New Generation Hotels by the Numbers: Why the bottom line beats traditional hotels

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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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1 comment
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