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Interview with Dieter Müller, CEO Motel One

Dieter Müller, aged 60, is one of the most respected hoteliers in Germany. A former export manager at BMW, he changed paths in 1975 to work with the group Accor to develop its brands in Germany. He became the financial director at Accor for Germany, Austria and Switzerland, and then VP for F&B. In 1987, he set up his own business in association with John Herminghaus, then General manager of Accor for the area, and founded the chain Astron. He developed it while observing the difficulty of the midscale market in Germany and the strong existing competition. In 2000, he launched a new brand called Motel One with his partners, including Philippe Weyland, and sold Astron in 2002 to NH Hotel Group. Proclaimed hotelier of the year in 2009 in Germany, he received the Grand Prix at the Worldwide Hospitality Awards in 2014.

Do you think you changed Germany's hotelscape with the opening of the first Motel One in 2000?

To be honest, I do not think we immediately affected Germany's hotel market overall. However, we have undoubtedly given new positive impetus to the economy hotel segment.

What was the state of Germany's economy hotel market back then?

There were very few brands on the sector in Germany, with exception to Ibis, Etap Hotel and Holiday Inn Express.

How were you perceived by the other actors in the hotel industry?

At first, we weren't taken seriously. Motel One only began to receive any attention from 2010. The industry saw a "life style" concept based on quality and design positioned on the economy hotel segment that had found its place on the market. This observation was also made by clients of other segments, whom we succeeded in convincing, and by investors who, until then, were only interested in hotels with 4 stars or more.

Has the Motel One
concept evolved significantly between the first opening and the most recent one fourteen years later?

Yes, the concept has naturally evolved quite a bit. For example, the first nine hotels were located on the outskirts of cities. Only from 2004 did we develop Motel One hotels in city centers and by applying the lounge concept with specific furniture that is now the signature concept of Motel One.

You have chosen a development model mostly based on subsidiaries, often keeping control of the real estate, how do you justify this?

First of all it was important for us to show the market and investors that the Motel One concept could work. This is why we invested our own capital and signed leasing contracts at our own risk. Classic  investors in Germany are not used to taking the risk tied to the hotel industry and give priority to fixed rental contracts, that are more long-term.

What could make this model evolve more toward management contracts, or franchises?

It is perfectly clear that we have evolved by opening up to management contracts and hybrid contracts ('manachised' or management-franchise - editor's note). On the other hand, our current organization does not yet make it possible for us to open up to a full franchise arrangement. Development through franchise can only be possible with very professional partners, who have a broad experience in hotel management.

After opening your 50th hotel, do you feel as though you have reached a milestone for affirming your presence in Germany and in Europe?

Yes, in Germany Motel One is a fairly strong and well-positioned brand. We are reaching occupancy rates that are well above market standards. Internationally, in addition to 5 hotels in Austria, we have entered the United Kingdom with two hotels in Edinburgh, one in London and soon two in Manchester. Soon we will open in Brussels, Prague and Amsterdam. We always assume that the launch phases abroad will take longer than in Germany. And yet we are observing that our concept is already very well received on these new markets.

Do you have a target in mind, some "magic figure"? What would it be? 

In the end, our growth rate will be dictated by the availability of good locations. Our current "pipeline" already implies growth by 7,000 rooms to reach 20,000 in 2017. Yet frankly speaking, in our strategy, quantitative growth is not essential. What is decisive is for the locations to be adapted to our brand profile and, above all, for our targets in terms of profitability to be met. Central location is one of the key factors behind the success of Motel One and must remain a prerequisite.

How can you solve the equation between the cost of prime locations and daily rates of economy hotels in Germany?

In German cities the relationship between hotel prices practiced on the economy segment and real estate prices is generally more favourable than in other European cities. In the end, in the good locations, we can manage to be on a par with other real estate classes, and even higher hotel categories, through efficient use of surface areas as defined by the concept.

When did you begin to feel that development outside Germany was desirable?

The first stage was to develop the brand in Austria because of the cultural familarity, and then to be present in all the key destinations. Logically we are entering this second phase of conquering European cities.

What strategy will you take outside Germany: operate a few hotels in major cities or build a domestic network each time?

The first phase is to establish our brand in major European cities. We must learn to understand the economy of each country and then enter the development phase of a network, as we did in Germany. The proof is that we are already present in Austria with 5 hotels and we are taking a similar direction in the United Kingdom.

Is it important for you to keep the brand's German identity or is each country considered a local market where the product is eventually adapted to its location?

We believe that the brand and product are designed such that no real adaptations are necessary to expand internationally. That said, of of course we take into consideration the specific needs of countries. For example, in the United Kingdom, our rooms are equipped with courtesy trays «Tea and Coffee» and big «Single Duvets».

Are you ready for partnerships with institutional investors, like in the UK or France?

Yes, we are open to these partnerships. We have developed a joint-venture in Austria with the Verkehrsbüro Group» (editor's note: Leading Austrian tourism group, owner of travel agencies and a chain with thirty or so midscale hotels, Austria Trends)

Are you already working on a "next generation" Motel One?

Naturally, because we consider the improvement of the product to be a constant process. Thanks to a faster renovation cycle we are able to implement new developments in existing hotels much more quickly.

Are you satisfied with the group's financial results within the current economic context?

Yes, we are very pleased with the results and we are currently achieving profits that are much higher than the industry average. That said, we have taken into consideration that in the mid-term ratios will drop for two reasons: real estate prices are already climbing in general; and increased competition on the Economy segment will put pressure on average daily rates.

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