Arco Buijs, CEO of Steigenberger Hotels AG, talks to ABTN about a three-year, €100m investment plan for the group’s two brands: Steigenberger Hotels and Intercity Hotels.
Steigenberger operates 78 hotels, with a total of 14,000 rooms, in Germany, Austria, Switzerland, the Netherlands and Egypt.
As well as investing €100 million in Steigenberger Hotels and Resorts and Intercity Hotels in France, Italy and the UK up to 2014, the company is looking to buy an existing UK hotel chain. It aims to own six or seven hotels in the UK within two years, including one Steigenberger Hotel in the centre of London, and a number of Intercity Hotels at main airports or train stations.
You joined Steigenberger last year. What was it that attracted you to the company?
It is a fantastic brand with a big heritage and a lot of opportunities and potential to grow. Our challenge is to make it happen. For 80 years it was owned by the Steigenberger family and it was kept very much in Germany and German speaking companies. Since the company was sold in 2009 to Hamed El Chiaty [Egyptian tourism entrepreneur and owner of Travco Group], his ambition has been to internationalise the company and grow.
What were your first steps?
The first step was to reshape the way we work, our systems, and our sales organisations. That has now been completed. We and our partners are now spending €100 million on the properties and the systems. I want to make sure we get opportunities to take the brand outside Germany. I like to compare it with the car industry in Germany, which is very successful at exporting its cars. People pay more for German cars than other cars, and so it would be good to export a German hotel brand.
We also have a market of 100 million German-speaking potential customers who know us, so we should also look at destinations that are attractive to the German-speaking markets. In the UK we are look at the cities and seeing whether we maybe can partner up with a small hotel company, or buy one. We see a lot of opportunities. The hotel market in the UK, for instance, is strong, and I think there is a chance here for our brand.
So where would you expand, Majorca? A lot of German tourists go there...
Majorca, yes, plus Italy, Spain, Turkey, North Africa, the Middle East, the Canary Islands, the Alps, where we are already, and the city side for the corporate sector. The UK is also a key focus. At the moment we are in Germany, Austria and Switzerland. There is still room for growth, we have 12 hotels in the pipeline, both Steigenberger and Intercity, all new builds in these countries in the next two years. We don’t need to do a lot of homework to expand in Germany, for instance. We know the laws and regulations and know where not to go. It’s easy to grow there. The challenge is to bring the whole machine outside Germany. I am confident we can do it but we have to take big steps. A few resorts in Egypt and one hotel in Holland.
Would this growth be in terms of management contracts?
It could be, yes, though we also do leases. At the moment in our portfolio most are leased and managed by us and we have a few management contracts. We also have a few franchises in both Steigenberger and Intercity Hotels – around ten in total. I think the expansion will come from conversions, although we will look at new builds.
The difficult thing about growing by conversions is it is difficult to say what the Steigenberger brand means...
I don’t think so. Steigenberger is individualistic not standardised. We have hotels that are quite unique – landmark properties – but we also do airport hotels, or pure business hotels, or resorts. What makes it a Steigenberger is it is in a great location and has a unique service. The food and beverage aspect is important, it’s not a product where you find ten in a row. Every Steigenberger has its own identity. On the marketing side there are certain things we have in every hotel – a breakfast buffet, for instance, or the service and the style, but the features of the hotel can be different. You don’t have to walk into the hotel and think I’m in Frankfurt but I could be in the Berlin property. Intercity is a more standardised product, purely mid-range and we know exactly what it is.
So all these Steigenbergers are the same rating would you say?
Steigenbergers are defined into Grand Hotels which are the top hotels, five star [First Class]and four star plus hotels [Deluxe]. Intercity today is always near a railway station or an airport. The idea is that you as a guest can arrive with your wheeled bag from the airport or railway, and you get a free ticket for public transport in the area where you are.
What do you think about loyalty programmes?
Loyalty programmes are important for knowing your guest. I’m not a big fan of rewards-based programmes, although we do have one –[Award World] http://www.steigenbergerhotelgroup.com/award_world_programm
and we are analysing where we go in the future. My opinion is that if the guest wants to get rewards, whether it is airline miles and points, then fine, you can earn those for your preference and our systems can handle that, but we want to learn our customers’ preferences. So if you like having two pillows or a certain type of room and I have it in my system and you come to the Frankfurt property we can provide that for you. This is better than just giving you the points.
What proportion of your guests are international?
In the big cities a large proportion, but if you go to our spa hotels in the countryside, it might be 98% German. Internationally to promote ourselves we have signed up with GSAs to promote the properties and part of the €100 million we are investing will go on this, but much is also on the buildings. Some €23 million is being spent on the Frankfurter Hof, for a complete overhaul of one wing of the building, creating a wellness area of 950 sqm. That’s quite a big operation.
Where do you stand on free internet?
In the future internet will be free, the question is when. We all made contracts with providers which we pay for and we get a commission on the sale of the internet which has been going on for six or seven years. Once contracts can be renewed we will think of giving it free of charge, but then it will be included in the room rate. For some of our hotels it is already free.
What are your hopes for this year?
I’m very positive for 2011. We had a very good 2010, Germany had a very good 2010 and so far in 2011 the growth is positive. It’s very sustainable right now. It’s why we are looking into the possibility of growing the two hotel brands outside Germany and in the UK.