Despite coronavirus, Steigenberger Hotels Aims to Hit the 500-property mark

Main Photo: The Steigenberger Frankfurter Hof

Date: April 2020

Location: Global, strong in Europe

Name: Steigenberger – Deutsche Hospitality

Who: Thomas Willms of Steigenberger shares the group’s ambitious plans, even in light of slowdowns caused by the coronavirus, in an interview with Germany’s Frankfurter Allgemeine newspaper.

Steigenberger has many ambitions for the year of its 90th anniversary. While the company’s 90th birthday would have otherwise been cause for great celebration, the recent coronavirus outbreak put an end to plans for any kind of party celebrating Steigenberger’s long and successful existence.

This also meant the company couldn’t announce its ambitious expansion plans with as much pizzazz as planned. After Jenny Zhang, head of Huazhu, Deutsche Hospitality’s Chinese owning company, had to cancel her trip to Germany and ITB Berlin was called off, Mr Willms shared the following with the FAZ newspaper: “Thanks to our new owner, we now have a different basis, especially in Asia, and can be even more international.”

“We want to achieve the previously announced goal of 250 hotels in Europe and the Middle East. In addition, we now have 250 hotels in the Far East – mainly in China. We want to grow to a total of 500 hotels by 2026.”

That sounds like a lot because it is. Steigenberger currently operates around 120 hotels and has 30 more in the pipeline. The group’s previous owner, the Egyptian hotel entrepreneur Hamed El-Chiaty, set Steigenberger on a growth trajectory before selling to Huazhu for €700m in 2019. These new goals take things to a whole new level.

Willms isn’t worried about the ambitious targets. When he speaks about the Huazhu boss, he speaks of “Jenny” as if she were an old confidante. “There is no difficulty in finding enough attractive hotel locations. As a rule, we do not build our own hotels but work with lease, franchise or management contracts. As long as interest rates remain low, there are enough project developers looking for hotel properties,” he says.

For a long time, Steigenberger was a synonym for German hospitality. “We have always offered hotels in the luxury segment. But there is a trend towards more demand in the lower to medium price segment now,” Willms explains.

“To grow, we have to address different customer groups. This is more complicated with only one or two brands. In addition to Steigenberger and Intercity Hotels, we now also have Jaz in the City for lifestyle-oriented customers and Maxx by Steigenberger to integrate existing hotels.”

The group has also started competing for more budget-conscious business travellers with chains like Motel One by acquiring Zleep Hotels. “In the economy segment, we bought the Danish Zleep group. The first German Zleep hotel will open in Hamburg in 2022.”

Adding more budget and mid-scale hotels will not be a detriment to Steigenberger’s premium properties. “Steigenberger has hotels with a great history, such as the Frankfurter Hof in Frankfurt or the hotel on the Petersberg near Bonn. These properties stand out from their surroundings, and we want to emphasize this more strongly in the future.”

Just as KaDeWe in Berlin stands out from other department stores, selected hotels will be more strongly differentiated through brand sharpening. “Our airport hotel and the Frankfurter Hof both bear the name Steigenberger. However, one is an airport hotel with a focus on business travellers, the other a classic grand hotel. We want to emphasize this difference more clearly,” says Willms.

In Frankfurt, where Deutsche Hospitality have their headquarters, an important new project is taking shape. “We want to be number one in Frankfurt. If we don’t expand, others will,” Willms says, speaking of a new property underway at the airport’s Gateway Gardens district.

“The new property at the airport will be our largest hotel complex with 1,000 rooms and the only one there with a conference hall for up to 3,000 participants. Upon completion, we will be able to offer close to 1,500 rooms in three buildings within a radius of three kilometres – in a central location in the middle of Germany.”

But growth is not just happening in Germany. Acquiring Deutsche Hospitality will make it easier for Huazhu to jump to Europe and establish a German brand that is valued in the Far East.

Willms can see things going even further in the future. “When we at Deutsche Hospitality weren’t part of a global hotel company, I wouldn’t have dared to enter the competitive American market,” he says. “This could be an option for the future. But nothing concrete is currently planned.”

In the short term, the consequences of the coronavirus present challenges for Steigenberger. “I expect the coronavirus to lead to a 10-15% drop in sales in the hotel industry in the next 100 days,” says Willms.

However, overall he hopes things will go smoothly for his company. “We have a strong business base with customers from Germany. This is why the decline in the number of guests from abroad is not quite as severe,” he says.

Also, there are big differences in the impact on business depending on the location. “Our Intercity hotels near train stations are still very well booked, but we have losses in Steigenberger hotels near the airport. The current trend is that people are switching to the train while the demand for flights is falling.”

Unfortunately, even when the crisis ends, it will be difficult to catch up in 2020. “Trade show cancellations hit the industry hard. Losses from many events being called off are difficult to make up for in the second half of the year because then conference and exhibition venues will be busier.”

For the first time ever, one of the group’s hotel restaurants has been awarded two Michelin stars. From now on, the Olivo in the Stuttgart Steigenberger Graf Zeppelin, led by head chef Anton Gschwendtner will sport this coveted distinction.

THPT Comment: Good strong stuff coming from Thomas Willms here, which is great news. Does it look like that Steigenberger is moving back to it’s original name as the parent company?, in that the change to Deutsche Hospitality seems maybe not to have been such a wise move, given the company’s global ambitions.

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