Don’t call Generator a hostel anymore, says CEO Alastair Thomann, who assumed the mantle of the 13-property brand in May 2017 after the company was acquired by the London-based Queensgate Investments Fund II. He and his investors doesn’t care for the traditionally negative connotation associated with the hostel name, preferring to slot it closer to a boutique brand, and some of the moves the company is making, like increasing the number of private rooms (while also increasing bed counts in shared rooms) is moving it further away from hostel traditions.
Not only is the company trying to move away from an old name, it is also professionalizing the business model, which until recently was manually inputting reservations. Its new, custom property management systems has helped make the business profitable with revenue increasing 18% to €83.6m in 2017, while EBITDA rose 30% to £26m. This year, revenue is projected to grow another 15%. The group is also professionalizing its marketing activities to grow direct bookings and is getting ready to launch a new revenue management system.
“You really have to customize a lot of the existing systems and that takes a bit of time,” Thomann told HOTELS during a recent interview. “We’ve found some great partners now, and we’re well along the way. I think, come April next year, I think we’re going to have a really good set up in terms of technology.”
The company is also aggressively pursuing growth with its €300m infusion from Queensgate. It just opened in Madrid, its first resort property on Miami Beach is pending and Thomann, formerly CEO of Hong Kong-based Rosewood Hotel Group’s Penta Hotels, said he is close to announcing another deal in the U.S. “We’re negotiating on quite a few deals,” he adds. “We’re also negotiating on a portfolio at the moment. So watch this space; in the next six months, there’s going to be quite a bit announced.”
Thomann added that Queensgate has a lot of capital set aside for expansion and it wouldn’t surprise him that based on the turnaround of the last 12 months if they spent even more than stated. “In terms of owned real estate, if we doubled the size of the portfolio in the next three years, that’d be great,” he said.
A big focus will be on U.S. expansion (most of the properties are in European gateways), as well as starting to consider the potential for franchising and management contracts. “We get a lot of requests every week and so far nothing’s been done, but clearly if you want to grow this would really speed up things as well,” Thomann said.
The Miami Beach property models the way forward for the brand as Thomann said about 65% of the 70 rooms are private rooms, while some of the shared rooms are even more flexible with walls that come down to convert a four-bed room to six beds, for example. In fact, as Thomann tries to optimize the Generator room grid he has added more than 200 additional beds across the system in the last 12 months. “With seasonality, you have to be flexible,” he said. “During certain seasons, you’re going to have more groups; other seasons, it’s clearly about the more premium couples traveling there for certain festivals and art events. It really just depends on market demand. I think that’s the really exciting thing about our product – that we can really maximize the bottom line by having the right number of beds and the right room types.”
The new leadership team is also optimizing under-utilized spaces. For example, in one Generator an entire corridor was used as office space but with newly upgraded systems those teams do not need to sit on property anymore. “All of a sudden, you can add an additional five dorms,” Thomann said. “It’s real basic, active management activity.”