As the world takes tentative steps towards a post-COVID reality, it seems there are two distinct types of companies emerging from the pandemic. There are those that cut hard and deep to protect their business; losing headcount, slashing budgets, and halting their supply chain. Then there are those who have gone out of their way to protect employees’ livelihoods, continued to invest in their brands and rallied supply partners. It’s increasingly clear that the companies who took the latter route seem to have fared better through the last 18 months – and none more so than leading budget hotel group B&B HOTELS.
It may seem extraordinary to cite an example from one of the pandemic’s hardest-hit sectors, but today, B&B HOTELS CEO Central & Northern Europe Max C. Luscher is remarkably upbeat: “We had 80% occupancy last night in our portfolio, which is not too shabby. We’re doing fine.”
“Fine” is an understatement. B&B HOTELS, majority-owned by Goldman Sachs since 2019, has more than 580 hotels, and plans for 100 new establishments next year. In fact, they are the fastest-growing budget hotelier in Europe, with an ambitious goal of expanding to 3,000 properties around the globe by 2030. They have recently launched new properties in Brazil and have merger and acquisitions ambitions that will facilitate operations in existing and new jurisdictions.
As B&B HOTELS’ CEO of Central and Northern Europe, it’s no wonder Max is upbeat. He joined the company in 2016 from KPMG, where he had spent the best part of a decade with the management consulting giant before an unexpected call from an ex-client saw him consider a return to his operational management roots. So why the leap from high profile management consultancy to budget accommodation provider?
Max’s reasons are clear. Firstly, he was attracted to the uniqueness of the business model and the lean management structure that allows the business to work with operational partners on the ground including local entrepreneurs.
B&B HOTELS is absolutely superior in terms of product and service.
“We were one of the first movers in the budget hotel sector, and we are backed by private equity, which I actually find very refreshing and energising.”
Certainly, his experience with private equity at KPMG helped him embrace private backing but Max could also see an opportunity to make an impact. It was brand and culture that Max first set his sights on, creating a purpose-driven vision under the tagline “Only For Everyone.” While a “something for everyone” brand positioning may be considered a risky marketing strategy, European customers love it. “Yeah, customer feedback is absolutely terrific. We run with a net promoter score of over 60, which is unusually high for the hotel industry,” Max says. He’s right: most high-end providers sit at around 30-40 NPS, budget providers much lower.
So how on earth has a hotelier, a budget one at that, managed to maneuver so deftly through a global crisis? “You know, COVID was certainly not fun, it was a hard time. We lost a lot of money. But based on an excellent team, we took the crisis as an opportunity to launch many new initiatives from a digital perspective and from a product perspective.” And this seems to be the great differentiator for businesses that invested, as opposed to making cutbacks, through the pandemic. Max explains: “For example, we introduced during the first lockdown a complete new digital distribution platform with a new global website, which we never had before.”
At the same time, Max’s team created new revenue-generating ideas and services within the hotels, like selling new and high-quality food and beverage offerings as a part of a new lobby concept. The team was relentless in its pursuit.
Throughout the pandemic, B&B HOTELS did not lose any staff, “other companies laid off staff, we did not. And I must say, I am not proud of very many things but I am proud of this because taking care of your employees is really important. Yes, we had to do some also measures like short term contract work, like everybody had to do, but our goal was always to keep it at a minimum, and I think we managed that.”
It’s fascinating to consider the growth of B&B HOTELS when the budget accommodation sector hasn’t particularly thrived in recent years but Max believes there’s something specific and unique to the success of this brand that stems from its very particular business model.
Max explains how it works: “Power on the ground is provided by independent local hoteliers, true local entrepreneurs. They get a revenue contribution share from us. So, if we make a revenue of 100, they get X% to cover their own expenses, which is mostly staff. But we invest in the beds and furniture, we cover the other operational expenses such as the breakfast supply and linen. The mandate managers basically use our set up and run the hotel on the ground for us.”
This model allows the company to run flexibly and at pace by partnering with local businesses and connecting into their communities. So how did B&B HOTELS manage to keep these partners afloat when hotels were closed? “We developed agreements and solutions with our mandate management partners to support them during the crisis. So literally, none of our hotelier partners went bankrupt which was a big achievement. We are a partnership-driven business model. And we value those partnerships in good times and bad times.”
The growth plans alone for B&B HOTELS are impressive but the company has other goals for the next few years too. “Through COVID we started a multi-channel distribution, something we hadn’t done before,” the CEO says.” We had previously a very strict B2C distribution policy. So now we trade in B2B and B2C. This simply allows us to grasp a lot more revenue potential. In addition to newly introduced and state of the art revenue management system and team.”
There will be a continued focus on digital growth too, including improving the customer journey with better online check-in, contactless check-ins, and new payments options. Data will feature in future strategies for growing the customer base, “data, will inform us on placing the right advertisement on the right channel with the right content, to address people correctly, and anticipate their needs earlier.”
Digitisation was certainly a strategy employed by many businesses throughout the pandemic. Many companies who were running behind with their digital presence ended up fast-tracking the process through necessity. Certainly, many small hoteliers and independents felt the sting, though Max assures us that a strong digital strategy has always been part of the business evolution plan.
While digital developments may keep customers happy, Max sees distinct benefits in taking on Industry 4.0 for internal processes too, and indeed borrowing digital capability from other industries as needed.
It's not only looking towards the customer, also towards the internal customer.
“We’re for example looking into setting up a digital corporate real estate management software. Because at the end of the day, we have many real estate processes and it’s about changing legacy systems into new ones”
Max shares the “funny story” of the company’s in-house hotel property management system, and how in any typical company the process of replacing a legacy system would take two to three years, but B&B Hotels in Germany has completed it in less than one year.
This small example perfectly illustrates the approach of the B&B HOTELS brand. From its relentlessly positive attitude to growth to its appreciation for partners in the hospitality sector, and Max’s clear trust and appreciation for his team. He leaves us with his parting goal: “I would like to bring back the vision of B&B HOTELS in Germany. Our goal is to be the favourite budget hotel company, for all our stakeholders, from landlords to staff from mandate managers to suppliers. Only for everyone.”