In an industry not adverse to self-aggrandising gestures, buzz terms, razzmatazz and the hard sell, humility can seem in short supply in today’s hospitality sector. As operators post more ambitious growth targets and roll out multimillion-dollar marketing campaigns, the levels of hype are often more evocative of a Vegas fight night than the pre-globalised hotel world of yore.
The latest hot topic, driving everything from hotel development to branding to service, is a demographic pinpointed as the industry’s great white hope: the millennial. Terms such as ‘connected traveller’, ‘independent mindset’, ‘digital native’ and ‘authentic guest experience’ have become omnipresent, as hotel executives and consultants desperately bid to demonstrate an affinity with, and understanding of, this fast-emerging market segment. Over the past 12 months, a slew of international operators have announced new lifestyle brands targeting a group slated to represent more than 50% of travellers within the next decade.
In February of this year, Steigenberger Hotel Group also entered the fray, but with a few marked differences. First, the group announced that it would be quite happy with an initial roll-out of one property a year – a declaration of low-key ambition unimaginable for the multibrand behemoths. And, unlike a number of those players, Steigenberger already had a debut property signed and under construction. Hyperbole was notable by its absence.
The first Jaz in the City, boasting 247 rooms and 11 suites, will open in Amsterdam this September. A second, 175-room property has since been announced for Stuttgart. At a time when operators unveil brand concepts with nothing to show in the pipeline, the manner in which Steigenberger has gone about promoting these developments speaks of a group more focused on news than noise.
"We are not a company with ten brands, simply adding an 11th," says group CEO Puneet Chhatwal. "There is a very large space between InterCityHotel and Steigenberger, and it’s a natural step to create something that fills that vacuum. We’ve been considered a traditional player; providers of understated hospitality excellence. That means the majority of our guests are baby boomers and above; we’ve not been able to really tap into the gen-X and gen-Y markets. That’s where the world is going and it’s where we need to be."
Game of risk
Getting Steigenberger where it needs to go has been Chhatwal’s mission statement since taking the reins in November 2012. Within his first two years, the group had established a presence in China, announced deals for its two brands in the Middle East and grown the European portfolio, within Germany and beyond. The transformation into genuine international player in such a short time frame has been remarkable.
But launching an entirely new brand is perhaps the biggest statement of intent yet, underscored by the decision to debut Jaz in the City outside the group’s home market. "That’s an essential component," Chhatwal declares. "Jaz should help us in our transition from a German to an international company and must only be in primary destination markets. You don’t get ten of those a year and we’re not one of those companies that must keep announcing new deals in order to keep the stock price up. We’ll wait for the right opportunities to arise."
The CEO believes up to ten hotels by 2020 is a realistic target, with "six or seven" in Europe and the remainder in the Middle East or Asia. All will be under management agreements rather than franchising – an approach Chhatwal sees as integral in maintaining brand integrity.
"I’ve nothing against franchising as a model," he explains. "But I’m more comfortable taking that approach with a cookie-cutter brand like InterCity or a grand city hotel such as Steigenberger. With a product like Jaz – more modern, geared towards music and style – the whole culture needs to be carefully cultivated and controlled."
Jaz in the City certainly hits a lot of the current sweet spots in its marketing spiel – "hip and happening hotels" targeting "sophisticated world explorers"; a major focus on delivering and embracing "authentic experiences" and "bleeding-edge technology" – but Chhatwal and his team also seem to have found a way of selling Jaz to investors more interested in bottom lines than bass lines. The Amsterdam site was signed when this new lifestyle brand didn’t have so much as a name; a real declaration of faith on the part of the developers. Connected to the city’s 17,000-seat indoor arena, Ziggo Dome, and a short stroll from the home stadium of AFC Ajax and Heineken Hall, it’s difficult to think of a place better suited for the brand’s debut.
"It’s a vibrant, dynamic city and that’s where we need to be," Chhatwal enthuses. "Paris and London also have that spirit, but real-estate prices and the cost of development make those markets more of a challenge. In Amsterdam, we had a set of circumstances where all stakeholders could buy in completely."
Keep moving
With two hotels already signed and under construction, Jaz has that hardest of things for any new brand to generate: momentum. However, it will be the group’s more established offerings that will be driving the majority of growth over the next few years. InterCityHotel already boasts 38 German properties (including one Vienna hotel), but the strategic aim is to offer an InterCity at every mainline train station and major traffic hub, establishing the brand as the hotel of choice in Germany’s mid-range business sector. Chhatwal believes 100 German hotels is a realistic target, citing the success of Travelodge and Premier Inn in the UK for precedent.
"We see a real gap in the mid-market," he explains. "Our properties have traditionally been located at rail stations. That land tends to be publicly owned, which often makes for a very cumbersome development. Move a few hundred metres away and you can really expedite the process. We’re trying to bring in a cultural shift and a willingness to be more flexible.
Further flexibility has been demonstrated amid Steigenberger’s efforts to establish InterCityHotel overseas. A Dubai signing was announced in March 2014, followed by Qingdao, China, late last year. Closer to home, two Dutch properties are in the pipeline, including a 2017 Rotterdam opening that Chhatwal says will showcase the next phase of the brand.
Up, up and away
In the upper-upscale segment meanwhile, the group continues to make great strides at home and abroad. Cologne was recently added to the portfolio and the CEO alludes to a Munich deal becoming a reality in the not too distant future, establishing brand presence in all of the country’s key gateway cities. Having debuted in China with the Hotel Maximilian, Beijing, last year, two further Chinese openings are scheduled for 2015, and another three before the end of 2018. Doha and Istanbul are joining the portfolio in 2016 and the brand is also ramping up its presence in Egypt.
As for Europe, Chhatwal is enthusiastic about the Spanish islands and, since our conversation, a 164-room Majorca property has been signed. "We need to re-establish ourselves as a leader in the resort space," he says. As for European gateway cities, the CEO and his team are certainly keeping their eyes open.
"Anybody who says they don’t want to be in those locations is lying," he chuckles. "But it can’t come at any cost. If the entry barriers are too high, we’d rather wait for the right opportunity to arise. It’s what we did in Amsterdam and Brussels. We’d certainly like to establish the brand in other capital cities: Warsaw, Prague, Luxembourg; and ideally, Paris and London."
Such pronouncements of grand ambition sit more comfortably within US rather than German corporate culture, but this is another shift Chhatwal is committed to implementing. He and his management team recently held an internal business conference, during which the CEO laid out the group’s achievements under the slogan, "Celebrating our past and cultivating our future".
"We need to allow some time for celebration," he explains. "Too often, people want to focus on what we have failed to do or what could have been done better, but this company has so many great qualities and there’s a reluctance to share them with the world. All our hotels are ISO-certified, for example. But do we talk about it? No. You won’t even find it on our website. That’s something we must rectify, but boastfulness doesn’t come naturally.
"And one person making noise is not good enough; we need to develop ambassadors, get the news out to opinion-makers and spread the word. It doesn’t happen overnight, hotel development is a long process, but changes are taking hold."
In sight, in mind
While Chhatwal remains committed to not losing sight of the group’s German heritage, as a leveraging tool for development deals, and a mark of quality in terms of delivery and service, the pivot towards becoming an international operator continues apace. He cites the beginning of a strategic partnership with Invesco Real Estate in March of last year as a prime example, with the international investment manager acquiring four German InterCityHotel properties on behalf of a new UK institutional mandate.
"Leaving behind German funds and institutional investors was a big statement. People are very interested in buying German real estate right now and that automatically gets us into focus," he says.
Other partnerships such as the strategic association with Thai operator lebua Hotels and Resorts, which has seen the restaurant concept, Breeze, introduced at the flagship Frankfurt property, brings further international attention.
It is an approach that is clearly working. The CEO says that he and his development team received an unprecedented number of meeting requests from potential development partners at IHIF this year. Furthermore, and for the first time in its history, Steigenberger has just been named by an independent jury as one of only 51 German "super brands", sharing the spotlight with such names as Bayern Munich and Adidas, and judged on the basis of brand dominance, customer loyalty, goodwill, longevity and overall brand acceptance.
"It’s when people start hearing about and seeing all this business you’re doing that they tend to want to do business with you," says Chhatwal. "You suddenly find you’re no longer doing the chasing."
It is a steely confidence that underscores the group’s overall direction under Chhatwal’s stewardship and its first steps into the fast-growing lifestyle segment. While the CEO would certainly like to hear his colleagues do a little more crowing about their success, one feels that unnecessary razzmatazz will still be kept to a minimum. Steigenberger is doing perfectly well dancing to its own tune.
