A model that gives guests the option to book by the room or by the bed is popular in Europe, and appeals to an underserved market in the U.S. and North America, CEO Hannes Spanring said.
NEW YORK—Economy hotels are sexy now, and that’s good for Meininger Hotels as the Europe-based hotel-hostel hybrid company ramps up its development efforts, which include soon entering the U.S. and Canada, CEO Hannes Spanring said.
“Economy brands are getting to be accepted as part of a shared experience,” he said during an interview at the recent NYU hospitality conference. “It’s not unsexy anymore. It’s very sexy, very trendy. People like it. And when you underline that with economics, that makes a fantastic proposition.”
Spanring said no one else in the hotel space is doing what Meininger is doing, which makes the company a disruptor. Meininger’s model allows guests to book, nightly, a room or a bed in a shared room, similar to a hostel.
“We don’t use the word hostel because there is always a little bit of a negative sentiment there,” he said. “You’re not flocking with your town to another floor for showering with 80 other people. We have bathrooms in every room, and if there are more than four beds in a room, we’re even splitting up the bathroom—having a shower, a toilet and a sink somewhere.”
The model is very popular in Europe, where Meininger currently has 26 hotels in 15 cities and is undergoing “a massive roll-out program,” Spanring said.
Entering North America
The segment of guests it attracts is so far underserved in North American markets, he said, though the concept is not unfamiliar, and is in fact sought out.
“U.S. Americans already are the sixth-largest customer group we have in Europe actually,” he said, noting the model is especially popular with school and other groups traveling in Europe.
“It’s not that the U.S. market is not going to take it; it’s how are we actually going to bring it here,” he said.
The development strategy is two-fold, he said.
“One, we have a big demand of Europeans traveling into U.S. markets. Second is to capture the market here. We’re already in contact with a lot of groups and teacher associations that are interested in a concept like Meininger. That means they are waiting for something like what we are offering,” he said.
Meininger’s model also appeals to families, as well as “individual travelers, who might be jumping from one city to the next,” for example, following a sports team, Spanring said.
“It’s a nightmare traveling with three kids, for example. If you’re lucky, you get a hotel with an interconnected room. Otherwise, mom has to stay with one or two kids, and dad has to stay with one or two kids,” he said.
At a Meininger property, families can share one room with multiple options for sleeping arrangements, including bunkbeds for the children. “So they save, because they don’t have to spend on two rooms,” Spanring said.
Groups and individuals staying with Meininger “are coming for a specific experience,” he said. “We are part of providing them with accommodation and the key to the city for that experience.”
The company has signed a long-term lease agreement with a local owner and developer to build its first U.S. property in the NoMa neighborhood of Washington, D.C., with a projected opening of late 2020. The 13-story hotel will have 154 rooms and 616 beds, and offer guests options to book rooms ranging from double-queen to multi-bed.
Meininger has also signed a second deal in Washington, D.C.
“Washington is a great city … and it works for us to have a cluster of two to three hotels in a city,” Spanring said.
Development in North America is focused first on the east coast and Canada, looking specifically at Montreal, Toronto, Quebec, Boston, New York, Philadelphia and Miami, he said.
Spanring said the process of entering these new markets has been very methodical, involving significant market and customer segmentation research and brand strategy. That includes “how will the name travel?”
“It’s a new continent, a new understanding. We’ve gotten very positive feedback, even from the name. People might have said, ‘we don’t know what it means. It sounds German.’ It means ‘good value for the money;’ that works for us actually,” Spanring said.
It was very important to have “boots on the ground” in North America, with local knowledge, he said. The company hired Ben Cary, who previously worked at Starwood Hotels & Resorts, as SVP of development in North America and assembled a small team that has been working for about a year and a half to enter the market.
“It took a while at the beginning, because what we’re offering is lease deals, which have not traditionally been that common in the U.S. We’ve seen that completely turning now, and a massive interest,” Spanring said.
“Also, you should not rush into a new market. Just stepping in and saying, ‘this is what we are’ is the wrong approach. You need to absorb what the market is going to do, what is the opportunity here.”
The company is also close to announcing a strategic partnership with two funds in North America, “with very deep pockets,” for an initial equity investment of $200 million to develop hotels on the continent, he said. That mirrors a strategic partnership in Europe with investor Convivio (formerly Fonciére des Régions) for up to €400 million ($449 million).
Investors are attracted to the model, in part, because of its resilience, he said.
“School groups is a big market, a massive market, and extremely resilient to any downturn,” economic or terror-related, for example, he said. “And they’re booking a year to a year and a half in advance.”
Others in the hotel space are now looking to copy Meininger, “saying, ‘we’re also hybrid now,” Spanring said. “In the end, it will take them years to catch up. We are definitely a disruptor. There is nobody out in the world that is doing what we are.”