Generator expands from hostels to hotel management
Executives at Generator, which pioneered the hostel-hotel hybrid, are extremely optimistic about the future as the hospitality business enters its next phase of growth.
On September 14, Generator took over operations of the 605-room Paramount Hotel Times Square in New York City, a property that can claim to have started the boutique hotel phenomenon when it was renovated and reopened in 1990 by Ian Schrager. , with a design by Philippe Stark.
The deal marks the London-based company’s debut into third-party management.
Alastair Thomann, CEO of Generator x Freeland Hotels, said hybrid accommodation options have had another wave of resonance post-pandemic. He started as CEO when Queensgate Investments bought the company in 2017 and has held senior roles at Penta Hotels, among other companies.
Patron Capital was the first company to invest in Generator, making hostel-hotels a niche investment segment and even spawned an industry conference, the Hostel & Budget Traveler Conference in 2014.
Times have changed, Thomann said.
“The difference today is that the brand and the industry are getting a lot more institutional capital. It’s a business model, and brands have been launched into space. Everything has become more professional. We learned how to monetize,” he said.
One example is that the two brands achieved comparable earnings before interest, depreciation and amortization in the second quarter that were 60% higher than in 2019, Thomann said.
“It shows how we are working at the moment. Even if we go down 10%, 20% over the next few quarters, we’ll still be ahead, even if we don’t even see it. Reservations are up; we don’t see any slowdown. We might even have a stronger [fourth quarter]and inquiries for [first quarter 2023] are strong enough that we can say no to groups,” he said.
The company’s properties have dining spaces that are booming, Thomann said.
“At our Miami Beach hotel, bar revenue is twice as much as room revenue at $3 million,” he said. [Generator x Freehand] brand has real value because it generates exceptional profits, while having low operating costs.”
Thomann said those running costs have increased and are a challenge for Generator x Freehand, but the brand’s sophisticated kitchens and small-staffed model help.
The company prioritized investments in technology.
“Before, there wasn’t really the technology to be able to manage dormitories and rooms. The sector was far behind the traditional industry, but that has changed. We improved the game, adapted. We can open hotels with four weeks notice,” he said.
Thomann added that investors and customers no longer look down on hostel-hotels, although Generator itself has long since dropped the “hostel” part of its name.
“The word ‘hostels’ defines us too much. We are suites, apartments and social experiences. With an ingenious, magical idea, we were ahead of our time,” he added.
Generator, founded in 1995, has 16 properties – in Amsterdam, Barcelona, Berlin, Copenhagen, Dublin, Hamburg, London, Madrid, Paris, Rome and Venice; and in the United States in Miami Beach, Washington, DC, and now in New York.
Freehand, which Queensgate bought in 2019 for $400 million, has four hotels, in Chicago, Los Angeles, Miami and New York.
The Freehand acquisition also came with the Broken Shaker bar brand, part of Bar Lab, which Thomann says will be introduced to its hotels in Europe.
Thomann said Generator and Freehand compete with the big brands, providing 4-star revenue streams but with a 2-star average daily rate due to the number of people who walk through the front door.
“It’s the perfect model for many properties. We can work with any size part. It’s a smart model, for the cheap, the squeeze markets,” he said.
He added that performance is partly driven by chain restaurants and clubs.
The desire to be social again is also contributing to income streams, he said.
“During the pandemic, we weren’t supposed to be social, but now we are more than ever. When they legally could, our guests traveled [during COVID-19]and I often heard conversations about how [guests] from place to place,” he added.
“If they are allowed to travel, they will travel. This is our core segment, they are more resilient,” he said.
Generator x Freehand plans to announce a dedicated development team soon. On August 4, the company promoted Siim Karu to Chief Commercial Officer. From 2017 to 2019, Karu was the company’s Global Head of Revenue Management; in the meantime, he held a management position at A&O Hostels and, like Thomann, he worked at Penta.
Generator’s interest in the hospitality management industry is broad and demand-driven, Thomann said.
“Our interest in this could be anywhere. We had our management platform designed to be in-game for third parties just before the pandemic, such is the demand we are seeing for it,” he said. “Under Patron, for third-party ownership under Patron, we weren’t quite ready, but now we are. We can grow much faster, but, yes, we will still buy. »
He said the company was interested in adding another hotel in London as well as in ‘big squeeze’ markets such as Edinburgh.
“Dubai too. They have almost no brands left and want to attract a younger visitor. We bring the real destination [food and beverage]. Even in New York, where we are unionized, we see 30% profit on beverages,” he said.
“In London, we could easily have five or six. Also in Paris and Hong Kong, Singapore, places with high occupancy, where it makes sense to add more rooms. Australia is a huge market for our type of property,” he said.
Thomann said he plans to add four or five hotels over the next 12 months, through master franchise agreements.
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