Germany’s Novum Hospitality ramps up portfolio growth
 
Germany’s Novum Hospitality ramps up portfolio growth
21 MARCH 2018 8:30 AM

Four years after migrating to an asset-light model, Germany’s Novum Hospitality is using its management prowess to grow its portfolio primarily with its Niu brand. More growth in Europe is coming, and CEO David Etmenan has his sights set on the United States.

BERLIN—Hamburg-based Novum Hospitality has shifted into high gear for its global expansion efforts—plans that include a significant presence in the United Kingdom and United States, among other markets.

The hotel management company has 60 hotels in its portfolio with 48 more scheduled to open over the next five years. The expansion comes four years after the company decided to focus on operating hotels after assisting in their development.

David Etmenan, Novum’s CEO and owner, is the second-generation owner of the company. He assumed the role in 2004 from his father, Nader Etmenan, who founded the company in 1988.

Under his direction, Etmenan said Novum began morphing into an asset-light management company in 2014.

“The mechanism of growing in the past was taking over existing business, putting (Novum’s assets) in a 3-star segment, like Best Western (Hotels & Resorts), like Choice (Hotels International),” Etmenan said. “But, changing the model during the past 48 months, we started to acquire, first of all, a 4-star upscale segment, which is oriented more for business, corporate, conference hotels.”

“Asset-light is our goal these days,” he added. “We are signing fixed-lease agreements, 20 years with a two-time (five-year) lease option, which gives the investor a fixed yield expectation, guaranteed expectation. We do markets with guaranteed packages, which gives us comfortable firepower (to grow globally).”

Being a privately owned company helps that model, according to the CEO.

“We do not have any regulations in terms of (International Financial Reporting Standards), so we could sign a lease agreement very confidently because we are not listed on any stock exchange,” Etmenan said. “We have no attaching in terms of IPO or other things. We are privately owned. We have quick decisions. We have a unique hierarchy.”

Novum’s divisions that specialize in construction and renovation as well as information technology help the company quickly move on projects, he said.

“It gives us the scope on how we can roll out and how we can execute our business model,” Etmenan said.

The Niu Cobbles Hotel in Essen, Germany, features an industrial design in its guestrooms. It’s one of 48 Niu properties open or under construction by Novum Hospitality. (Photo: Novum Hospitality)

Novum Hospitality operates 160 hotels comprising approximately 20,000 hotel rooms. It markets three of its own brands—Novum Hotels, Novum Select Hotels and Niu Hotels. In addition, it has hotels in the AccorHotels, Best Western Hotels & Resorts, Hilton, InterContinental Hotels Group, Marriott International and Wyndham Hotel Group portfolios.

Among the company’s largest priorities is expanding its Niu brand, an offering that focuses on a niche segment between 3-star, midscale product and a 4-star, upscale product, he said.

“Niu is meaningful, inspiring, unique, and with these words, you can play around and find creativity,” Etmenan said. “The fundamental (difference of) this concept is the design scheming of the room, of the interior design in public spaces, the flooring, the elevator, the public toilets.”

The Niu brand is associated with the charitable foundation Viva con Agua, which has a pool of 350 paid artists across the world, Etmenan said.

“We are spending more than 100,000 euros per property into this charity,” he said. “Fifty percent is returning to projects in Africa and reflecting the sustainability of our aspect of establishing charity into the hotel, in the neighborhood, but also for the guests.”

There are 48 Niu properties open or under construction. The company originally planned to roll out 80 to 100, but that total could go higher, he said.

“You have to think about being something different and making something unique to be in a category which does not fit in any other segment,” Etmenan said.

The CEO pointed out “tutorial models” such as Generator Hostels, Ace Hotels and Hoxton, but said a higher quantity of hotels is important for Novum.

“The point of rolling out on a global aspect … where you have a development of branding and a level of brand value to create in a higher quantity is important,” he said. “That was, for us, one of the reasons why (we’re) just putting focus now … only into developments.”

The rapid expansion needs Novum’s experts that are heavily analytics-oriented, Etmenan said.

“We have respect in terms of growth, but what we are using is our own analysis team,” he said. “We have an excellent reporting system. We have a controlling system where we can look over into our figures, and of course we have partnerships where we could have benchmarkings, where we have our own.”

That mindset allows the company to be confident when it settles on markets in which to grow its presence.

“We have also one strategic view so that once we want to go into destinations, we’re not changing the strategy rapidly,” Etmenan said. “That means that we took a look over a while, which means one or two years before announcement that we’ll target the country for growing, so that we have all the figures in our mind and we have all our figures in our data.”

Another brand, more markets on the horizon
The company is looking to further diversifying its portfolio and Etmenan would not rule out the company venturing into the serviced apartment and hostel arenas. Novum is also working on developing a new boutique lifestyle brand, he said.

For the moment, Novum is setting its sights on working with various developers to extend its reach. Novum initially identified companies such as GBI AG—which has a strong track record in Germany and Austria—and HBB Group—which has strong roots in the Netherlands—to develop partnerships, according to Etmenan.

“With each developer, we want to target 10 projects to do with them,” Etmenan said. “The ability and investment record and track record is for us as an operational company important toward the development. They feel secure to have somebody inside and (have) the relationship, which gives them the confidence of an exit.”

Novum is working with Fortus Properties to develop a 135-room Niu property in Manchester, England, which will be its first in the United Kingdom.

“We are not only looking after London; we are looking after Manchester; we are looking after Glasgow; we are looking after several cities that we could roll out that brand of Niu,” Etmenan said, adding that the goal is to have approximately 20 hotels in the country.

Etmenan said he expects the company to grow globally, including in the U.S.

“We are looking currently also in the U.S. We are talking about New York; we are talking about Los Angeles,” Etmenan said.

The biggest opportunity for Novum is continuing to build its list of development partners so it can continue scaling the company, he said.

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