BERLIN — The European hotel industry is crying out for more institutional investment and risk-sharing partners who understand the need to accelerate development, operations and experiences.

At a panel during the International Hotel Investment Forum titled “Stronger Together: Overcoming the Crisis through M&As and Improved Alignment,” Marcus Bernhardt, CEO of Deutsche Hospitality, who took over the firm in November 2020, said the industry is in need of good partners who are open to both the downside and the upside of making hotel deals.

“You go to church in good and bad times,” he said.

The pandemic has granted time to reflect on the strength, or lack thereof, in partnerships, he said.

“We will reconsider who we want to continue with or not, but most partners have shown us a very positive picture,” he said. “We had some waivers at the end of 2020 and the start of 2021, but our contracts are long, so it is critical to continue talking."

Stefan Lenze, co-CEO of Motel One Group, said his group has taken the opportunity to extend several leases during the pandemic. The company has 77 properties and has just signed its first hotel in the U.S., a 20-year lease in New York City with owner Union Investment.

“If you are paying your rent, discussions are pretty amicable,” he said.

Ruslan Husry, managing director of ownership company HR Hotels GmbH, said growth has been largely organic for his group during COVID-19, but he predicts more mergers and acquisitions activity will start to occur soon.

“The question is, how do you price when there are no transactions," he said. "I think we still need institutional and larger investors in Europe. We’ve been very careful, taking actions on costs right at the beginning of the crisis, to keep cash as much as possible inside the house. We did not know how long [the pandemic] could last.”

“We are fast and have a short term for decision-making. Our goal is to grow fast but organically,” he added.

Lenze said operators with the best products and, overall a strong portfolio, will ultimately weather the crisis just fine.

“[Motel One has] worked for a decade to do this, not to have [guests] go to a boring business hotel in the heart of nowhere,” he added.

Husry added that, knowing the worst can happen at any time, it is important to maintain excellent communication with partners. “Especially if you are like us and are asset-heavy,” he said.

HR Group, which has 74 hotels, completed a deal early into the pandemic to acquire 16 Mövenpick-branded hotels from Accor in Germany, Switzerland and the Netherlands with a total of 3,696 rooms.

In January 2021, the firm added 24 properties from Vienna House, which now will lease the assets.

Lenze said Motel One did not stop paying rent during the pandemic.

“We paid it everywhere, and we now have better relationships with landlords for future deals," he said. "The same is true for our own people, who are saying, ‘You know what, we’ll stick with you. You have treated us well in the past.’ They are incentivized to give the same level of service even if only five guests arrived all day,” he said.

Deutsche Hospitality’s Bernhardt said the "game-changer" pandemic remains “a disruptor from a financial point of view, but it also an accelerator to make sure we are fit for the future, to go to the next step.”

His company added a new lifestyle brand, House of Beats, which will debut with two assets in Germany and two in Italy. It is Deutsche Hospitality's eighth brand.

“We would like to grow, not to double but to quadruple, and that is what we’re going to do,” he said.

The company bought 51% of Zleep in 2019, an economy-lifestyle brand that is well-known in Scandinavian countries. The brand has a robust pipeline, he added.

Deutsche was purchased by Huazhu Group in November 2019 for 700 million euros (at the time equivalent to approximately $772 million).

Lenze said he does not anticipate his firm selling assets.

“Selling? You need to ask our chairman. But, no, and why should we? Things are going great, and we are expanding. There are more development deals and an increased footprint in Austria, Poland, Italy, London and New York City.

“Just this morning, we did a deal with Pandox [for a hotel] in Copenhagen,” he said, referring to its Scandinavian debut, a lease agreement for a former H27-branded hotel due to re-open in October with 200 rooms.