Deal-making is a hurdle for growing business. In this TV show Tom Walsh of Staycity discusses a strong development pipeline.

Deal-making in alternative markets

It is a very limited marketplace. I mean our our objectives, were 900 units today, by the end of next year we'll have 2000 keys. There are deals that we did over the last few years that are under construction at the moment, many of them, a couple of them opening this year, and four or five properties opening next year. It's hard to find the properties that's, you know, that's, that's you know, par for the course, you really are competing with other users, whether it's office use or residential use, or hotel use, you're generally competing for, you know, scarce real estate in city centre locations. We're, we're seeking city centre locations, so you're, you know, you are by definition really, uh, competing with other users. Our growth plans will see us having about 5000 keys by 18 or 19. We're quite comfortable we'll be able to find sufficient properties for that we've, as I said, 2000 open by the end of next year, and a pipeline of 1300 on top of that. And, a good strong unsigned pipeline, so you know, we're able to ferret them out, you know, bit by bit, deal by deal.

Browse more videos by the Hospitality 250 experts and find more insight into deal-making and other hospitality topics.

Generally speaking residential yields are much lower than hotel yields, the happen to offer lower risk profile, there's more customers, there's higher occupancy, and generally speaking residential also tends to correlate with house price inflation, which is different than the hotel business so resi values tend to go with house price values, and so as an investor you look at both the cash flow and the value side of things. Whereas in the hotel it tends to be that the cash flow is directly correlated all the time with the value. And so, yields tend to be lower, but capital appreciation can be higher, in resi than in hotel.

Africa is more than a great opportunity, it's the biggest market to come. Just to keep in mind, a few numbers; first, 1.5 billion inhabitants by 2050, it will be bigger than uh, China or bigger than India. In the continent of Africa fits more or less all the whole world; uh China fit in Africa, India, Europe, US, and Brazil, just to give you the size of Africa. And today, if you take the market, only 5%- 5.3% of the sub-Sahara Africa, just to give you uh, the, the- the mass market that we are developing, uh, branded hotels, 5%, versus 44 in, in Europe, and 70 in the US. Then, to show you the massive opportunity we have, all together, bigger than chain original player like Mangalis Hotel Group, or small independent hotels, to support the growth of Africa.

The perception of Africa is always different. If you are well connecting with Africa, this is our case, because our ownership is Africa; we are belonging to a company, we are based in, in Ivory Coast in Senegal for the past decade, and we know all the issues of Africa that we need, and we know we need to understand how we work in Africa, which is, I agree, totally different than in Russia or Western Europe or in even in the US. And as far you know all the issues and how to deal with, it's more easy to work with than, you know, and Africa, probably there is more administration, more bureaucracy than in Europe, but the way of doing business is more the same, the wish of doing business is the same, and the acceleration of doing business is clear, then all in all, at the end, it's not to say complex to do business in Africa. It take more times, according some countries, logistics is an issue, logistics to bring the stuff from Europe or from Asia, it's an issue to build, it's an issue, but with the new technique of the approach and the new logistics that we deploy, it's more easy to in Africa, and the time frame from day one, the construction and delivery to operate, the time has reduced by two, at least for past 5 years, and even with take modular construction we proposed a construction for 10 to 11 month, which is track record in the industry.

Real estate funds can be a part of the development process for hospitality projects. In this TV show Andrew Pratt explains what Patrizia is all about.

Real estate funds and commercial investment businesses

Patrizia was set up in the mid 1980s, basically as a residential property company investing in residential property in Germany. Went through an IPO in 2005, now has over fourteen billion euros worth of assets, mainly in central Europe, fifty residential and commercial, we have thirty funds in Germany, we're the second biggest house builder in Germany as well now, the market in Germany's changing from being a, er, rental market to home ownership. Similar model to the UK. We act for a hundred pension funds across Europe - well across the world, actually. The strategy for Patrizia was to replicate that model, in the UK. Came into the UK, about - just under two years ago now we've been setting up both residential and conversion, commercial investment businesses.

Hospitality TV will continue to feature shows about real estate funds and development. Why not take a look at who else has been featured in the Hospitality250.

The serviced apartments hospitality sector is gaining more prominence in the industry. In this TV show Marcel Lindt discusses Frasers service apartments.

An expanding hospitality sector

So Frasers is a leading operator of serviced apartments, we have about ninety properties and about fourteen thousand units under operation and in the pipeline at the moment, we are from Singapore originally, and so we have a very strong presence in Asia, but we also have a good presence in Europe, and in the Middle East. More recently we have also started to look at Africa as a region to grow. So, I would say the main difference to a hotel is, that you get larger rooms, you have a separate living area, you have a separate kitchenette, sometimes even a full blown kitchen, we often have a separate bedroom, essentially we've giving more space to the traveller. On the other hand, you have less, open spaces, so you have less public areas, typically. So, we are - we tend to be in areas where there's lots of restaurants around, so we feel we don't need to have a lot of F&B offering in our properties. Same with conference and banqueting, you probably find is more in a hotel, for us that’s more sort of, you know, we have a small meeting rooms for - for smaller events, but we are not doing big conferences, like the one here now at the moment.

Hospitality TV will continue to feature shows about serviced apartments and other hospitality sectors. Why not take a look at who else has been featured in the Hospitality250.

I think the main reason you'd invest in a hostel concept is there's a real shortage of this type of accommodation - it's a niche that hasn't been well catered for. So, while maybe twenty per cent of world travellers are youth travellers, only five per cent of accommodation is designed for youth purposes, so there's a real shortage and the other reason you'd do it is actually the economics are very good, you'll see on a sort of revenue generation index spaces that we will clearly out perform a typical three or four star hotel and the reason for that is simple, we have quite high bed densities, typically there are four beds in each, room, so you've basically got, on a smallish size room with it's en-suite bathroom, four people, consuming, food and drink, er, paying for the bed, and that creates a very, a very powerful, revenue generation per square meter.

In terms of profitability, hostels rank very high, because already the revenue generation is very strong given the bed density, and because our costs are actually much lower - typically for instance we've just opened up our Paris hostel with nine hundred and sixteen beds, and that's staffed by forty five people, so the ratio of staff to guests is incredibly good and on that basis actually our profit per bed and per square meter will certainly be well up in the hotel space. It's not at five star levels, but it's very comparable to many three or four star hotels. The staffing levels are, obviously, materially lower, because what we're doing is providing much more basic services - the focus is very much on the ground floor, the social spaces where we have our event coordinators, our bar staff, and all the, all the reception staff, this is a 24/7 operation. And then upstairs the housekeeping's much more limited, there are no televisions, there are, just beds, er, and therefore the cleaning is much more basic, but it's functional and very purpose driven.

Hotel owners will all have some common challenges. HOFTEL aims to help hotel owners work together as Simon Allison explains in this video.

Hotel owners unite

Well we are a hotel owner's alliance, so - why? Essentially because if you look at the structure of the industry, I mean most people know, a lot of the hotel real estate is managed by third parties, by other people, and if it isn't managed by third parties it's branded by third parties. And most of those are bigger and more global and certainly more experienced at negotiating contracts than the owners. So, ten years ago, I decided with a group of other owning companies to get together and form an alliance, almost like a hotel owner's trade union. And our objective is to leverage the combined power of owning companies around the world.  

Hospitality TV will continue to feature shows about hotel owners and real estate. Why not take a look at who else has been featured in the Hospitality250.

OTAs have disrupted the industry in more ways than one. In this TV show Brian Reeves discusses how OTAs drive conversion rates.

OTA's approach to conversion

I guess the cornerstone, from a conversions perspective, the cornerstone of conversion matrix is abandonment analytics and understanding why it is visitors to our web site don’t end up booking with us. So we look at the performance of a typical hotel’s web site and compare it with the online travel agents; there’s a gulf between the two. So people like Booking.com spend a lot of time, probably a lot of money in multi variant testing which is the key too that drives the conversion improvement. Hotels are starting to pay attention to that a little bit at the moment but what happens as a result is that as the online travel agents improve their conversion rate, their advertising cost per room night sold decreases. So what they’re able to do is carry on with a lot more digital marketing work which tends to be disruptive and gain an awful lot of OTA market share in that space where even if you look at – I think it’s got some of the leading hotel brands. They haven’t caught up from any like, science perspective terms of understanding that key component which is I guess the central component from a travel investment perspective.

The Hospitality Channel will continue to follow discussions around OTAs and bring you videos from experts within online travel agents. Look out for the next 10 industry experts to be announced as part of Hospitality250