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This year´s IHIF in Berlin recently came to a close. The premier hotel investment forum focused especially on New Generation Hotels. hetras CEO Martin Reents took part and noted the top ten reasons to invest in New Generation Hotels.

10. The needs of travellers are changing. Guests will no longer pay a premium for  traditional brands, they are not impressed by imposing architecture and they turn down unnecessary service. They do, however, want to walk into a lobby that feels like home, require a perfect night’s sleep in a sparkling clean and quiet room and expect in-room technology to match what they have at home.

9.   New generation hotels lead the way in advanced digital technology. Today’s guests want to take control of their destiny. They want to manage their own profile, preferences and bookings, check themselves in and out, and take advantage of hotel services at their own convenience on their own electronic device.

8.   Highly successful pioneers have paved the way in Scandinavia, England and The Netherlands. New generations brands continue to open throughout Europe and the world.

7.   New generation hotels invest less per room, require less staff than comparable hotels and yet still achieve higher room revenue per available room than traditional hotels.

6.   New generation hotels are anything but “cheap hotels.” Quite the contrary: They consistently achieve top values in daily rates and in high occupancy, which exceeds 80% year-round.

5.   Lower personnel costs mean better service for guests, not worse. Through automation, the few employees in the hotel can actually focus entirely on the guests. This is reflected in the excellent reviews new generation hotels regularly receive in the review sites.

4.   Altogether, new generation hotels achieve a gross margin of up to 54%. The best hotels achieve around 20 to 50% higher profit margin than the average for traditional 3 to 4-star hotels in a comparable market.

3.   Real estate is available. Requiring only a fraction of space compared to traditional hotels, new generation brands can build a hotel on a very small space and even convert existing office buildings in prime locations into successful hotels.

2.   Savvy investors and funds are already bucking the traditional hotel models and moving to the new generation.

1.   Greater returns with lower investment: This simple formula sums up the success story of new generation hotels. The best new generation hotels can pay back the entire investment (including land) within 4.6 to 5.7 years – About twice as fast as traditional 3 to 4-star hotels in a comparable market.

While some new generation hotel managers are still trying to figure out how to solve the self-check and self-checkout procedures, other industries have come quite far in offering similar services to their customers. We have looked at the airline industry in the past. But today let’s look at an industry  people use on a more regular basis: the retail industry. In particular, the supermarket.

Having spent six months in England, I couldn’t help but notice that all of the supermarket chains have implemented self-checkout terminals. For traditional shoppers, the stores still offer a standard check-out procedure. After researching hotel self-checkout options, I was curious to try the self-checkout at the supermarket. After all, I hadn’t found any in my home country of Germany.

My expectations were not high. I assumed that the supermarkets put those stations there to save on personnel, not to increase convenience for the customer.

M&S

Without going into too much detail, I must say I was pleasantly surprised with the simplicity and speed of these self-checkout terminals. What’s more, they were fun to use. In fact, it was hard to get anything wrong. I merely had to take my items out of the shopping basket and put them into bags. The machine is equipped with multiple scanners and mirrors so that it almost always found and scanned the bar code right away. Paying was easy too. Cash, credit card, debit cards all worked easily. I could even get cash back with my debit card. Dropping coins into the moving tray (instead of the ubiquitous slot) was downright fun.

Those hotels with kiosks have discovered that self-service check-in and check-out works fine if everything is standard: guest is identified, reservation is unchanged, room is clean and vacant, credit card is valid and so on. As soon as something is slightly unusual – such as two ro

oms with two different names, extended stay, change of payment type, room upgrade, room not ready – the hotel kiosks can’t handle it and the guest has to use the standard check-in.

But the supermarket self-checkout station had no trouble with special cases. If I forget to bag an item, the scale under the bags notices right away and a voice tells me to bag the item or cancel the purchase of that item. If the bar code can’t be read easily, the machine prompts me to type in the product number. If an item doesn’t have a bar code, e.g. fresh produce, I just place it down on the scale, select it from a menu of produce, and then pop it in the bag. If I have a coupon, I just scan it like any other item and the machine processes it correctly. If I change my mind or replace a product last minute, the process is quite intuitive. I’ve used these kiosks at least one hundred times and haven’t run into a problem yet.

The only times I couldn’t complete the transaction on my own was when I bought a bottle of wine. A member of the staff had to come over and swipe their own card, acknowledging that I was entitled to buy alcohol.

The supermarkets have understood that self-check still requires store personnel to be around and help out from time to time. Even if it’s just a bit of friendly banter, the stores don’t want to lose the human interaction altogether.

I’m sure we’ll see the supermarket self-checkout station continue to evolve. As NFC tags (or a similar technology) gets cheap enough to tag every product, we can just pass our shopping cart through a gate and everything is scanned instantly.

Several new generation hoteliers are moving towards mobile apps so that the guest can bypass the kiosk altogether. But a well-designed kiosk can be fun and fast for the guest and still allow interaction with the hotel staff. Unfortunatel

y, most hotel kiosks today are neither fun, nor fast, nor capable of handling special cases. Which is why most hotel kiosks are also unused.

Hotel managers could learn a great deal from the successful supermarket check-out stations.

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Martin Reents

“In the future, differentiation in the hotel industry will be due increasingly to digital technology and less to the basic structure and size of the property,” states Martin Reents, CEO of hetras for several months now. Talking about himself, the new man on board of this software company says, “I unfortunately cannot manage hotels, but I sure know how to manage cloud software.”

Cloud software is becoming increasingly existential to the hotel industry after the first new generation hotels emerged on the market – first in the Netherlands and England and meanwhile in several Northern and Eastern European countries as well.

Entrepreneur Martin Reents, with a degree in mathematics, is impressed above all by the numbers. He is certain that: “On balance, new generation hotels achieve a much greater return than comparable classic hotels.”

This is confirmed by Michael Struck, founder and CEO of Ruby Hotels & Resorts GmbH. Struck states: “We are able to operate hotels profitably with 70 rooms or more in under 2,000 square meters  – due to more efficient usage of floor space – at a break-even point of less than 45% utilization.”

Some background information:

Investment: New generation hotels are typically positioned in the 3 to 4-star hotel segment. But while classic hotels usually invest 100 to 170 thousand euros per room, new generation hotels spend at the most 70 thousand euros per room.

Sales: Despite a lower level of investment, new generation hotels are anything but “cheap hotels.” They consistently achieve top values in daily rates and in utilization rates, which are well above 90%. Total RevPAR is roughly 50% above the average of 3-star hotels in the same location (20% above nearby 4-star hotels).

Personnel costs: A good new generation hotel requires less than 0.2 employees per room. Personnel costs amount to 9% of sales. In the classic comparison group, there are typically 0.5 employees per room (22-25% of sales).

Gross operating profit per available room (GOPPAR): Other direct costs (e.g. commissions, cleaning, purchasing) for new generation hotels are comparable to those for classic hotels. They typically amount to 30% of sales, so that gross proceeds for new generation hotels amount to 61%. Of that an additional 7% of sales go for indirect costs (for example, hotel management, facility management). Altogether, new generation hotels achieve a gross margin of up to 54%. Per individual room, the best hotels achieve around 2.5 to 3.2 times more profit (GOPPAR) than the average for traditional 3 to 4-star hotels in a comparable location.

Yield: Greater results with less investment – This simple formula sums up the success story of new generation hotels. The best new generation hotels earn up to 30% (GOPPAR) from investments made per year. The industry average is closer to 5-10%. These figures do not include “franchise costs,” in other words, those investments and running costs that are required to develop and maintain a new generation chain.

You are mistaken if you think that the guest ultimately make sacrifices in service because there’s nobody to take care of him. Surprisingly, this is something most guests do not even notice. Martin Reents knows: “New generation hotels do not realize their lower personnel requirements at the expense of their guests. This is made possible primarily by automating administrative tasks and through standardization of regular operations.” As a result, the few hotel employees can actually focus more on the guests. This is also reflected in the excellent reviews new generation hotels regularly receive in the review sites.

Since the end of last year, Martin Reents has been running the company in a team together with co-managing director Ulrich Pillau. Together with their team, they are taking this innovative and rapidly growing company for modern hotel management software on a new course of expansion. As CEO, Reents specifically wants to promote “the use of the flexible and state-of-the-art system architecture for the operation of profitable new generation hotels.” In recent months an increasing number of new hotel groups, such as Qbic Hotels, OKKO Hotels, Ruby Hotels, HTL, citizenM, Glow and Bloc Hotels, have opted for the cloud-based software solutions of hetras. “Our aim,” says Reents, “is to support these hotels in their pioneering role as the vanguard of a new, internationally operating and technologically sophisticated hotel business.” Smart business travellers should receive the best service – with the most modern tools that a software company can provide. Not more, but certainly not less.

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