New generation hostels. Travellers' expectations are changing over time and the sector must reinvent itself and evolve to meet these new emerging needs. This is how the new generation of hostels came into being. Frédéric Josenhans, President of Grape Hospitality and Cyril Vaussard, General Manager and intrapreneur @Tulip Residences / New Lifestyle HoSHo concept, Louvre Hotels Group came to share the genesis and development of these new-gen hostels during the Hospitality Operator Forum.
Innovation at the heart of Grape Hospitality's DNA
Frédéric Josenhans: I reread an editorial that Vanguelis Panayotis wrote in 2018 in which he said that the future was the hybrid hotel industry and that it was time for everyone to get on board and move forward. That's what I want to talk to you about today. How Grape Hospitality has embraced this hybrid hotel model that we believe is the future of the budget hotel industry.
At Grape Hospitality we are unique in that our business is to own, operate, transform, innovate, perform and provide a great place to work for our teams. We don't just operate our own brands, we are also a major franchisee of Accor, InterContinental Hotel Group and Louvre Hotels.
We believe that catering is a major element of the hotel industry of both today and tomorrow. We know how to do it on our own, but we also know how to do it with franchise partners in certain hotels.
We are rather opportunistic depending on the location and the market, but always behind that is this desire to transform and to respond to new customer expectations. Sometimes we couldn't find what we were looking for, so we created our brands based on these opportunities, such as The People, Demeure de Campagne, Birgit Hotel, as well as some restaurant concepts.
Our model is based on innovation and the creation of value on the premises, fund management and operations because we are first and foremost real estate owners.
The golden age of standardisation
Our analysis of the economic market in France has enabled us to see an enormous standardisation with the creation of brands such as ibis, B&B, MEININGER and Campanile. These brands still have many years to live and to perform on the market and we should not denigrate them, we are also franchisees of these brands.
They have two battles today to be able to continue to survive and earn their own profitability, and those are the distribution costs, which have increased considerably in these models, and the operating costs. Some are more profitable than others depending on their management and that is a real concern for us as an operator of these brands.
The emergence of new segments
There was then the great phenomenon of ‘lifestylisation’, though that often brings its own difficulties with it as lifestyle is linked to F&B, and managing F&B is not as simple as managing accommodation. It requires not only additional skills, but also complementary structures.
We think that today within this economic segment, there is a real space for something other than just a fairly classic segmentation. We estimated that we could gather all the demands of our customers around a new model. This new model is what we have dubbed ‘hybridisation’, which has strong components in the overall organisation that we wanted to give to this brand.
Designing a project from A to Z
The first criterion is location, which means that this model must allow us to have the best locations in the city. Of the nine The People hostels that we have opened, they usually have very good locations in cities like Paris, Marseille and Strasbourg. The anchor point is also a happening place within the neighbourhoods for the people who come to our establishments but also for the locals. This is a major point in the creation of our properties.
Then, once we have this quality of service, we add to this ‘happening place’ different types of accommodation that depend on the mix of customers we wish to attract. These different types of accommodation will be for example quality double rooms, rooms for families, beds in dormitories of 6 to 8 maximum, and also flats and studios. The customer can choose whether to come with their family, with friends, alone or for business. This is a real advantage because it is optimisation, or what we call the bed per square metre ratio.
Once we have the ‘happening place’ and the accommodation, we can add complementary offers such as coworking spaces or leisure spaces. So, we have this sort of mix that will adapt to the location and become the go-to for the surrounding area. For example, we are going to open a coworking space in Le Havre. This is how we are going to try to put together the puzzle of this new brand.
The importance of a strong and unifying CSR approach
If this brand wants to attract the young, the not-so-young and, above all, employees, it must have a strong and innovative CSR commitment. We have therefore decided to build this commitment on three levels.
In terms of our responsibility as a property owner, we will be careful in the developments we make. For example, The People Nation is built entirely of wood, it is one of the very first of this type in Paris. Obviously our establishments are certified, but that's not enough, we have to go even further in this approach.
As far as the employees are concerned, we have decided to involve them in this CSR approach, and it is they who will promote it with various operations such “as the green days”. We also need to pass on the passion for home-made food in our food offer, so we serve seasonal and quality products, sourced from the baker next door for example.
We must also take our customers along with us, so we have created what we call the 'good shower'. When customers take their showers, they turn the hourglass and the colour indicates whether they are spending too much time in the shower or not. In this way, we encourage our customers to participate in saving energy.
The successful marketing of its offer
In our business model, the F&B offer will represent between 40% and 50% of our turnover, as is the case for the lifestyle segment. In the classic hostel offer, there are many dormitories and few F&B.
The second ratio that we pay particular attention to during construction is the number of m² per bed. In Paris, we have a 7 to 9 m² ratio per bed all-inclusive and in the rest of the country we have a 10 to 12 m² ratio per bed.
The important thing is to market this F&B well, so marketing is done locally. The restaurant owner is above all a local business owner who is already established in their neighbourhood. As far as distribution is concerned, our priority is direct distribution via our website. I don't have much long-term data, but I can say that we launched our website in February, and we are already at 25%. The objective is to reach 40-45% very quickly without having the mass of investments that distributors or large operators can have.
We do revenue management in three dimensions because we sell by the room, by the bed and at different prices. That is to say that the same room can be sold once as a full room and once by the bed, so we have to optimise revenue management. It is much more complex than hotel revenue management.
Since the beginning, social media has been at the heart of our communication, it is through it that we attract people because we will not do television advertising. Today, The People has nine establishments open, four in Paris and the rest are in Marseille, Tours, Les 2 Alpes, Strasbourg, Lille, and soon in Le Havre and Caen.
We are focusing on development and acceleration in France because we believe that there is a real space to exploit in this new budget accommodation market, which is neither a hotel nor a hostel market. We are therefore going to carry out this acceleration on the basis of two models: a priority model which is that of our own premises and funds, and another based on opportunities with franchise partners who share our values. Our objective is to have about fifty establishments in the coming years.
The beginnings of the HoSHo project
Cyril Vaussard: The HoSHo project developed by Louvre Hotels adds another string to our bow: the hostel business, a segment in which we did not operate before. HoSHo is a hotel-hostel, the principle being to provide a new offer to build up an acquisition clientele.
We conducted a market study in 2019 on the hostel market in France, which showed an occupancy rate of 77%, an average price per bed of €28 and an annual growth rate of 7%. It is also worth noting that 32% of the young clientele, i.e. millennials, prefer to stay in hostels rather than in hotels.
At Louvre Hotels, we have expertise in the budget and low-cost segment with our dedicated brands. We are very interested in young workers, families, tourists and students.
Quality at a reasonable price
The HoSHo project is a hotel in the form of a hostel with bunk beds. Our work focused on the optimisation of the dedicated surfaces. We concentrate on the automation of our systems, for example there are dispensers at the reception. On the other hand, the front desk area is very minimalist, we don't have a reception in our establishments. We offer the possibility to privatise the rooms, to have breakfast and also to use the on-site launderette.
We look for locations close to railway stations and airports and we are currently working on a project to convert offices and brownfield sites. We will therefore also be looking at the outskirts of major cities, particularly around Paris and large regional cities.
We have worked hard on the accommodation offer, particularly on the quality of the beds, which transforms into "the dream station" thanks to the comfort of the bedding, the soundproofing, the lighting and the electrical outlets. Each client thus finds themselves in their own personal cocoon.
The proven success of the first establishment
Let's look at our own project in the south of Paris at Porte d'Italie. The first facility opened last year, it has 39 rooms across 5 floors and 236 beds. It also has coworking and breakfast areas, a rooftop, four automatic check-in machines and many other facilities. The occupancy rate is 75%, the average price is €25 because we wanted to be below the market price. We already have elements of profitability; we have a 47% EBITDA and a RevPAR of €19 per bed.
Looking into the future
We are still in the early stages of building this project, with the website under development. We set the minimum size at around 250 beds up to 500 beds. We don't have an F&B offer, so we remain on a very economic model with maximum streamlining so as to be able to guarantee profitability.
We are currently looking at leasing, which is something we would like to work on with investors. We are also going to develop a franchise.
It is an international project because we are already working on European destinations. Within 5 years we would like to have about 10 establishments and within 10 years we are aiming for 45 establishments. For us, this is the desire to find ‘scalable’ products that are enticing for investors.
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