Core Hospitality has been launched by the CEO of Zleep Hotels, targeting third-party management opportunities in the Nordic region.
The company told us that the market was ripe for a third-party operator, as the global brands looked to expand into a growing market which is dominated by leases.
Core Hospitality already has one confirmed project in Copenhagen with Moxy Hotels and is due to take over the operation of the Marina Hotel on the Danish coast at the beginning of 2018. As a hotel operator that is brand agnostic, the company is able to operate and cooperate with several hotel brands and owners.
Core Hospitality will be run as a sister company to Zleep and one example of the crossover between the two will be with the operation of the Marina Hotel.
Peter Haaber, CEO, Core Hospitality and Zleep Hotels, told us: “Marina will be an unbranded hotel – we will depend on using our Zleep distribution. We do rely on the OTAs to some extent, but we try to keep it below 30%, a bit higher with our two airport locations, if you count the GDS as well, but we go to our corporate clients.”
Commenting on the decision to launch Core, he said: “We have known for a long time that Zleep Hotels were to operate other types of hotels than modern economy hotels. It was an obvious next step for us to establish Core Hospitality to develop and operate hotels with other brands than Zleep. The operating company is a strong addition to our pipeline of Zleep hotels in the years to come.
“When I started 15 years ago, I was looking for a brand to launch into the economy market, but at the time people were saying “Scandinavia, where?”, so I went back home and founded our own brand to franchise.
“Everyone is now looking to get into Scandinavia – after we issued the press release we’ve had four or five brands contacting us. Management contracts are very hard to get in the Nordics. We have found that it’s ben easier to find financing, even local financing, with a brand – we’ve been invited to many more opportunities.
“We haven’t done any hostels, although we would love to do one. Everything is happening in the hostel sector, they are shaping the future. There is also money to be made – teenagers and people in their 20s travel so much more than they used to.
“We haven’t been in the upper-upscale segment and we probably wouldn’t be the first choice to do that. The lower and upper midscale is where the market really is. I’m sure there are opportunities to do an upper-upscale hotel in Copenhagen, but one, not 10.”
Haaber’s assessment was backed by a study from Christie & Co, which commented on appetite from international operators to penetrate the region.
The company pointed to “clear gaps” in the internationally-branded full and limited-service sectors, which could take advantage of the increase in visitors. The capitals of all four countries have seen revpar increases around 25% over the past five years, while arrivals grew by over 3% pa, and overnight stays in Oslo, Stockholm and Copenhagen increased by almost 5% annually.
Despite this gradual internationalisation of the region, Scandinavia was still dominated by local operators, and Scandic and Nordic Choice are the largest operators
Giving international investors pause was the preference for leases. Recent developments have, however, seen a shift to a tripartite structure.
Anna Eck, senior consultant, Christie & Co, told us: “It’s important to stress that there need to be more third-party players that would take that role. Banks tend to lend on leases, there are enough local brands that will take leases. But the opportunity is there.”
HA Perspective [by Katherine Doggrell]: And more third-party players there now are, following the lead of the likes of Redefine BDL. As Haaber told us “It’s been very useful to be able to copycat the UK”.
Core is unlikely to face immediate competition from the global TPOs, with Haaber commenting: “It’s so difficult to operate here, the language alone is difficult, we don’t have many competitors being third party operators”.
The rise of the TPOs in the UK and the US has lead to a levelling of the playing field between owner and brand, with many owners favouring an agnostic third party which they felt would fight their corner rather than seeing a hotel as one in a collection of hundreds.
Haaber said that this was less of an issue where there were a number of owner operators and only small representation by the global brands. With the large flags only now entering the market, power is likely to remain with the owners.