In October 2016, Steigenberger Hotel Group announced to the world that it was embarking upon the next leg of its journey towards becoming a global power player, and would now be travelling under a new brand identity: Deutsche Hospitality. In an era when name recognition is fundamental to the pursuit of international growth, shedding an umbrella moniker that boasted more than 85 years of history might have been interpreted as counterintuitive. But the decision was indicative of a wider ambition: to make the group synonymous with Brand Germany, a signifier of quality, stability and strength. Furthermore, the operator was upfront about this being the precursor to instigating new brands, having launched lifestyle offering Jaz in the City the previous year.
Over the 18 months or so that followed, there were rumours about new launches, but nothing concrete. In fact, arguably the biggest headline move was a departure rather than an arrival, with Puneet Chhatwal, the man responsible for steering Deutsche down this new path, stepping aside after five years at the helm to become CEO of Indian Hotels Company.
His successor, Thomas Willms, joined Deutsche as COO in June 2017, having previously served as Starwood Hotels and Resorts' senior vice-president for Central and Eastern Europe, and is therefore the company’s first leader to have only experienced the company under its Deutsche identity. Nevertheless, he was following its evolution with great interest prior to coming on board. “Being German, I always watched the company closely,” reveals Willms, who became CEO in January. “What really impressed me was how the group maintained a ‘Germanness’ and proximity to its roots, while really building upon that culture as it went international.
I am a big fan of very clear, distinct brand promises. Maybe it’s why we haven’t grown as quickly as some others, that insistence upon staying completely true to those values and standards. But that’s the advantage of not being stock-listed, we don’t need to make deals for the sake of making deals; we can wait for the right ones.
Maximising scale
Nevertheless, Willms acknowledges that only having three brand offerings – the upper-upscale and luxury Steigenberger; upper-midscale Intercity Hotels; and the aforementioned Jaz – has meant having to pass on a number of extremely attractive opportunities, preventing Deutsche from achieving a scale in the franchising market enjoyed by a number of its competitors. The response was revealed at the beginning of March, with Willms and his team unveiling Maxx by Steigenberger, an upscale brand with particular potential in the conversions category.
“We have so many requests from owners who want to join us, but brand stipulations have made those deals impossible,” the CEO explains. “Maxx by Steigenberger keeps that promise of quality, but also provides so much more flexibility, building a strong consumer brand that sits between Steigenberger and Intercity, with fewer standards on hardware, but maintaining the same culture and DNA. Franchising represents a real potential growth area for us and this is an ideal vehicle, giving existing family-owned hotels, for example, the opportunity to join. Jaz is not ready for franchise, it’s still too early; Intercity we’ve traditionally done ourselves; and Steigenberger only accounts for a few. This changes things.”
Deutsche currently has 20 franchised properties in its portfolio, but, with the group having targeted 130 hotels in operation by 2020 (the figure currently stands at 103), that number will grow. Willms refuses to speculate upon the proportion of those new properties he expects to be flying the Maxx banner, or what the new brand might mean for such projections – “let’s wait to see how the investment community reacts” – but there is acknowledgement that Deutsche’s domestic market will likely be the initial driver of growth.
“Yes, I’d imagine the first properties will be in Germany,” he allows. “That said, there’s absolutely no reason not to take it international. I appreciate there have been plenty of rumours about new brands since the launch of Deutsche and it’s a conversation I really pushed upon my arrival. You have to remain strict and genuine, but must also build the best platform for growth. This was a piece that was clearly missing and [it] means we can grow qualitatively, while keeping our other brands clean and strong.”
While clear stipulations are in place for elements such as service, staffing and F&B, properties deemed to fit these criteria will be permitted to maintain their own individual character and affiliation will only require modest branding investment. Though no signings can be revealed just yet, conversations are ongoing and Willms sounds confident about the direction they’re taking. “It’s been extremely positive,” he says.
Pushing further afield
The excitement seems genuine and, looking at Willms’ CV, there can be few European executives more suited to leading such a launch. “I spent 20 years at Starwood, so am coming from a background with real appreciation for the operational and developmental value of good branding,” he says. “It’s a direction I’m familiar with and it’s what so excited me about joining Deutsche Hospitality in the first place.”
His regional experience should also be valuable. Germany fell under Willms’ purview at Starwood, a market that still accounts for the overwhelming majority of Deutsche’s portfolio, but he was also responsible for helping the US operator establish itself further east, in a geography Deutsche is yet to adequately cultivate. “We are currently weak in Eastern Europe, with only one contract signed – an Intercity in Budapest – but I see a lot of opportunities in the region across all brands,” says the CEO. “It’s certainly an area we’re targeting and it has the added convenience of being closer to home.”
Not that proximity to the Frankfurt HQ is any sort of prerequisite for expansion opportunities. A regional headquarters has been established in Dubai, from where moves into the Middle East and Asia are being driven, and multiproperty growth is being pursued in a number of geographies through the forging of new partnerships. “We cannot enter a new market and stop with one hotel,” Willms explains. “That makes no sense for owners or in terms of operations. We’re in Dubai, Oman, Riyadh, we have a good partner in India, we’re opening in Bangkok. This is the direction for the next few years.”
At the time of our conversation, the CEO has just returned from a trip to India and Thailand, meeting partners and checking up on the progress of new hotels. Willms foresees a mixture of business and leisure hotels for the Steigenberger brand, with a focus on international gateway cities and holiday destinations that welcome a steady stream of German-speaking and European travellers. The Munich opening last year means a full house of such city locations in Germany, but there remains significant opportunity elsewhere in Europe, particularly in the leisure space. “We are not in Italy or Greece yet, and in Spain, we only have Mallorca,” says Willms. “We can grow particularly quickly in the resort markets, taking Steigenberger to the beach, but the right cities are also on the agenda. Everyone wants to be in London and that applies to all brands, but it’s bloody expensive. Finding the right location and partner is a core objective.”
Forging relationships
Partnership is a theme the CEO returns to time and again. Deutsche does not own any assets and has no plans to invest in real estate. Growth will be driven by management contracts and franchising, with great effort having been made to move the group from an overreliance on leasing. Deals can be tricky to come by when entering a market for the first time, and Willms appreciates the need for flexibility and understanding on both sides.
He cites India as an example of this approach, where Deutsche has entered a joint venture with MBD Hospitality to manage and franchise properties under the MBD Steigenberger brand. “We would never be so bold as to simply go in on our own, and try to develop real estate and take on the development risks,” Willms explains. “We have found a very good partner on the ground who knows the culture and how to get things done successfully. We’re not leasing or investing, we don’t need to own the hotel, so partnership is key to success.
“This is a people business. I believe in forging relationships with owners and, coming from a pure management background, appreciate the importance of maintaining and building upon those relationships. We may not be in Marriott’s league, in terms of size, but we do have scale and that’s something we can combine with flexibility. Far shorter decision-making systems mean we act and react far more quickly.”
On the topic of scale, 2019 will see a record number of openings for the IntercityHotel brand, with seven new properties across Germany, Hungary, UAE and Oman, including the biggest to date, a 400-room hotel at Frankfurt’s main rail terminus, and all sporting the new design template created by Matteo Thun. “The brand is 30 years old and we are only at 40 hotels, so I can see IntercityHotel expanding very quickly, in Germany and internationally,” says Willms. “Growing outside Europe looks to me like low hanging fruit.”
As for Jaz in the City, Amsterdam has been up and running since November 2015 and a Stuttgart property opened this January. The next slated launch is Vienna in 2020. “We’re still in the process of defining the design and F&B concept for Vienna, and it’s all incredibly exciting,” says Willms. “We want to be in all the lifestyle cities – Berlin, Milan, Krakow, Dusseldorf and Hamburg, to name a few – and there’s been a lot of interest. Stuttgart is providing a great showcase to the German market. We’re also ready to go beyond Europe – Dubai would be great – and already have one property signed in Cape Verde.”
Moving ahead
Willms acknowledges that the lifestyle segment is somewhere all ambitious operators want to be, but feels it’s a space many still don’t understand. “It’s not enough to have a red chair in the lobby,” he explains. “It comes down to creating an entire culture, a philosophy, a DNA. We have done that very well with the first two hotels.”
When asked about other initial priorities of his tenure, Willms points to CRM and digitalisation, once more citing his background with Starwood. “Coming from a company that was the market leader in loyalty, the challenge here is a little different in terms of size,” he says. “The base work has been done, the right brands are in place, we’re getting to know the customer far better. The next step is getting the CRM and loyalty systems rolled out. Again, our size can work as an advantage; we can be flexible and fast.” Willms is a keen runner, the veteran of six marathons. However flexible and fast one might be, he understands success is never instant and hard work’s a given. Nevertheless, the arrival of Maxx by Steigenberger, and a clearly defined vision for the future of the other three brands, means the chief executive appears to have hit the ground running. A lot of distance has been covered in the past 18 months, but this still feels like the beginning of what promises to be an exciting journey.
