• Motel One prepares for Premier battle

German budget hotelier Motel One grew revenues by 25% in the third quarter, as the group bids to consolidate its lead in its home market and continue international expansion.

British rival Premier Inn has recently announced plans to launch into the German market, putting Motel One on notice that it will soon see increased competition; while at the same time, Motel One is opening further hotels in the UK.

Year on year, Motel One has grown from 44 to 52 hotels, and most recently announced openings in Leipzig and Bremen. A further five hotels will open during the current quarter, in Berlin, Vienna, Magdeburg, Prague and London.

In Leipzig, a new 180 room hotel is the second property in the city for Motel One. Developer TLG delivered the hotel, which has been sold to life assurance company Alte Leipziger. In Bremen, Motel One has developed and funded its own hotel, a 254 room property, via Motel One Real Estate.

Despite the new openings, Motel One’s occupancy in Q3 was steady at 78.6%, though revenue per room sold increased 5% to EUR82.7. Year to date, earnings before tax are up 24% to EUR43m. The home German market saw revpar up an average 4.1%, with Berlin and Hamburg the best markets, while Munich and Frankfurt suffered from a lack of trade fair business. Internationally, Edinburgh, Vienna and Brussels were strong markets for the company.

In common with its UK counterpart, Motel One also asks guests for feedback, and has consistently improved guest satisfaction scores. Satisfaction now exceeds 90% across service attendance, friendliness and cleanliness, though satisfaction with breakfast remains lower at 81.8%.

Motel One has grown its portfolio with a mix of tenures: it owns 21 hotels and leases 31 under long term agreements, with the proportion of owned hotels down to 30% from 41% the previous year. The company recently spent EUR19m buying sites in Hamburg and Manchester. The pipeline of 22 hotels includes 7 owned and 15 rented, and of these, nine are planned within Germany.

Whitbread, meanwhile, delivered a strong trading update in December, with its UK properties advancing occupancy once more, up 3.3% to an average 84.2% as it increased room nights sold by 10.1%.

The company has made a number of management changes to acknowledge the next stages of its growth. Patrick Dempsey, who has spearheaded Premier Inn’s UK growth, will be stepping down and is to be replaced by two internal appointees. Meanwhile property managing director Mark Anderson is also being placed in charge of Premier Inn’s German expansion.

The first German Premier Inn is set to be in Frankfurt, where a 200 room property is being converted ready for a 2015 opening. An initial target of six hotels in Germany has been set, with the major German cities the clear locations.

Whitbread is comfortable investing in its city locations, which in London deliver strong returns. Chief executive Andy Harrison revealed he could well be spending GBP120m on two central London sites, and possibly more, depending on negotiations regarding further properties. The two sites alone, he said, could provide space for 450 rooms under its new Hub compact format, creating an annual profit of the order of GBP15m a year.

The strong occupancy figures mean the end of great early booking deals for guests who plan trips months ahead. “What we’d like to do is raise our average room rate by raising the early prices, rather than the late prices – and to flatten the yield curve in the process,” Harrison told analysts.

 

HA Perspective [by Chris Bown]: There are plenty of similarities, and a few differences, when lining up Motel One with its larger British counterpart Premier Inn. And the pair are increasingly going to go head to head, as Motel One adds to its UK portfolio, and Whitbread searches out its first locations in Germany.

As well as its established sites in Edinburgh and the new London property, Motel One has sites in Manchester, Newcastle and Glasgow in the pipeline. Meanwhile, in Frankfurt, Premier Inn will be up against four Motel One hotels around the city when it opens. It has spent plenty of time preparing for the foray into Germany, and is already selling its UK hotels to German visitors online, via a German website.

Motel One likes large sites, and is prepared to bid for city centre locations in order to get the right locations. To date, Premier Inn, with a greater reputation, feels less of a need and works from smaller sites, sometimes on back streets; but Harrison’s comments regarding Hub suggest he is keen to spend for good locations, too, and for larger sites.

What is remarkable about Premier Inn’s performance, is its ability to keep improving occupancy quarter on quarter; this despite the new openings that Motel One blames for its own occupancy figures not advancing. The brand appears to have massive momentum in the UK market, and with Hub, Whitbread expects to broaden its appeal, rather than simply divert existing customers into smaller rooms.

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