• Meininger mooted for sale

Cox & Kings is reported to be working with Lazard on a possible sale of Meininger, to help reduce the parent group’s debt.
The hybrid budget brand has been on a self-described “rapid expansion spree”, targeting Europe as the sector continues to attract investors.
Meininger currently has 28 hotels in operation, with a pipeline of 12, opening four hotels in Europe this year with a further two due before the end of the year, in Paris and Lyon, marking the brand’s entrance into the French market.
The issues at Cox & Kings precipitated Malvern Travel Technology, which owns the Laterooms and Superbreak brands, going into administration in August. Cox & Kings was a shareholder in the group and defaulted on its debt repayments, making it unable to support the business in the short term.
In a statement to the Bombay Stock Exchange on 16th July, Cox & Kings said: “The company proposes to meet its financial obligations through a combination of internal accruals and monetising its assets. The company is working towards plans to make good its obligations.”
At the end of the month Indian bank Yes Bank acquired 18.55% stake in Cox and Kings on invocation of pledged shares. It has also acquired 30% stake in Ezeego One Travel & Tours, which was promoted by Cox & Kings.
“Yes Bank has, pursuant to invocation of pledge acquired shares – 3,27,50,139 equity shares having nominal value of INR 5 a share, constituting 18.55% of the post-issue paid-up share capital, of a listed company, Cox & Kings; and 34,080 equity shares having nominal value of INR 10 (USD 0.15) per share, constituting 30% of the post-issue paid-up share capital, of an unlisted company, namely, Ezeego One Travel & Tours,” it said in a regulatory filing.
Cox & Kings had a debt of Rs3,238 crore at end of FY19, comprising of both short-term and long-term debt.
Cox & Kings’ most-recent annual report described Meininger as being on a “rapid expansion spree” having added 2,110 beds in FY 2017-18 and was set to add ~4,000 beds in FY 2018-19, charting an increase of over 35%. Yet, it said, the average bed occupancy had remained relatively stable.
Peter Kerkar, group CEO, said: “We are seizing the opportunity that Europe presents as a leading tourist region to our Hybrid hotels business. In Meininger, the pace of expansion accelerated. I think Meininger has strong legs and will cover a long distance in the next few years.
“Meininger continued to strengthen its brand appeal in the hybrid hotels segment. It is not only disrupting the traditional hotel industry in Europe with its innovative offerings but is also posing a challenge to the home sharing and the hostels segment. The concept of offering a clean, safe and affordable accommodation is being well appreciated by the market and the demand is quite buoyant for such a product.
“As it expands its footprint and open new hotels the network effect which drives high repeat customers for the new hotels improves the start-up occupancy levels. Meininger hotels targets families, school groups, affluent backpackers and business people.
“Meininger follows a very diligent and elaborate process of evaluating sites for future expansion. The reason Meininger is able to achieve high occupancy even in new hotels within a short time of launching is the process it follows for signing up a site. Thus, while a typical hotel takes three to five years to achieve occupancy of 60% to 65%, Meininger manages to reach those levels in less than half that time.”
“According to Savills, the hostel market remains underserved and full of opportunity, with hostels accounting for 1.41% of room supply and 0.23% of the active pipeline in the UK. By 2020 the hostel market globally was projected to grow by 7% to 8% year-on-year on a current value of USD5.2bn in bed revenue.”
The sector has found itself of growing interest to investors. In May PAI Partners was in exclusive talks to sell hotel chain B&B to Goldman Sachs’ merchant banking division for a reported USD2.2bn. This was further underlined by BlackRock Real Assets’s EUR100m joint venture with Amistat International to build a pan-global European hostel brand.

HA Perspective [by Katherine Doggrell]: The time has long come for Cox & Kings to sell off the most promising horse in its stable and there should be no issues in finding a buyer, given that the company has been fending them off with a stick for the past several years. The funds have found the Meininger flag most attractive – earlier this year French property fund Sodify Pierre Europe bought the Meininger Hotel Salzburg City Centre, with the property broker hailing a speedy transaction.
The brand is a persuasive one to any company looking for a spot of hostel for their portfolio, as long as they have no lease terror. The mind of this correspondent turns to InterContinental Hotels Group’s agreement last year with Covivio, which rebranded the Principal estate. This transaction might be a shade too large for IHG, which has been gazing at the higher end of the market, as have most of the operators of late.
But as Meininger has shown, in the battle against Airbnb and the chance to show your owners that you really can offer a bit of everything, a brand where you can clearly see the value per square foot is no bad thing to have. Expect an enthusiastic price.

Additional comment [by Andrew Sangster]: The hostel market sparked into life back in 2017 when TPG bought A&O and Queensgate splashed EUR450m on Generator. In June this year Blackrock joined the action with its Amistat.
With Meininger, investors can get a piece of hostel action with the reassurance of the hotel-like offer that Meininger simultaneously encompasses.
The company undertook a review of its identity a few years back as it thought the name Meininger might be a problem. It came close to rebranding but finally decided against it. A new buyer is certainly to take a hard look at this and perhaps seize the chance to reposition the chain not only in name.
With Accor’s Jo&Joe now starting a roll-out, the competition is hotting up and clear differentiation will help drive the success that Meininger has in reach.

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