26.06.2020

ahgzplus Reiner Nittka: "Almost full Occupancy in Berlin City West"

Longstay offers have weathered the Corona crisis better than many hotels. The head of Germany's largest hotel real estate developer, GBI AG, explains why.


ahgz: 
Reiner Nittka, the Serviced Apartment segment has enjoyed particular popularity for several years also in Germany. What scale has it achieved now and how is it coping with the crisis? 
 
Nittka: 
Serviced apartments are coping much better with the crisis.  About two thirds of the properties across Germany remained open during the lock-down. Even at the lowest point of the Covid-19 crisis, they registered an occupancy rate of 30 to 35 percent, and GBI's SMARTments business in some cases even scored significantly higher. And now things are looking up noticeably. The current 4 percent market share of serviced apartments in the lodging market is set to increase significantly. In cities the value is often already about twice as high today. And by 2022 the supply is expected to increase by 50 percent nationwide: from now 31,300 to approx. 47,000 units, the market report of the Berlin-based Apartment Service is going to report this month. I have no doubt: the offer of the Segment is urgently needed. 

ahgz: 
What exactly are the occupancy and RevPAR figures from March to June? 
 
Nittka: 
From March to June 15, we had an occupancy rate of 45 percent in all German SMARTments business, instead of the usual 90 percent. RevPAR is around € 20; in 2019 it was € 42. This decline by almost half is painful, of course, but compared to the hotel market as a whole, it is significantly better. After all, the situation has reversed during the Pandemic as was proved by our analyses of the very fresh RevPAR figures from STR for our Berlin, Munich and Hamburg locations. Normally, the RevPAR in these locations is twice as high on average for the entire hotel market as in our SMARTments. During the Crisis, however, the situation was overturned: the RevPAR in the SMARTments is twice as large as in the hotel market as a whole in these cities. This shows quite impressively how popular and crisis-proof our range of products is. The first investors have already noticed this and approached us about these remarkable figures.

And this top-performance also continues in the upswing. Some of our houses have been doing particularly well since the first easing of restrictions a few weeks ago. In Berlin City West, we have a booking level of 83 percent for June. You can even anticipate full occupancy again. In Hamburg, we even had to turn down guests for our property on the Outer Alster at the end of May because the City of Hamburg had stipulated a maximum occupancy rate of 60 percent.  

ahgz: 
But who are the guests? Aren't there a lot of business travellers staying away? 

Nittka:
 There have indeed been some significant changes during the crisis months. Commuters, consultants and project staff stayed at home - and are now slowly coming back again. However, the fact that more than 40 percent of the rooms have been occupied since the beginning of the crisis is also due to new groups of guests emerging. Corporate contingent tenants sent in crisis teams and SMARTment business became a welcome home office alternative, booked both by companies and directly by employees fleeing the confinement and noise at home. Word got around that a comfortable workplace, great Internet and the kitchenette for self-catering was waiting for them. In the evening then it was back home again. Hospitals, with which we cooperated anyway related to further training courses, now saved stressed employees from having to travel long distances to and from their homes. And there were short-term business travellers who saw in us the ideal opportunity to practice the required social distancing. And in summer, families will stay with us during their city breaks.  Those who have remained loyal to the SMARTments business the entire time are people who have not yet found a permanent home after moving to a new city, usually for job reasons - they use SMARTments in the transition phase.   

ahgz: 
Many hotels recorded occupancy rates only in the single-digit range in April and May. How can the differences be explained?

Nittka: 
People were looking for a safe 'home away from home'.  At SMARTments you can be completely self-sufficient with the own kitchenette. You won't come too close to people in the lobby, breakfast room or restaurant. The rooms are only cleaned on demand, hence social distancing works perfectly. Also the arrival and departure takes place almost contactless and without people thanks to the high digitisation. This is indeed a unique selling point. 

 ahgz: 
 What do you see as the special advantages of Serviced Apartments during this period?

Nittka: 
In addition to the kitchen and the workplace, the SMARTments are characterised by strong digitisation. Fortunately, this had been on our agenda for years. Thanks to the cooperation with the technology experts at hotelbird, access and usage codes are transferred to the mobile phone directly when booking. And in the future, even smartphone grouches and jinxes with defective devices will be able to enter the room contactless, because we want to set up together with hotelbird self-service terminals at all locations that generate key cards. And even in the launderette, you can avoid other guests by digitally controlling personal washing times. Payment is by card.  

ahgz: 
There is now a competition for long-stay guests: hotels want to have this target group for them as well. 

Nittka: 
It won't be easy. Hotels can follow suit with implementing digitisation. But the space advantage in the apartment remains, even if it is sometimes only a few square metres. And with our innovative furnishing and equipment ideas it works even better. Even the kitchen unit is not that easy to install. In addition, our customers have been using our various delivery services for a long time and are also supported by our teams in the properties. This is part of the concept and a well-established routine.

And one should not forget - we can offer very competitive prices, as there are many services and areas that are obligatory in a hotel, but not for us. Hotels would now have to abandon such expensively built areas if they wanted to enter the competition for long-term guests. And unlike the hotels, we need hardly any staff in the SMARTments.
 

ahgz: 
On the other hand, GBI with its SMARTments business houses is suddenly focusing on short-term guests as well. Why? 

Nittka: 
Before the pandemic, such stays were an absolute exception, maybe for technical reasons as a gap filler between longer booking phases. In the Covid-19 crisis, short-term guests helped to mitigate our losses. Thanks to digitisation and contactless check-in, we did not need more staff for this category of guests; the organisation did not change. But to avoid a wrong impression: This currently affects about one in ten overnight stays, and this will soon change again, as we will continue to focus on long-term guests in the future. We measure our 'length of stay' in months.
 
ahgz: 
The Serviced Apartments themselves are now divided into many different segments. Which are the most promising? 

Nittka: 
First, Serviced Apartments as a whole will certainly perform better than the market. And SMARTments business with its focus on the essentials - good accommodation, self-catering and a comfortable workplace - will very well meet the needs of guests. The additional assets of aparthotels such as 24-hour reception, breakfast buffet and possibly a fitness room are currently losing weight. We notice from guest enquiries and discussions with partners that the trend we represent is increasing. And the price continues to gain in significance, especially in times of crisis. The GBI Group of Companies will therefore expand the SMARTments family to include the new brand SMARTments eco. Here we are combining all our experience into a digital, slim and absolutely cost-efficient product. In doing so, we will also specifically target medium-sized cities in strong economic regions. And, thanks to our decades of experience with student residences, we are able to build so cleverly that you will feel comfortable even in small spaces.    
 
 

ahgz: 
GBI is the largest hotel developer in Germany. How is the crisis affecting you? 

 
Nittka: 
Of course we feel the pinch, but there is no panic.  GBI has already sold all hotel under construction. And long-standing very good partnerships ensure that the projects planned for this year can also start construction. Our calculations have always remained conservative and, fortunately, we have never looked at the maximum factor. As a result of this strategy, our sales prices were recently confirmed by an expert appraisal in the middle of the crisis and we can now carry out a currently planned sale as scheduled. We are currently focussing more on our SMARTments range and are also doing much more in the student and subsidised housing sector.

 
ahgz: 
But is that enough to get out of the crisis well?

Nittka: 
We believe that the locations with a high proportion of tourism in addition to business will be the first to emerge well from the crisis. So we can say that holiday hotels in Germany are currently experiencing a bit of a boom. Our TUI hotel on Sylt is already fully booked for the summer!

When the hotel market as a whole will return to its pre-crisis level is currently the one-million dollar question. From my talks I have to offer: forecasts between 18 months and 5 years. What one can safely say is that companies that hold their hotel properties are currently in a better position. There are also first signs that some operators are reviewing their asset light strategy. 

ahgz:
What happens to the new construction projects?

Nittka: 
We were able to continue construction as planned; there was merely a short construction stop in Austria. This success is also due to our ' GBI Planung und Baumanagement‘ team. Instead of outsourcing responsibility for the construction site to general contractors, the work contracts are awarded in individual lots.
 

ahgz: 
In your newsletter you write that GBI wants to balance the portfolio between commercial and residential use by 2025 at the latest. Do you see no more future in hotel development? 

 
Nittka: 
We just have to see what level we come from in hotel construction. GBI established a second pillar years ago with GBI Wohnbau and very successfully diversified its assets through the SMARTments family. We will continue to pursue this strategy without neglecting hotel development. You have to appreciate that we also have some very nice hotels in the pipeline. However, we will now focus more strongly on the development of residential quarters. There we have the great opportunity to combine all our elements of housing, student apartments, SMARTments business, SMARTments living, hotel, senior apartments and also offices. And certainly nursing care properties will play a greater role in the future.

 

ahgz: 
But housing has always been considered difficult because of the many regulations?

Nittka: 
Yes, that's right. But we are deliberately focusing on subsidised housing. We are now a sought-after specialist in this field, particularly in Bavaria and Baden-Württemberg, but also in federal states such as North Rhine-Westphalia, Lower Saxony, Schleswig-Holstein and Hesse. In addition, we have also built and continue to build SMARTments student apartments.
 
 

ahgz: 
Since January 2019, GBI has been managing a hotel fund for the Bayerische Versorgungskammer (BVK), a large pension fund,  with a  remarkable return so far. What effects do you expect there? 

Nittka: 
The effects are still minor. After all, the majority of fund investments to date have been project developments, with the first being completed by the end of the year. This construction work will continue unchanged. The existing hotels in the fund - like all hotels - have a significantly lower occupancy rate. But we are optimistic that this will normalize thanks to the excellent locations.

Moreover, the hotel fund is already a result of our security considerations. A market downturn was anticipated, albeit not as drastic. The concept of the BVK Hotel Fund is based specifically on fixed leases at good addresses in commercial centres and on sustainable rents. With these requirements, we wanted to escape the hype and rising prices and factors at least a little. To this end, we also focused on the purchase of well-established portfolio hotels in major German cities. There may also be future investment opportunities that nobody had thought of before. After all, in a crisis new favourites tend to develop, don't they?  

 
Ahgz: 
In view of the mediocre prospects for the city hotel industry: Is the breakthrough of holiday hotels imminent? 

Nittka: 
Actually, holiday hotels in Germany can certainly become more interesting. 76.3 percent of the total of 307 million overnight stays in hotels, inns or guesthouses are accounted for by guests from Germany. If everyone now takes more holidays between Kiel in the north and Garmisch-Partenkirchen in the south, the hotels will benefit. As I said, we can see this in the Dorfhotel Rantum on Sylt, which will be a TUI Blue from next spring. The hotel is currently being completely overrun. However, the problem remains at German tourist locations that more than 80 percent of hotel demand is limited to 6 to 7 months. And everyone now has witnessed how holiday hotels had to close overnight. 

 

Reiner Nittka 

Born 1963 in Friedrichshafen

Education: Studied at the FU Berlin (Political Science, Journalism, American Studies) 

Stations: Berlin State Chancellery, PA to the Governing Mayor Walter Momper, management positions at the Treuhandanstalt, Berlin State Development Corporation  

Today's positions: CEO of GBI AG (since 2016) and since 2018 also CEO of GBI Holding AG. Also Managing Director SMARTments business. 

 

link to the article (source:ahgz): https://www.ahgz.de/news/marktanalyse-reiner-nittka-fast-volle-belegung-in-berlin-city-west,200012263177.html