
Carl was appointed executive chairman of Patron Generator Holding Ltd in summer 2011. He led the rebranding work and has been involved in the rapid roll-out of the Generator hostels platform. He is also on the board of Stay Wyse, the industry association covering youth accommodation providers. He has extensive leadership experience in a number of consumer oriented businesses, having been a chief executive of Holidaybreak plc and commercial director of British Airways. He has worked extensively in the UK and Germany but also has experience in several other European markets. He was formerly on the board of Comair (South Africa) and Austrian Airlines, and is now chairman of Vive Unique, a managed luxury home rental business in London. His background includes seven years at McKinsey & Co. Carl has an MA from St. John’s College, Oxford and an MBA from Harvard Business School, where he was a Baker Scholar. He is an Austrian/British binational.
When did you actually realize there was room for innovation in that particular segment of hostels?
Patron Capital was looking for a vehicle to invest in the promising hospitality industry and at the end of 2007 bought The Generator which was then a family business. About ten years ago we realized that there was something missing in the hostel sector in particular, that it needed a new, more design-led, integrative approach.
Did you approach the concept from a hotelier's point of view or a backpacker's standpoint?
Neither. The backpacker standpoint would mean immediate reduction to the bed core minimum, and the hotelier approach would mean adding in cost complexity. We tried to follow the low-cost airline approach, taking a white sheet of paper and writing down what we wanted to achieve. We drew from both elements; from the socializing aspect of the backpacker and the design of hotels. The difficulty lies in achieving the right balance between the two.
Where did you find the talent, the expertise to design the concept in every detail?
We called upon people from outside the hospitality industry; some came from the airlines and others from the travel industry. If we were to have been led by pure hoteliers we would have gone wrong, and the same is true for a backpack background. We searched for people with a modern mindset who could generate new ideas.
What was your main discovery when addressing the design concept of The Generator?
The first thing that we took into consideration was that people want to socialize and spend time together. So the key was to change the amount of space devoted to socializing. Typically 25 to 30% of our ground facilities are devoted to socializing, whether it is for relaxing, surfing on the Internet, or partying and drinking and eating with friends. A lot of new spaces were created that a typical hotel won't invest in. People don't want to spend so much time in their room. This is the big insight. The room should be very functional, pretty but not lavish, a place where you sleep but don't actually live. A significant amount of investment goes into ground facilities, and creating a recognizable atmosphere. We are investing more intensively in local flavor. This is partly due to social media. When people arrive and take pictures of themselves for Instagram, Flickr, or Facebook, they want to be identified with the city they're in. In Berlin we used an artist who rendered the Berlin Wall, in Paris you can see metro tiles. Young people, who represent 85 to 90% of our clientele, want to share the experience of where they are.
When do you feel the need to move from the first successful experiences to a more "industrial" development and a change of scale?
We have ten hostels now and a couple more are in the pipeline: Amsterdam, which is being built as we speak, and Rome which will be a conversion. We just signed a couple more sites which will be announced shortly. The goal is to maintain a rate of two or more openings per year. Now we are looking at North America. From a consumer's point of view it's important to feel that you are in a network, which leads to the possibility of developing a loyalty program. In terms of brand recognition there should be a Generator in most major cities. From an investor's point of view it is important to have a foothold in the major hospitality markets around the world. Clearly at the moment, we know that the concept works in Europe and we need to demonstrate that it can be translated in different parts of the world: in America soon and in Asia in the near future, which is important for us. There is no reason why it shouldn't work, but investors want to see that it does before moving ahead. And obviously, the longer term intention is to get other investors interested in Generator. Patron Capital is our owner, but we know, as a private equity fund, that some day they will be interested in passing on their investment to other partners. Invesco already bought a 23% stake in Generator. Making the asset more recognizable and having demonstrable success in different parts of the world will increase the liquidity of our capital structure.
Do you find it reassuring to be owned and financed by a trust fund such as Patron Capital?
Patron Capital is a real estate fund and this is reassuring because all the assets are owned by us, which gives us more flexibility to do what we want with the building. Right now, we are a property business with a successful operation on top of it. As the development will focus more on leases, management contracts, and maybe franchising - although we think it is dangerous to franchise a brand too early -, the operating business will become bigger and bigger. When Patron Capital came into the game, the real estate market was more depressed with many good opportunities. This is less and less the case for future developments.
How opportunistic can you be to find the next spot, the next building? Do you need to be very flexible or do you keep strictly to fundamentals?
So far the original model is being followed with few changes. The problem is that in certain markets there are not so many buildings to acquire or lease that can accommodate a large number of beds, which is what we are looking for. In the future, we could be more flexible. In Venice we had to go down to 240 beds and in Rome the capacity will be lower than usual. In more seasonal markets we will accept downsizing the concept. However, we need economy of scale to maintain a 24/7 reception, as well as a bar and social areas, and events.
Will innovation be a constant and evolving process to re-invent the Generator of 2020?
Actually each new Generator tends to fly in new directions. What we are focusing on now is to improve our food and beverage offer. When we started, F&B was very basic for snacks and breakfast; we had a cafeteria. It is more important now to have street-facing food outlets that are open to the public to create more traffic during the day. Where it is possible, we would like to have a much bigger F&B presence in order to cater to the lunch time business crowd. You can expect the announcement of a new concept during the summer.
How do you anticipate behavior changes, needs for new services and products for the generations to come?
I am on the board of Staywyse, the Global association for youth travel accommodation and there has been a lot of research on the consumer habits of Millennials, but the problem is that often they only tell you what you are asking for. The millennial customer is a complicated animal. It is more interesting to focus on the generation that will be our customers in a few years' time, the 14 to 17 year-old generation. And frankly I don't know the answer. We tend to look at studies and reports, but most of them look backwards, therefore there are not too many insights for the future. We base our next move on intuition. We try something out and see how it works. It is increasingly possible to get feedback as to how it resonates among our young customers. We get very fast feedback as to where we should place our next investments. Then there are interesting things about the millennial consumer. First of all, we get more and more Asian millennial customers and we have to adjust to their needs which are quite different from the European millennial generation. And secondly, our population is aging slightly because we are also getting older people in our facilities; baby-boomers are interested in our concept as well, and we also get a few business travelers. Enjoy the experience. You only need to be young at heart to enjoy our concept, not necessarily young as such.
Could you invent a "universal" hostel-hotel suitable for different segments of clientele, different generations?
My answer is no, definitively no! We will never have hotels near airports or exhibition centers. That is completely against our concept of being in trendy areas, where young people want to go out and socialize. By all means, if anyone wants to come to us he is welcome, but we would not change the concept to make it more suitable to business travelers, romantic couples or elderly visitors. Trying to please everybody is dangerous because you dilute the concept. If there is one thing we do know about Millennials it is that they like to relate closely to a brand and the brand needs to be consistent, with a personality that talks to them. If you become too generic, you become too meaningless.
Did you find it difficult to make the concept understood by partners, clients, financiers...?
Yes, sometime we struggle with semantics and the word youth hostel that has a negative connotation. This is unfortunate as if we think that over time there will be more design-led hostels that will change the mindset of the business community. We tried to put forward the Boutique Hostel denomination but then again, boutique means a small intimate place which is not really the case when you have 600 beds. Another thing is to explain our metrics to the industry: we refer to bed and not room for example. The investment community is warming up to hostels, but they haven't yet completely understood it. I heard "poshtel", lifestyle hostel, boutique hostels,... For now we only push the word Generator in our communications, avoiding the word hotel or hostel altogether.
Also like :
- Generator opened in Paris
- Invesco invests in Generator
- Generator to enter Amsterdam