BERLIN—Meininger Hotel Group’s part-hotel, part-hostel operating model has been so successful for its new owner that executives aggressively are pursuing opportunities to expand beyond the 16 hotels in the portfolio.
Navneet Bali, CEO and head of development and finance of Meininger since Holidaybreak and parent company Cox & Kings fully acquired it in 2013, described a Meininger property as a designer budget hotel with a hostel embedded inside.
“It’s one of the most exciting products in the hotel industry right now. There’s nothing like it,” Bali said during a break at last month’s International Hotel Investment Forum.
Berlin-based Meininger has 16 properties with more than 2,000 rooms in its portfolio. The unique angle for the company is that it closely tracks the number of beds in its system as well.
“It’s a good quality budget hotel except we are able to sell by the bed,” Bali said. The company has more than 7,000 beds.
Guests can book an entire room or book a bed in the room to share with someone they most likely don’t know. Each room has a bathroom. Some of the hotels feature female-only rooms; others feature bunk beds to cater to families.
While the rate varies at each property, the chain’s system-wide average in 2014 is €19 ($26) per bed or approximately €65 ($90) per room, Bali said.
“If you stay with us you get the environment of a hotel,” he said. “The safety factor is a big selling point. … It has all the qualities of a standard international hotel, including security and housekeeping.”
A road less traveled
The Meininger name comes from the road where the first hotel was located, Bali said. That hotel is no longer in the portfolio. The chain focuses on four groups of travelers, including students, families, businesspeople and the celebration market.
Bali acknowledges that 6% of Meininger’s business is derived from the “party market,” but the company keeps the hotels quiet and safe with industry standard security and housekeeping.
“If you only catered to that, families wouldn’t come or school groups wouldn’t come,” Bali said.
The CEO said the average age of Meininger’s customers is in the mid-20s. With that age group comes a lot of backpackers—guests the hotel group welcomes with open arms.
There is no background check for guests, but Bali said the brand has “excellent operating procedures to keep it a safe environment.”
“The whole sharing concept is something this millennial generation embraces,” Bali said. “This is what I want to grow.”
During a panel discussion at IHIF, Eva Bachmann, Meininger’s development manager, said the company places a huge importance on Facebook and other social media outlets for word-of-mouth promotion because that’s how its typical guest communicates.
Meininger has a centralized sales department and utilizes school group intermediaries for business. Bali said the brand aggressively markets on Internet channels such as Hostelworld.com, Booking.com and its own site. One of its primary focuses is making the reservation process mobile-friendly.
Urban locations preferred
The company prefers to be located in or near a city center or a transportation hub to be attractive to the urban traveler, according to Bali.
“We like places where there’s no need to take a cab,” he said. “City center is ideal, but as long as there is a transportation hub, we’re OK. For instance, in Amsterdam, we’re 10 minutes from the city center, but it’s located at a railway station.”
The company has four properties in Berlin, two in Frankfurt and one each in Munich, Hamburg and Cologne. There are four in Austria—three in Vienna and one in Salzburg—and one each in Brussels, Amsterdam and London.
On the wish list for expansion: Paris, Barcelona, Rome, Madrid, Florence and Venice, among other markets in Europe, Bali said. Bachmann during the panel pointed to other global targets, including Buenos Aires, Rio de Janeiro, Sydney, Hong Kong, Tokyo and Bangkok.
Bachmann said New York, Washington, D.C., New Orleans, Miami and San Francisco will be primary targets in the United States.
“That’s where backpackers and families like to go,” she said. “People always want value in those types of markets.”
“By 2019 we want to have 50 hotels and something like 18,000 beds,” Bali said.
The brand can be new-build or conversion, but because it tends to be located in urban areas, rehabbing an existing structure is the most common form of expansion, Bali said. For example, the Brussels property, which opened last year, is located in a converted brewery.
A pure operating company
Meininger Hotel Group is part of Cox & Kings—a travel conglomerate based in India. It operates as a subsidiary under Cox & Kings’ Holidaybreak division.
“The business model is we are a pure operating company,” Bali said. “All of our hotels are leased from owners. They’re long-term, 20-year leases based on a fixed rent that is indexed for inflation. We intend to keep it that way.”
Bali, whose career stops have included Taj Hotels Resorts & Palaces and HVS, said the model is among the most interesting things he has come across in the hotel space.
“I’m a hotel investor, and I like the way this works,” he said.
The London resident said he was in India developing several Holiday Inn Express hotels as part of a $125-million fund when he got the call to join Meininger two years ago.
“Last year at the end of April we paid the last check to the previous owners and brought in a new management team,” Bali said.
Originally owned by Meininger Holding GmbH, the company was sold to Holidaybreak in three separate transactions, Bali said. In November 2010, Holidaybreak acquired a 50% stake in the company with the option to purchase the remaining shares. The acquisition of the second tranche of 24% was completed in April 2012. The final portion was bought in April 2013. Terms of the transactions were not disclosed.
The new executive team has focused on keeping the hotel/hostel model in focus and on track. Bali said his PowerPoint presentation to investors was simple: “I put up one slide to investors. It said ‘more of the same.’”
The operational aspect of a combined hotel and hostel hasn’t been an easy transition for a lifelong hotelier.
“The biggest learning curve for me was understanding really how to operate it because it’s a unique business model,” Bali said. “It’s not cookie-cutter, so to understand the operating culture is essential. It was working so well; I didn’t change anything.”