Matt Luscombe, CEO of Cycas Hospitality, said the Amsterdam-based hotel operator has bucked the trend and is realizing growth, albeit from a lower base, during the industry’s recent turbulent times.
Luscombe spoke exclusively to Hotel News Now upon the company securing a management deal for an 11-hotel portfolio owned by InterGlobe, an Indian conglomerate with interests in aviation and hospitality. InterGlobe's portfolio includes travel-retail firm Travelport, Indian low-cost airline IndiGo and 18 hotels and 3,308 rooms in India operated by Accor’s Ibis family of brands and with five more properties in the pipeline.
Based in Gurugram, a city close to New Delhi, InterGlobe has handed over operations to Cycas of 10 K+K Hotels-branded properties. The portfolio includes two assets each in Austria and Czech Republic, along with single hotels in France, Germany, Hungary, Romania, Spain and the United Kingdom.
There is one independent hotel in the deal — the 278-room Reichshof Hotel Hamburg — and in total the portfolio comprises 1,472 rooms.
K+K, a family firm founded in 1961 in Salzburg, Austria, was bought by a joint venture between Highgate Hotels and Goldman Sachs in 2015 and then sold to InterGlobe in 2019.
Luscombe said the deal is very important for Cycas.
“We went through a competitive pitch process in December and January, and we feel good about the deal as it recognizes and reinforces Cycas’ credentials as a truly pan-European hotel operator for both branded and independent hotels,” Luscombe said. “We are now truly pan-European, and we see more international investors interested in us, investors who are looking at building portfolios in key cities."
Cycas plans to renovate the properties included in the deal.
“With COVID and everything else, the deal presents an exciting strategy for the future, especially as there is a refurbishment plan for the hotels,” he said. “The K+K portfolio is really in a good condition, none are new, but with the upcoming refurbishment, Cycas has a stunning portfolio. It is a really nice place to be coming out of the pandemic, with the newest, shiniest product."
The additions see Cycas expanding into 12 European countries, including debuts in Austria, Czech Republic, Hungary, Romania and Spain.
“We now have comfortably 6,000 rooms, with mid-40 hotels, and we will have a couple more before we disappear for the summer, and we are now fully across the segments with brand partnerships, diversity and breadth that is unparalleled [in Europe],” Luscombe added.
Third Parties
Third-party hotel management continues to gain interest across Europe, Luscombe said.
“My view is that third-party management will continue to grow in Europe and is a natural consequence of the big-brand hotel firms not managing as much, and anyone below the luxury segment as it is not as economically attractive," he said. “And more institutional capital, the enormous funds, often do not want to have operational capability on their [profit and loss statements],” he said.
Cycas' third-party management competitors such as Kew Green Hotels and Jupiter Hotels have a different business model, Luscombe said, while Interstate Hotels and RBH, which he added were more similar in nature to Cycas, operate predominantly in the U.K.
“We have the bragging rights that we are pan-European. We have so many flavors, and we will also lease hotels or co-invest. We have flexibility thanks to being owned by an entrepreneurial Thai family,” he said, referring to the majority ownership of Cycas by Thai family office Hua Kee in 2017.
Since that change in ownership, Cycas’ strategy has broadened, Luscombe said.
Cycas was founded in 2008 with a goal of developing and operating extended-stay hotels, a segment with significant demand gains during the COVID-19 pandemic.
“I was brought on board in 2019, which was the worst timing in the world, but the goal set was to triple in size in three years," he said. "We have seen on average a new deal every month, which I am enormously proud of when much of the industry has been frozen. Few can point to any growth, and yes, that is from a low base, but now we have comfortably more than 6,000 rooms."
Luscombe said Cycas fees are paid both from the top and bottom lines, which permits a closer alignment to owners.
“Hotels are bouncing back very steadily. Valuations have held up really well, in an industry crisis the kind we have never seen and hopefully never will again. There is money out there, which is the function of lots of things, including 10 years of low interest rates," he said. “And some obvious alternatives [for capital] have not been so attractive. Offices, seen as rock solid, are asking far more questions."
He added the unsteady economy is quite unprecedented.
“There has been a big chunk of the economy in hibernation for several years. Other than in world wars, there has been nothing like it. We’ve been whacked with the defibrillators, and it takes time to recover,” he said. “An economic downturn now will not feel as bad. I do not want to lessen any effects, as there are debts [in the industry] to pay off, piggy banks to refill, but we are not looking at any headwinds being a crisis."
Requests for comment from InterGlobe had not been returned by press time.