Thai developer U City’s €330 million ($348 million) capital injection in Europe’s Vienna House brand will see “one of the last independent European brands” diversify into global destinations with European source markets and buildings that permit individualism.
GLOBAL REPORT—European brand Vienna House is likely to see global growth as a result of an agreement with Thai developer U City to buy the brand’s assets and management for approximately €330 million ($349.7 million).
Vienna House and its future owners now plan on expanding its business from Central Europe to such regions as Thailand, Asia, Europe and the Middle East.
Vienna House CEO Rupert Simoner told Hotel News Now that U City was looking for a long-term investment in a portfolio in Europe. The deal, Simoner added, was helped by his established relationship with the Kanjanapas family, the principal shareholders of BTS Group Holdings, which owns 35% of U City stock.
Daniel Ross, BTS Group Holdings and U City
Daniel Ross, director on the board of U City and chief investment officer at BTS, was in charge of finalizing the deal with Vienna House. Among its businesses, BTS owns hotel management firm Absolute Hotel Services, which includes the brand U Hotels & Resorts and several flags under the Eastin label.
"U City is contracted to buy 24 hotels in total with just over 4,100 keys, eight from (German investment and development firm) Warimpex, 16 from Vienna House, as well as its management platform, which has contracts for all 24 hotels, plus a further 12 third-party hotels,” Ross said.
Both Ross and Simoner are excited about the deal, which Ross said is due to be completed by the end of July.
“It remains the same company, but stronger,” Simoner said.
He noted that Vienna House will look for new locations that reflect the company’s existing strategy in Europe.
“We are already looking for destinations with a strong affinity to individualism, which is what Vienna House stands for, and which have a European source market. This is why, for example, I have been in Havana,” Simoner added.
Ultimately, Simoner is hopeful that the deal strengthens his company without taking away what makes it successful.
“We are seeking synergies with regards to distribution and new development opportunities in Asia, but the DNA of Vienna House remains exactly the same and will develop its way, which was one of the main reasons U City became the sole shareholder,” said Simoner, who referred to Vienna House as “one of the last independent European brands.”
Piyaporn Phanachet, who became U City’s CEO in January, told HNN that she believes in the long-term future of the European hotel industry and sees great potential in Germany, Poland and Czech Republic, where Vienna House is very established.
“We have assets established in Asia, and this deal will give us complimentary assets in Europe. The deal gives us propriety brands that we can then use in Asia, and the timing of the deal was quite friendly,” Phanachet said.
Ross said the U City board believes the deal provides attractive, long-term hospitality and currency opportunities despite short-term concerns in Europe.
“U City recently bought an office asset (33 Gracechurch Street) in London, which in terms of investment, Brexit provided a 5% discount on price together with a 15% discount on currency,” he said.
Ross said the Vienna House deal had several attributes U City was looking for, including high-quality assets, a source of recurring income, growth prospects and the opportunity to diversify earnings.
“(Vienna House) is a very complimentary platform. We are here to support the existing management, whom we have strong confidence in. We will leave them to run and grow the business, with appropriate support, expertise and finance,” Ross said.
Vienna House now is charged with expanding its offerings outside of its traditional Central European base.
This is something Simoner said he has been setting his sights on even before U City’s interest.
Phanachet said global growth will be key for the brand going forward.
“We believe hotels still are not purely based on domestic demand, both in Europe and Asia, which is why we want to diversify,” U City’s Phanachet said.
Simoner said the key to making this work is to tweak and personalize the brand’s core concept by location while retaining the core of what makes it work.
Ross said that flexibility will be crucial.
“Every hotel can be adjusted depending on its environment, but we see with Vienna House that they do not do a cookie-cutter model,” Ross said.
Both Simoner and Ross said the wealth of potential colonial-style buildings in Asia would see Vienna House’s brands work very well in Thailand and other Southeast Asian nations. Simoner is optimistic about deploying this strategy in Cuba, as well.
He said he was looking at melding historical exteriors with stylish interiors, and he had been talking to government officials about the opportunity to join a hotel to one or two adjacent colonial houses.
“In Bangkok, we already looked at one such building, which was, by coincidence, built by an Austrian in 1905. We can play with the Austrian zeitgeist in the interior while providing both Austrian and Thai hospitality,” Simoner said.
U City’s investment in the European hotel industry follows that of Minor International’s February 2016 buy of Portuguese chain Tivoli Hotels & Resorts.
Paul King, CEO of Bangkok-based hotel consultancy Hotel IQ, is not surprised at this second development, saying Thai companies were playing an active and growing role in the hotel industry.
“For example, ThaiBev, traditionally in the beverage industry, has a division called TCC that owns hotel properties globally and continues to expand, (while) … Central Group plays a big role in the domestic hotel market with Centara Hotels & Resorts (that) are also expanding and spreading their reach outside of Thailand,” King said.
King said U City’s move might push the Thai travel market towards European hotels or might simply be a good move in portfolio diversification and to draw in more investors lured by the status of a European hotel brand.
“It’s fair to say that the average middle-class Thai has more personal disposable income and exposure to travelling abroad, and Europe is a very popular destination,” King said.
Creating brand awareness for Vienna House in Thailand could have long-term benefits in that regard, King noted.
“I would say, boldly, if not inaccurately, most Thais would lean toward a brand they already know, which, again, makes this deal more logical should the acquisition be for the purposes of filling European beds with Thai visitors,” he said.