the freedom to do what we like,” Benson said.
Possible destinations include London; Edinburgh, Scotland; Stockholm; Barcelona and Berlin.
“We still believe there is a space in Berlin,” Schuurkes said, referring to the city from where many believe the hostel-hotel phenomenon was created.
In October, CityHub will open a 126-room property in Rotterdam, Netherlands, in an old, three-floor canal building, Schuurkes said. A third site has been secured in London.
“We are continuing to look at projects not suitable for other uses, to bring a new dynamic to an area with a model appealing to landlords,” Schuurkes added.